Step 4 - Choosing your credit card processor

If you plan to accept credit cards on your site, and there is practically no way that you can avoid doing this if you will be selling a product or service, you're going to need a credit card or merchant account. It is important that you choose your credit cared processor before you select a shopping cart or e-commerce program. Not all shopping carts are compatible with all credit card merchant accounts.

You have two basic choices when it comes to accepting credit cards. You can either apply for a merchant account,or you can use a third-party card processor. There are some major differences between the two types of credit card accounts and your costs can vary as well.

A merchant account is a three-way relationship between you, the transaction processing company which approves or declines the customers card and initiates the transfer of funds from the credit card issuing company to your bank who deposits the funds into your account within 24-48 hours after settlement.

Opening a merchant account requires that you either apply to your current bank, or use a merchant account provider service like Cardservice International which will match you with a bank that provides merchant account services.

A traditional merchant account can be expensive, especially if you are just starting in business and are not generating any sales.

There are a number of recurring fees that you will be charged, and some of these fees are owed whether you make any sales or not. The most typical fees include:

  • An application fee (although many providers will waive this fee)
  • An account "set-up" fee payable after your application is approved.
  • A per-sale "discount" that can run between 2% to 3% of each sale.
  • A flat per-transaction fee of anywhere from .35 to .75 cents or higher.
  • A monthly minimum fee if your sales volume falls below the minimum volume that the merchant account provider assigns to you.
  • Statement fees, gateway fees, and communication or connection fees which can run as high as $60 to $75 per month.

On the other hand, third party credit card processing services like PayPal, ClickBank and give you a relatively inexpensive entry into accepting credit cards without generating a lot of expenses. PayPal has no setup fee and simply charges you a percentage of each sale. That amount can vary from 1.9% to 2.9% depending upon your monthly transaction volume. There is also a .35 per-transaction fee. 2Checkout and ClickBank both charge a one-time setup fee plus a fee per transaction much like PayPal's The advantage with ClickBank is that you can also use their built-in affiliate program which allows other merchants to promote your product or service. These merchants earn a commission from each sale. The commission is deducted from each sale by ClickBank and is forwarded to the referring merchant each month. This can be a great way to drive additional business to your web site and only have to pay for performance.

Spend some time to investigate all of your credit card processing options before you choose one. It can be very difficult to change providers once you are up and running.

You can check out reviews and features for many of the major credit card processors by visiting

See Item #3 in the 10 Best Practices for Running an E-Commerce Site for additional suggestions.

You can check the following links for the relevant services

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