Comments on: Top 5 Reasons to Avoid a Merchant Account Provider http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/ A blog about merchant accounts and merchant services Wed, 07 Jan 2009 14:06:47 +0000 http://wordpress.org/?v=2.0 by: Justice http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-310 Sat, 23 Dec 2006 17:29:18 +0000 http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-310 Most Gateways are a revenue source to their creators. When looking for a low-cost gateway, look for a software creator who does more than just create software. In other words, find a company who will be satisfied to make just a normal margin on your processing volume -- and not nickel and dime you on the per-transaction side for the privilege of using their Gateway software. Now, the main reason Gateways like Auth.net can get away with charging a nickel access their Gateway is Auth.net is providing a service which requires little to no tech knowledge on the part of the merchant. However, you will notice that larger online retailers tend to have their own system in place based on these metrics: 1. Ease of use for the consumer. [This makes Google Checkout an exceedingly smart choice, although most folks in the payment industry don't want to admit it - due to what that thought means to their bottom line in the near future.] 2. A flexible payment software the retailer can tailor in-house to accommodate their industry-specific needs - like you mentioned ebooks. The size of the online transaction is vital as well when making your Gateway provider decision. If your average ticket is less than $10, you may be wanting to explore the not-so-public world of micro-payment processing. If you are planning to make a good portion of your sales overseas, then you had best understand the PayPal currency conversion factors. If you have an in-house tech-savvy person, [who can handle API, JAVA, PEARL, and such] then you could start off with a payment Gateway software made by one of the companies who have other interests than charging you a set up fee or a nickel fee to hit their Gateway. In clear words, there are payment Gateways with a zero dollar set up fee and a zero per item fee; you just pay normal Interchange plus a margin to that company. NobelPay is one such gateway. And Google Checkout would be your other viable option - if you are not doing micro-payments. When you start talking about how iTunes makes any money processing micro-payments, you are entering a whole different segment of the payment industry. Most Gateways are a revenue source to their creators. When looking for a low-cost gateway, look for a software creator who does more than just create software. In other words, find a company who will be satisfied to make just a normal margin on your processing volume — and not nickel and dime you on the per-transaction side for the privilege of using their Gateway software. Now, the main reason Gateways like Auth.net can get away with charging a nickel access their Gateway is Auth.net is providing a service which requires little to no tech knowledge on the part of the merchant. However, you will notice that larger online retailers tend to have their own system in place based on these metrics:

1. Ease of use for the consumer. [This makes Google Checkout an exceedingly smart choice, although most folks in the payment industry don’t want to admit it - due to what that thought means to their bottom line in the near future.]
2. A flexible payment software the retailer can tailor in-house to accommodate their industry-specific needs - like you mentioned ebooks.

The size of the online transaction is vital as well when making your Gateway provider decision. If your average ticket is less than $10, you may be wanting to explore the not-so-public world of micro-payment processing.

If you are planning to make a good portion of your sales overseas, then you had best understand the PayPal currency conversion factors.

If you have an in-house tech-savvy person, [who can handle API, JAVA, PEARL, and such] then you could start off with a payment Gateway software made by one of the companies who have other interests than charging you a set up fee or a nickel fee to hit their Gateway. In clear words, there are payment Gateways with a zero dollar set up fee and a zero per item fee; you just pay normal Interchange plus a margin to that company. NobelPay is one such gateway.

And Google Checkout would be your other viable option - if you are not doing micro-payments. When you start talking about how iTunes makes any money processing micro-payments, you are entering a whole different segment of the payment industry.

