How Merchant Accounts Can Save You Money

We all know that accepting credit cards is the key to online sales. Unfortunately, most merchants are unaware that acquiring a merchant account can actually save them money. And in many cases, big money!

For this experiment, we will use a fictional character named Bill. Bill owns and operates a great online resources for marketing tools and resources. Bills website is a membership based website, and therefore could potentially be approved for both third party processing and an internet merchant account. Bill starts off processing his business with a popular third party processor who offers him the following plan:

Start Up Fee - None

Monthly Fee - None

Transaction Fees - 13.5% (Initial or One Time), 15.0% (Recurring)

Bills sets up his business with this popular third party processor and charges $30 per month. He has built an extensive reciprocal link exchange directory, has purchased some PPC advertising on a few of the best search engines, and has reached a excellent spot in the content based search listings for the top 5 search engines. His customer base has grown from zero before accepting credit cards, to 150 members, is just one month. Bill can't believe his success at internet marketing, and is planning on building even more web based resources and tools for his website, thus increasing the value and content. He is ecstatic at the initial results, so let's take a look at Bills numbers:

$30 (Per Membership Sold) x 150 (Memberships Sold) = $4,500.00

$4,500 x 13.5% (Initial or One Time Transactions) - $ 607.50

$4,500.00 (In total sales)

- 607.50 (Total fees)

= $3,892.50 (Net profit after all processing fees have been deducted)

Ok. Well Bill certainly had an excellent first month accepting credit cards with his new business venture. But let's see how Bill would have made out if he would have secured an internet merchant account for his new business:

Start Up Fee None

Monthly Fee $15.00

Discount Rate 2.35% (Initial, One Time or Recurring)

Per Trans Fee .30 cents

Gateway Mo. Fee $15.00

AVS Fees .10 cents

Now the first thing we see is that the merchant account company is showing us more fees. This may be disheartening at first sight, but we should really explore what these fees are, and how they affect our bottom line.

Start Up Fee: This remains the same. Bill paid zero to get setup with his new merchant account, just as he paid zero to get setup with the third party processing account.

Monthly Fee: The third party processor offered us no monthly fees, yet we must pay $15.00 with the merchant account company.

Discount Rate: The merchant account has labeled one of their fees as "discount rate." These fees are the fees Bill will pay as a percentage of each transaction. They are similar to the main fee charged by the third party processor. This fee when charged by the merchant account company is substantially smaller than the high percentage charged by the third party processor. But we will wait till the end of this experiment to see who offers the better comprehensive deal.

Per Trans Fee: The merchant account company charges Bill .30 per transaction he processes through his merchant account. Of course, we have already established that Bill will pay no per transaction fees with the package he received from the third party processor.

Gateway Monthly Fee: Because Bill will also need an internet payment gateway for his merchant account to work online with his website, he will also be paying $15.00 a month for his Gateway Monthly Fee.

AVS Fees: The AVS fee stands for Address Verification Service. Bill will want to use this service, to help reduce potential fraud, and customer chargebacks to his merchant account. He will now pay an additional per transaction fee of .10 per transaction.

Let's see the numbers behind processing with a merchant account as opposed to a third party processor:

$30 (Per Membership Sold) x 150 (Memberships Sold) = $4,500.00

$15.00 (Merchant Account Monthly Fee) - $15.00

$15.00 Gateway Monthly Fee) - $15.00

2.35% (Discount Rate) x $4,500.00 - $105.75

30 cents (Per Trans Fee) x 150 (Memberships Sold) - $45.00

10 cents (AVS Fees) x 150 (Memberships Sold) - $15.00

Total Fees (With Merchant Account) = $195.75

$4,500.00 (In total sales)

- 195.75 (Total fees)

= $4,304.25 (Net profit after all processing fees have been deducted)

With the merchant account, Bill was able to keep substantially more of his sales for himself, as profit. Bill could use these extra resources to advertise more, expand his operation, and even hire someone to work for him, even if only on a part time basis. The point is that that the better deal in credit card processing is always with a merchant account as opposed to using a third party processor.

