"Wow, I had no idea there would be this much involved in processing credit cards online."
Everyone of my clients has approached me about real-time credit card processing and almost all of them have turned away. It's not as simple as they thought it would be and far more expensive than they imagined. Setting up your web site to receive and process credit cards in real-time is expensive and time consuming. Those who have offline processing capabilities already established should consider bypassing the expense of real-time processing, at least in the beginning. It all depends on the situation. Below is a general guideline of what is involved in real-time credit card processing as well as the expenses involved.
What Does It Cost?
What does it cost? Quite a bit. Online credit card processing requires two services that both incur fees of some sort---the processor and the merchant. Both of these services vary widely in price and options. Each are discussed below.
Your Web Site
The credit card is entered by the user. Your site will need an SSL (Secure Socket Layer) certificate so you can securely accept credit cards. You also will need a programmer to integrate the credit card processor in to your site. Both cost money and are discussed in greater detail below.
Credit Card Processor
This is the company who handles the transaction each time you process a card from your web site. They withdraw the funds from the user’s credit account and transfer them to yours. You usually pay a processor set-up fee and a per transaction fee. There are several online based credit card processing companies. Some of the biggest include CyberCash.com, AuthorizeNet.com and iBill.com . Always be aware of your per transaction fees and if and/or how much they increase as you process more cards.
Merchant Account
This is the bank account the funds will go to when a card is processed on your web site. Normally there is a set-up fee, monthly fee, and then a per transaction fee. You can get a merchant account from several places including banks and other merchant organizations. Merchant accounts range widely in price. Some processors will include a merchant account free when you purchase the processing service, but you pay a higher per transaction charge. You may find you save money in the long run paying the upfront set-up fee as opposed to getting one free.
Watch out for hidden costs and make sure you examine all the options before you choose. Be aware that your merchant provider may only accept Visa/MasterCard payments. If you want to process Discover or American Express it costs extra. Make sure your merchant provider offers options for Discover and American Express if you also want to accept them. Be aware of monthly maintenance fees and penalties for not processing a minimum amount of cards in a given time slot. As with the processor, always be aware of your per transaction fees and if/how much they increase as you process more cards.
SSL (Secure Socket Layer) Certificate
Also known as "secure shopping," don't forget about this. If you are going to collect credit card information online then you must protect the transfer of that information from a user's PC to your web server. Such transfers can be intercepted by hackers. Therefore, the transfer of sensitive data must always be encrypted and SSL certificates do just that. SSL certificates can be purchased from several organizations but the most popular is Verisign.com with GeoTrust.com rapidly gaining ground. An SSL certificate for your E-Commerce site with the above mentioned organizations will run you between $199.00 and $349.00 the first year and then slightly less upon renewal each additional year.
Paying for the Installation
Someone has to connect your site to the processor and install the SSL certificate. The SSL ordering process is also something that a developer will likely have to help you with. Companies that provide SSL certificates are very thorough and strict with the ordering process.
Off-domain Processing
Several organizations offer credit card processing services. The biggest one being PayPal.com. How does PayPal work? This is a handy way to avoid the expense of online credit card processing. However, this service requires your customers to leave your domain and go directly to a third-party Web site to complete payment. On occasion, this can cause confusion and may be seen as unprofessional.
What If I Already Have a Merchant Account?
If you already have the merchant account then all you need to do is decide on a processor and establish a gateway between the processor and your merchant account. Establishment does incur fees of some sort (set-up and per transaction) as mentioned above. If you already have a merchant account then chances are you also have a terminal. See below.
What If I Already Have A Merchant Account And Processing Terminal?
If you have a terminal, then don't rule out offline processing. In your situation, real-time credit card processing should not be considered unless you really have to have it. If you are only processing a handful of orders each week then you can save yourself a considerable amount of money by processing those cards manually with your terminal. You still collect the credit card information securely from your web site but pull the information from the site and process it with your terminal. You would be amazed at the number of sites that do this.
Are There Any Drawbacks To Offline Processing With A Terminal?
The drawback is processing problems will not appear in real-time (i.e. the users card is no good). This would be most important where a download is involved in the order. If the order is sent in real-time where access must be granted immediately---then you may want to consider real-time processing.
What If I Do NOT Already Have A Merchant Account?
Carefully consider if you need real-time online processing of your transactions, or a terminal or both. The terminal is a little expensive, up to $1,000.00. It may be cheaper to buy a merchant account and the online processing capabilities. Just remember you do not have the flexibility to process cards for other purposes. Your processing is bound to the web site. Owning a terminal allows you to process transactions for multiple purposes for your business and in multiple ways (phone, mail, etc.). Businesses which span across a wide range of clients and personal sites, all should accept credit cards.
So, real-time credit card processing is best left to those who have web sites that are generating enough income to justify it---or those who do not already have offline processing capabilities. You need to analyze your situation closely and make the best decision for your business as a whole. Why cut into profit margins that are already going to be low? Add real-time credit card processing when it makes sense and is affordable to do so.
Rob Taylor is a web developer and Ecommerce consultant for a number of small businesses located across the United States. Since 1997, his services have helped many organizations acheive and sustain an online business presence.
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