]]> by: Chris Rempel http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-306 Fri, 22 Dec 2006 23:12:07 +0000 http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-306 Steve, Yes, Clickbank.com, 2CheckOut.com and PayPal.com serve as payment processors for ebooks, software and other digital goods. PayPal actually has very reasonable rates, but they enforce their TOS with an iron-fist, so make sure you're within those parameters. Clickbank has a built-in affiliate network of over 100,000 affiliates, and it's a great way to generate extra sales that way. Just set up a mirror site of your primary product page. CB also pays your affiliates for you directly, which creates some confidence on the endorsement end (affiliates like it). Clickbank has a $45.00 product activation fee. 2CO is sort of just like PayPal, except their rates are higher and they have a signup fee. I'd say you're better off using a third-party for info products and so on for the first bit, and then once your volume reaches a certain point, it will make more sense for you to get a merchant account. See this chart on WilsonWeb to see what I mean: http://www.wilsonweb.com/wct4/pg-merchacct.htm Hope this helps Cheers, Chris Rempel Accept by Phone, Inc Steve,

Yes, Clickbank.com, 2CheckOut.com and PayPal.com serve as payment processors for ebooks, software and other digital goods.

PayPal actually has very reasonable rates, but they enforce their TOS with an iron-fist, so make sure you’re within those parameters.

Clickbank has a built-in affiliate network of over 100,000 affiliates, and it’s a great way to generate extra sales that way. Just set up a mirror site of your primary product page. CB also pays your affiliates for you directly, which creates some confidence on the endorsement end (affiliates like it).

Clickbank has a $45.00 product activation fee.

2CO is sort of just like PayPal, except their rates are higher and they have a signup fee.

I’d say you’re better off using a third-party for info products and so on for the first bit, and then once your volume reaches a certain point, it will make more sense for you to get a merchant account.

See this chart on WilsonWeb to see what I mean:

http://www.wilsonweb.com/wct4/pg-merchacct.htm

Hope this helps

Cheers,

Chris Rempel
Accept by Phone, Inc

]]> by: ShoeString Steve http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-288 Tue, 19 Dec 2006 23:58:07 +0000 http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-288 Interesting. Does anyone know if there is a list of 3rd Party Processors who specialize in ebooks, software, or other digital content delivery? I'd like to compare prices. Interesting.

Does anyone know if there is a list of 3rd Party Processors who specialize in ebooks, software, or other digital content delivery? I’d like to compare prices.

]]> by: John Conde http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-283 Mon, 18 Dec 2006 14:44:03 +0000 http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-283 The payment acts as a credit card terminal for websites. It takes the credit card transaction and sends it to the processing bank for approval. It then returns the results to the website. You don't need one with a third party processor because they act as the gateway as well. Setting up a payment is actually the opposite of exclusive. Anyone can get one. No credit check is required. You only need a merchant account to work with the gateway and that's it. As for Plug 'n Pay, the features they charge minimum fees for aren't traditional gateway offerings. They are actually special services Plug 'n Pay offers and bundle in with their gateway. As a result the pricing will be different from their regular gateway services. The payment acts as a credit card terminal for websites. It takes the credit card transaction and sends it to the processing bank for approval. It then returns the results to the website. You don’t need one with a third party processor because they act as the gateway as well.

Setting up a payment is actually the opposite of exclusive. Anyone can get one. No credit check is required. You only need a merchant account to work with the gateway and that’s it.

As for Plug ‘n Pay, the features they charge minimum fees for aren’t traditional gateway offerings. They are actually special services Plug ‘n Pay offers and bundle in with their gateway. As a result the pricing will be different from their regular gateway services.