Most third party processors leverage the high levels of risk and chargebacks they must face everyday, by charging enormous fees and rates to their entire customer base. Third party processors are synonymous with Adult related websites. This is the reason for their increased exposure to risk. They must charge high rates to overcome the losses they are subject to by processing for a category of merchants that, unfortunate as it may be for them, falls into a certain level of risk and fraud that most other merchants do not. Because the merchant account company restricts its clientele to only companies with non adult related content, they are able to offer an entrepreneur like Bill, selling online content through his membership based marketing website, a much better deal in credit card processing.

$4,304.25 (Net Profit with Merchant Account)

- 3,892.50 (Net Profit with Third Party Processing)

= $411.75 (Total Savings with Merchant Account)

This experiment has shown that the average website owner can save substantially by choosing wisely when it comes to their credit card processing solution. We have proved that most any entrepreneur can and will save substantial amounts of money by using a merchant account for their online credit card processing, as opposed to processing with a third party processor. In our little test, Bill saved $411.75, and that was just in the first month alone.

Remember, that the third party processor will charge more, 15.0% to be exact, per transaction, once the customer is charged on a recurring basis. This means that for the second month, Bill would have paid even more to his third party processor; $675.00 to be exact! And that is just on the first months returning 150 customers. Every time Bill has a recurring payment processed through his third party processing account, he would be subject to a 15.0% transaction fee on all those sales. Not a very thrifty choice for credit card processing.

As with any business decision, be smart. Compare rates and plans, and make sure the "simple" setup is really worth the cost. In most cases, your Merchant Service Provider can setup your merchant account in as little as 24 hours. This is faster than your third party processor, and adds even more value to the otherwise already vastly superior deal you are receiving with your very own merchant account.

Make the decision that is best for your business, and best of luck! Please visit Josh Greth at CardStreet.com.

Copyright 2003 Josh Greth. All rights reserved.

About The Author

Josh Greth draws upon his 20+ years of Credit Card Processing/Executive experience in the field of Merchant Services. He developed, owns, and is the reigning CEO of CardStreet Cardservice Corp., a company that has been processing credit card transactions for over two decades. To date, they have established over 100,000 successful merchants and helped make their dreams a reality, by creating a simple, yet cost effective, means of credit card processing. For more information on credit card processing, or to obtain your own merchant account for a retail, internet, wireless or phone/mail order business, please visit CardStreet.com.

Copyright 2003 Josh Greth. All rights reserved.

____________________

Advertisement: Honest Riches - Click Here!

Advertisement: Lost AdWords - Click Here!

Advertisement: Get $1 Million A Month In Google Pay-Per-Click Ads Free! - Click Here!

Advertisement: Who Loves Money? - Click Here!

Advertisement: SEO Elite, the GrandDaddy of SEO Software - Click Here!

---

Eleven Things You Must Know About A Drop Shipping Directory And Its Company

1. Balance - You want to find a directory rich in many different categories of products rather than the quantity of products available. Many of the directories... Read More

Government Buying and Selling on the Internet

Global Insight, a leading economic and financial forecasting company, (formerly DRI-WEFA), states that all levels of government (federal, state, and local) should see steady increases in the... Read More

The Internet and Customer Care: Aid or Anarchy?

It was reported in 'Marketing' magazine this month, that Britain is becoming a "disaffected nation", with each adult apparently making an average of 12 complaints to service... Read More

How To Sell Websites Fast !

