E-Commerce Beginners Guide: Choosing a Third-Party Credit Card Processor
If you are reading these lines, you are obviously in the process of selecting the payment solution for your on-line business. Basing on experience of many merchants, it is possible to state that importance of this decision is crucial. Selection of the proper credit card processing solution determines the stability of your business. Therefore, we will try to state some tips on selection of the third-party credit card processor.
In many cases, potential vendors concentrate on the obvious factors while making their choice, i.e. the only thing they look at is discount rate or percentage charged for each transaction processed. However, this approach is very superficial. We would suggest composing the list of potential solutions and processing the basic research on each of them comparing the results. Here is the list of factors that we would include into analysis (make sure to contact the credit card processor with an inquiry if any of the listed factors are not discussed clearly and entirely on their web-site):
- all possible charges (discount rate, transaction fee, gateway fee, holdback percentage and any other fees that are going to be deducted from your sales);
- availability of support;
- security mechanisms provided by the payments processor;
- additional features included with the vendor's account;
- if applicable, it is important to collect other vendors' feedbacks about the provided services;
- information about the process of application and acceptance criteria.
The majority of credit card processors do not disclose all charges they deduct from their vendor's account. For example, many of them choose to set 8 to 16 percent holdbacks on their vendor's accounts, i.e. this amount is put on hold for 3 to 6 months and is released upon expiration of this period. Many credit card processors do not display taxation charges that are added to their discount rate. Therefore, it is ultimately important to clearly understand all charges that are going to be deducted from your account to have the real competitive figure for your comparative analysis.
It is very probable that you are going to have problems of technical character as you start processing the transactions and in the process of work as well. Therefore, it is important to understand how the credit card processor handles the technical problems of its clients. Clarify if the phone support is available and how the support responds via e-mail. You should formulate an inquiry with all questions that you might have after reading this article and address them to the credit card processor of your choice. Note the time required for response and the quality of response itself. This would generally represent the attitude of the credit card processor to your future inquiries.
Many credit card processors choose to narrow the security mechanisms to holding the beginning vendor's funds for several months and then refunding all sales to the customers in case they see anything "suspicious". Search the Internet for tons of horror stories of such kind. Many businesses have collapsed without even starting properly just because their choice was not right. Ask your potential payment processor about the security mechanisms they apply to decrease the possibility of the credit card fraud. If the answer is unclear or if they reply that it is vendor's responsibility to ensure the security of transactions, there is a huge probability that with the first chargeback you receive, your holdback will be increased or funds put on hold.
It is important to understand the potential necessity for expansion of your business and analyze the availability of the technical facilities. Many credit card processors provide their vendors with additional possibilities, e.g. shopping carts, promotion instruments, marketing solutions, etc. It is important to understand what instruments you have at your disposal as one day their availability may become critical.
Collecting the feedbacks from other vendors is fairly simple. Angry voices are easily spread through the multitude of merchant forums available on the Internet. Just type your potential credit card processor name + feedback in any major search engine to get tons of results. Positive feedbacks are rare as those who have no problems rarely care to tell about their satisfaction. On the other hand, person who had negative experience and whose financial interests were infringed will do everything possible to make his experiences available to public.
Study your credit card processor's marketing materials to clarify what the process of application is and what the possible complications are. Be ultimately suspicious if your account is active and working without any visible security checks or complications. This is the clear indication of the fact that security checks are going to be processed after your account is active and processing. They will put your funds on hold and process all necessary security checks and most surely they will take their time regardless of your business interests.
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