]]> by: ShoeString Steve http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-279 Mon, 18 Dec 2006 08:10:27 +0000 http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-279 Whoops, I just read the "Merchant Account Comparison" which explains the difference between a Merchant Account and a Third Party Processor. Sorry for the confused post. Where does the Payment Gateway fit in compared to a Merchant Account and a Third Party Processor? Does a Payment Gateway require a credit check? Is it even MORE exclusive than a Merchant Account? (It almost seems like it must be, since the flat fees are so high and they don't change a %.) Here I was all excited about using Plug & Pay and recouping the startup cost over time, but now it's starting to look like I'll have to settle for PayPal, at least until I get big. :/ (And this is a relatively minor point, but the Gateway Comparison article identifies Plug & Pay as a Gateway, and they do have a monthly minimum charge for some of the services they offer.) Whoops, I just read the “Merchant Account Comparison” which explains the difference between a Merchant Account and a Third Party Processor. Sorry for the confused post. Where does the Payment Gateway fit in compared to a Merchant Account and a Third Party Processor? Does a Payment Gateway require a credit check? Is it even MORE exclusive than a Merchant Account? (It almost seems like it must be, since the flat fees are so high and they don’t change a %.)

Here I was all excited about using Plug & Pay and recouping the startup cost over time, but now it’s starting to look like I’ll have to settle for PayPal, at least until I get big. :/

(And this is a relatively minor point, but the Gateway Comparison article identifies Plug & Pay as a Gateway, and they do have a monthly minimum charge for some of the services they offer.)

]]> by: John Conde http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-278 Mon, 18 Dec 2006 06:06:06 +0000 http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-278 Payment gateways are different and separate from merchant accounts. Gateways don't charge monthly minimum fees. They charge regularly monthly fees for using their services and setup fees are normal. With merchant accounts the monthly minimum fee is not required and is in addition to the monthly fee. It does not all merchants equally (small merchants are the only ones who pay this fee). Also, setup fees are standard for payment gateways whereas for merchant accounts it rarely should be charged. Payment gateways are different and separate from merchant accounts. Gateways don’t charge monthly minimum fees. They charge regularly monthly fees for using their services and setup fees are normal. With merchant accounts the monthly minimum fee is not required and is in addition to the monthly fee. It does not all merchants equally (small merchants are the only ones who pay this fee). Also, setup fees are standard for payment gateways whereas for merchant accounts it rarely should be charged.

]]> by: ShoeString Steve http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-277 Mon, 18 Dec 2006 05:42:16 +0000 http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-277 Wait, how can #5 be bad? In a previous article on this site, http://www.merchant-account-services.org/article/payment-gateways-reviewed/6 , ALL of the payment gateways reviewed have both a large setup fee and a monthly minimum fee. And these are the industry leaders! What gives? If there are merchant services out there that don't have a setup fee or a monthly fee, and also have equivilent (or lower) per-transaction rates, why didn't THOSE services get reviewed? My budding business is going to be selling software. Hopefully many thousand units. I'd rather pay Authorize.net's $300 startup fee plus 10 cents per transaction than pay PayPal's free setup but 30 cents + 1.9% - 2.9% per transaction. I'm currently looking at Plug n' Pay despite their insanely high setup costs all across the board, because their Digital Downloads service would completely automate the fulfillment process for me, thereby eliminating the need for an employee to manually process every sale. (While I'm on the subject, does anyone know of any services equivilent to Plug n' Pay's Digital Downloads? Basically I'm thinking anything that works for ebook sellers, but isn't limited to the ebook format, would work great for software sellers, too. I looked around briefly but couldn't find any alternatives.) Wait, how can #5 be bad? In a previous article on this site, http://www.merchant-account-services.org/article/payment-gateways-reviewed/6 , ALL of the payment gateways reviewed have both a large setup fee and a monthly minimum fee. And these are the industry leaders! What gives? If there are merchant services out there that don’t have a setup fee or a monthly fee, and also have equivilent (or lower) per-transaction rates, why didn’t THOSE services get reviewed?

My budding business is going to be selling software. Hopefully many thousand units. I’d rather pay Authorize.net’s $300 startup fee plus 10 cents per transaction than pay PayPal’s free setup but 30 cents + 1.9% - 2.9% per transaction.

I’m currently looking at Plug n’ Pay despite their insanely high setup costs all across the board, because their Digital Downloads service would completely automate the fulfillment process for me, thereby eliminating the need for an employee to manually process every sale.