This article will explain in depth the steps needed to sell your website fast in today's marketplace.Step 1 Establish a Reasonable Price for Your SiteHow Much Can... Read More

Complementary-Relational Linking and How It Could Save Your Internet Business

The concept of linking is that sites with common interests should link to drive more traffic to each other's businesses and to increase their "popularity." Search engines,... Read More

7 Questions to Ask A Potential Internet Merchant Account Provider

Recently I went looking for an online merchant account, with disastrous results. I made the mistake of taking information at face value and relying on the ecommerce... Read More

Intranet Portals ? Search and Taxonomies

Knowledge Management for beginnersKnowledge Management (KM) can be defined simply as the process through which organizations generate value from their intellectual and knowledge-based assets. Knowledge assets are... Read More

How To Accept Credit Cards Without a Merchant Account

To increase sales on your website, you must accept credit cards. To process credit cards, you could apply for a merchant account through your bank or other... Read More

Your Readers are Publishers Too

Too often we charge ahead and treat the web as if it were just like any other medium. We know it isn't, but somehow we just can't... Read More

Something new in e-commerce: the Echo System Build

How four partners build and manage an exclusive art posters web site by emulating the way the echo works. Imagine a top-notch photographer, some demanding visitors and... Read More

Saving Money On Your E-commerce Site

After building and transferring many e-commerce sites it still amazes me that owners of e-commerce businesses are still wasting money in three basic ways. For fear of... Read More

Choosing the Right Online Shopping Cart

Are you a website owner or a web designer/developer? If either applies, I would venture to say that eventually you'll need an online shopping cart for one... Read More

ECommerce Scenario in Pakistan

Pakistan with highest growth rates in 1960s and bad politics in 1980s and 90s but, the stage is totally changed in 2000s as the economy is managed... Read More

Online Lead Generation: Can it Work for My Business?

Business-to-business service providers have a wide range of tactics they can deploy to gain new clients or customers. Direct mail; cold calling; TV, radio or print advertising... Read More

How to Get Free Internet Merchant Accounts

This article will show small businesses how to get free internet merchant accounts. If your business is to grow and succeed, it is essential to accept online... Read More

The Census and the E-Commerce Wave

Understanding business and product sales can sometimes put me in a whirlwind. My job tends to get me involved with loads of different opportunities dealing with all... Read More

Website Marketing: 10 Resourceful Things You Can Do With A Product That Doesnt Sell

Do you have any product that has not been moving well?Would you like to learn what to do with it?Here are website marketing secrets to help you:1.... Read More

Web advertising e-Marketing Places!

Overview:What is web advertising?Internet Advertising is popularly known as web advertising. Internet webadvertising giving Opportunity to the advertiser to target geographic country wise, subject wise, targeted Customers... Read More

Set Yourself Apart From The Ordinary

I have written at length about the need to anticipate your visitors' needs. I have talked about how the first screen of the homepage needs to connect... Read More

Stakeholder Analysis and Stakeholder Management

What is a Stakeholder?Try "define: Stakeholder" in Google and you will be surprised by the huge differences in the way this simple word is defined. It perhaps... Read More

Choosing an Ecommerce Shopping Cart

Choosing an online shopping cart is a big decision. Unlike a traditional brick and mortar business, your website is your only chance to impress potential customers. It... Read More

Creating The Perfect Ecommerce Website

If you're thinking of jumping on the bandwagon and going into business with your own ecommerce website, you'd do well to look at a few examples before... Read More

Selling Online for Newbies

If you are interested in selling online, it is quite easy to get started. First of all you must have a product or service to sell. The... Read More

Turn Your Rusty Junk Into eBay Gold

Often times people to stop to realize the income potential of their "junk". And, when they DO decide it might be worth selling, they never give eBay... Read More

Why This Is The Perfect Time To Start Charging For Website Subscriptions

If you're a writer, researcher, subject matter expert, enthusiastic hobbyist, or an authority on almost any topic, there has never been a better time to start your... Read More

Intranet Project ? RAD or Waterfall?

Building BridgesI have often used the analogy of building a bridge to explain to business colleagues the difference between Rapid Application Development (RAD) and Waterfall.Let's say that... Read More