How to accept credit card payments on your site without a merchant account
Why Do It?
Credit card payments allow you to take advantage of the following types of customers:
After reading your advertisements and hype on your site, buyers would be all fired up about your product. If they have a means of making a purchase immediately, you’ve secured that sale. If you only allow cheque (“check” in US English) payments, the additional time it takes for them to get their cheque book and mail out the cheque may be a deterrence. They may also have second thoughts later.
Credit card payment is a tremendous convenience if your customers are overseas. It automatically takes care of the problems of currency differences as well as the time it takes for a cheque to travel to the vendor. You will lose a large number of overseas customers if cheque payment is the only way you can accept payment.
Methods of Accepting Credit Card Payments
There are actually two ways in which you can accept credit cards on your site.
Using Your Own Merchant Account
To do this, you will need a bank that will allow you to open a merchant account. Requirements for this will vary from country to country, and you should check with your local banks for more information on this.
Through a Third Party Merchant
There are numerous companies around that are willing to accept credit cards payments on your behalf in exchange for various fees and percentages. These are also known as “payment gateways”.
Which Method Should You Use?
The initial costs of opening your own merchant account is usually higher than when you use a third party merchant. Indeed, some third party merchants have no setup fee at all. However, the transaction fee (which is what you pay the bank or third party merchant for each sale) is much higher when you use a third party as compared to when using your own merchant account.
A third party merchant is usually convenient to use when you don’t know if you can actually make much out of your product or service. If you just want to test the water to see how things are, this is usually a good way to start. It is also convenient in that the merchant takes care of everything for you. You just get a cheque at the end of each payment period (if you have earned enough) and concentrate on your products, services and customers.
Another benefit of the payment gateway is that if you use a reputable one, your visitors may be more willing to buy your goods online since they trust that merchant to keep their credit card numbers safe.
While having your own merchant account lowers your transaction costs, you have to be careful to minimize your risks since you’ll be processing the credit card payments yourself. By risks, I mean that you will have to deal with things like fraud (where people buy things with a stolen credit card number) and chargebacks (where someone forcibly reverses the payment to get a refund through their bank) yourself. This is not to say that there are no risks attendant in using a third party merchant.
Some Third Party Merchants / Payment Gateways
Here’s a list of some third party merchants that you might want to consider if you’re looking for ways to accept credit card payments. I have not used any of them myself, as a vendor (except for PayPal, and that was a very long time ago), so scrutinize them all carefully and use them at your own risk.
Note that rates and stuff that I publish below were correct at the time I investigated these vendors. It will most likely have changed by the time you read this since the merchants tend to modify their rates from time to time according to market conditions. Make sure that you check the current (up-to-date) details from their site before making any decision.
Volusion: This is actually a web host that also provides credit card processing. That is, all its hosting plans not only come with a built-in online store which you can use to sell your products and services, but you can also use them as your payment gateway to process credit and debit cards without signing up with a separate gateway. There are no setup fees, and transactions are charged for web, mail and phone orders at 2.17%. Yes, you read that right; some of their packages even allow your customers to order by telephone. Unfortunately, though, you need to be a US citizen to sign up for their payment gateway services. (Non-US citizens can of course still use their web hosting service with its built-in online store if they use some other payment gateway, such as the others listed on this page.)
RegNow: Designed for software authors to sell their ware, this merchant charges a one-time activation fee of $19.95 USD plus a transaction fee of 6.9% plus $1 USD per unit for their commission (minimum $2 USD charge). They also provide you with facilities that allows you to easily set up an affiliate program.
PayPal: This well-known service allows you to set up a Premier or Business account (you are subject to certain limits when receiving credit card payments if you use a Personal account, and probably also higher fees per transaction). The charges range between 1.9% + $0.30 USD to 2.9% + $0.30 USD for each transaction if you are in the US. Non-US users are charged different amounts according to the country.
Kagi: Kagi’s fees seem to vary according to the order size, type of item sold and the type of payment (credit card, cash, money order) used by your customer.
Digital River: Digital River supports a wide range of credit cards (including the common ones like MasterCard and VISA), currencies and even PayPal. Unfortunately, their website isn’t very informative (unless you like advertising tripe), so I can’t tell you the rates they charge nor even whether they support physical goods in addition to digital ones. They require you to write to them for more information using their online form.
CCBill: There are no setup fees. Transaction fees vary (I can’t find the schedule though) depending on the volume of sales in each accounting period. According to their website, “these fees are never more than 13.5% of revenues charged during this one-week period for CWIE hosting clients and 14.5% for non-hosting clients”.
CCNow: This is only for people who ship tangible, physical products. There is no setup fee, and they charge 9% per transaction except in the November and December where the fees are 8% per transaction (yes, lower).
How to Put an Order Form or Shopping Cart on Your Website
Once you have signed up the vendor of your choice, you will be able to put an order form or shopping cart on your site. Each vendor has a different method for this, but most, if not all, will provide you with premade forms that you can customize for your product or service.
For example, if you use Volusion, the built-in website builder provided allows you to set up a store on your site directly. Other gateways have different methods.
Trying It Out
Whichever you choose, if you are selling things on the Internet, you really have not much choice but to accept credit cards. You probably don’t know what you missed until you try it out.
All the best for your business!