(While I’m on the subject, does anyone know of any services equivilent to Plug n’ Pay’s Digital Downloads? Basically I’m thinking anything that works for ebook sellers, but isn’t limited to the ebook format, would work great for software sellers, too. I looked around briefly but couldn’t find any alternatives.)

]]> by: John Conde http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-264 Thu, 14 Dec 2006 22:13:22 +0000 http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-264 You use cable TV providers as an example but it is not an accurate comparison. Cable TV providers don't charge you a monthly fee and then also charge you to watch TV. Merchant account providers make money every month from the merchant's statement fee plus they make money every time a merchant processes a sale (and most likely for every transaction). Merchant account providers also have other "legitimate" avenues to make money such as from selling equipment and referring the merchant to American Express and Discover Card. Smaller merchants may not be lucrative individually but having a large portfolio makes them much more attractive as a whole. If a merchant account provider is efficient in establishing merchant accounts their overall costs in boarding these merchant should be negligible. Charging a monthly minimum fee may make a smaller merchant attractive to the merchant account provider but that doesn't make it reasonable for the merchant to accept this fee as being necessary. Plus when there are plenty of merchant account providers who offer merchant accounts without this fee, why should any merchant find it acceptable to pay it? You use cable TV providers as an example but it is not an accurate comparison. Cable TV providers don’t charge you a monthly fee and then also charge you to watch TV. Merchant account providers make money every month from the merchant’s statement fee plus they make money every time a merchant processes a sale (and most likely for every transaction). Merchant account providers also have other “legitimate” avenues to make money such as from selling equipment and referring the merchant to American Express and Discover Card. Smaller merchants may not be lucrative individually but having a large portfolio makes them much more attractive as a whole. If a merchant account provider is efficient in establishing merchant accounts their overall costs in boarding these merchant should be negligible.

Charging a monthly minimum fee may make a smaller merchant attractive to the merchant account provider but that doesn’t make it reasonable for the merchant to accept this fee as being necessary. Plus when there are plenty of merchant account providers who offer merchant accounts without this fee, why should any merchant find it acceptable to pay it?

]]> by: Josh Marks http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-263 Thu, 14 Dec 2006 21:57:49 +0000 http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-263 #5. monthly minimum - I feel that you have portrayed this fee in the wrong manner. I don't quite understand how a monthly minimum of $20 or any reasonable amount is a 'penalty'. It costs merchant service providers money to be in business. To be able to provide all of the services that allow a merchant to accept cards a provider has to generate a profit from every account. Compare it to any monthly fee you have. How about cable TV? If I don't watch it I still get charged. Is that fair, yes. Why? Because it provides me with unlimited information and entertainment making my life more convenient. The same goes for a business owner and a merchant account. In my opinion it's a justified fee as long as providers don't abuse the amount collected each month. #5. monthly minimum - I feel that you have portrayed this fee in the wrong manner. I don’t quite understand how a monthly minimum of $20 or any reasonable amount is a ‘penalty’. It costs merchant service providers money to be in business. To be able to provide all of the services that allow a merchant to accept cards a provider has to generate a profit from every account.

Compare it to any monthly fee you have. How about cable TV? If I don’t watch it I still get charged. Is that fair, yes. Why? Because it provides me with unlimited information and entertainment making my life more convenient. The same goes for a business owner and a merchant account.

In my opinion it’s a justified fee as long as providers don’t abuse the amount collected each month.

]]> by: Anonymous http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-225 Wed, 06 Dec 2006 15:57:22 +0000 http://www.merchant-account-services.org/blog/top-5-reasons-to-avoid-a-merchant-account-provider/#comment-225 [...] After a recent post on the merchant account services blog, I thought that this was a completely appropriate post about deceptive merchant account fees. [...] […] After a recent post on the merchant account services blog, I thought that this was a completely appropriate post about deceptive merchant account fees. […]

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