Merchant Account Fees

There are many different kinds of fees that go into credit card processing that the merchant may have to pay. Knowing the different types of fees can save you money.

Discount rates
The discount rate is the fee the merchant pays per transaction. There are different rates depending on the type of transaction.

Qualified rate
The lowest rate. This usually requires that the cards be electronically swiped and the transaction settled within 24 hours. Also known as Swipe rate.

Mid Qualified rate
This is the percentage rate merchants are charged whenever they accept credit cards that do not qualify for the lowest rate. Here are some reasons why this can happen.
non-swipe transaction

• non-swiped credit card transaction
• foreign car, business card or rewards card
• batch not done in a timely manner (24-48 hours)

Mid qualify is also known as a partially qualified rate.

Non Qualified rate
This rate will be the highest charged. Here are some reasons a transaction would fall into the non qualified rate.

• non - swiped credit card, no address verification
• foreign card, business card or rewards card, with no additional fields entered
• batch not done in a timely manner (24-48 hours)

Merchant Account Fees

There are many different kinds of fees that go into credit card processing that the merchant may have to pay. Knowing the different types of fees can save you money.

Discount Rates
The discount rate is the fee the merchant pays per transaction. There are different rates depending on the type of transaction.

Qualified rate
The lowest rate. This usually requires that the cards be electronically swiped and the transaction settled within 24 hours. Also known as Swipe rate.

Mid Qualified rate
This is the percentage rate merchants are charged whenever they accept credit cards that do not qualify for the lowest rate. Here are some reasons why this can happen.
non-swipe transaction

• non-swiped credit card transaction
• foreign car, business card or rewards card
• batch not done in a timely manner (24-48 hours)

Mid qualify is also known as a partially qualified rate.

Non Qualified rate
This rate will be the highest charged. Here are some reasons a transaction would fall into the non qualified rate.

• non - swiped credit card, no address verification
• foreign card, business card or rewards card, with no additional fields entered
• batch not done in a timely manner (24-48 hours)

Pay Pal vs Merchant Account

A proper headline would be third party payment processors vs a merchant account. Google checkout and Pay Pal are good examples of third party payment processors. In a recent survey only 44% of PayPal customers and 19% of Google Checkout customers rate their purchase experience as good or very good.* So what are the differences?

Fees
Third party payment processors don't require you to have a merchant account. In a sense your using their account and they are charging you for the privilege, but higher fees aren't the only differences.

Funds
Your money goes directly to your account usually two days faster with a merchant account. Third party payment processors store your money for you making you request it be deposited to your account. This can add 3 to 4 days before you see your money. When your money is in your bank it is FDIC insured, not so with third party processors.

Dispute Resolution
When your the merchant account owner you are represented by your acquiring bank and reseller, both of which want you to get paid. Google Checkout and Pay Pal are known to freeze accounts first ask questions later. The problem with this is that their customer support is non-existent, try to find a phone number for PayPal and when you email them you get back canned responses that are not helpful. Talking to a person is very important when your money is involved.



* Survey of online shoppers conducted January 2007 by J.P. Morgan

More on Shopping Carts

There are tons of shopping carts to choose from it can and will get confusing. You need to choose one that you'll be happy with because your gonna be stuck with it for a long time. When and if you decide to move off a shopping cart it can be a time consuming task so try to avoid that. Here are some important considerations when choosing a cart.

Payment Processors
The most important thing your cart will do is process transactions. Not all carts work with all payment processors or payment gateways, so you need to check your carts supported gateways page. If they dont' have this page or it is hard to find you need another cart. If you already have your processor you can check their supported carts page.

Some carts will let you make an add-on, or module to support a processor, but its generally a better idea to use one that is supported out of the box. The reason being when they update the cart you will have to update the module. If the cart software provider supports your processor out of the box they will generally update it along with the new version of the cart.

Hosted Carts
If you don't want to go through the hassle of getting a web host and maintaining the cart yourself you can use a hosted cart. A hosted cart will usually charge you both a monthly fee and a percentage of the transaction. Shopify, and ProStores, are good examples of hosted carts. Some of these carts also put limitations on the number of products in your store. A hosted cart can get pricey, but for some its the only way to go.

Non hosted Carts
The non hosted carts come in all shapes and sizes and have a wide range of prices. Some of the best carts are free believe it or not. ZenCart and osCommerce are two widely popular open source carts that won't cost you a dime. BV Commerce a non open source cart can cost upwards of $500.

Before you run out and get the free shopping carts there are some differences you need to know about. The free carts don't have a customer service department on standby ready to help you when something goes wrong. The better ones do have a forum or knowledge-base that can help, but it can get frustrating, especially if it is a new problem no one has experiened before. Paid carts will at least have an email you can use for support the better ones will have a phone number to call or even a support chat. If you going to pay money for a cart make sure they have responsive support department. Ask them some pre-sales questions and see how fast they get back to you. If they don't respond quickly to a pre-sales question chances are they are even slower post sale.

Server Technology
When going the non hosted route you'll need to get a web hosting account. It isn't as hard as it seems, but you will need to choose a server type based on the type of cart your going to install. ZenCart for example uses PHP. PHP is the language the cart is programed in. A linux server is the best environment for a PHP scripted cart. The shopping cart your interested in will have a requirements page that will detail the scripting language, database and other items that need to be installed for the cart to work correctly.

Which is best for me
Make sure your payment processor is supported first. Hosted carts work best for the beginner, but if you have some technical ability the non-hosted cart would be a good choice. If you really need to customize your cart you have to go with an open source version.