A Quick Guide to Third-Party Credit Card Processors

If you've ever looked into getting your own merchant account,
you already know how expensive it can be. Application fees,
setup fees, standard monthly fees, transaction fees... they
all add up fast! It can be too much for a business that's
just getting started.

There is an alternative. Third-party credit card processing
companies handle your credit card transactions for you in
return for a cut of your profits. Setup is typically
either free, or there's a small, one-time fee.

Here's here it works: once you've applied and/or been
approved and paid any applicable setup fees, you create
ordering links for your products. These ordering links
lead to the third-party processor's server, where they
handle orders on your behalf. Credit cards and online
checks are common ordering options provided by third-party
processors. Some also offer a telephone ordering option.

After your customer places an order, that sale is
automatically credited to you, minus the company's
commission. You are paid by the third-party processor
at regular intervals, according to their pay schedule.

So what's the big deal? Why would third-party processors
appeal to startup businesses? Aside from the setup fee,
you are only ever charged IF and WHEN you make a sale.
If you don't sell anything, you're not charged anything.

Here are a few things to consider when researching third-
party processors:

* How much is the setup fee? Don't be put off if there
is one; three of the four processors I use charge a
setup fee, and they've been well worth the small cost.

* Transaction fees. After paying these fees, do you
still make a reasonable profit? I've seen fees
ranging from around 5% to about 30%, with the average
somewhere in the middle.

* Are there additional fees for accepting online checks
or telephone orders? Does the processor even offer
these as options?

* Settlement fees. Does the company charge to cut you
a check each pay period, or to wire transfer your funds
to you?

* How much is the reserve? A 'reserve' is the amount held
back from each pay check as a "slush fund" against future
refunds, returns, or chargebacks. What percentage do they
hold as a reserve, and for how long? It's commonly 10%,
10%, held for 6 months before being released back to you.

* Pay frequency. Most pay either every two weeks, or
once a month.

* Reliability. Talk to others who have used the service
to see if they've had any problems. If your order
processor is 'down', your customers can't buy!

* Restrictions and limitations. For example, is there a
minimum monthly sales quota you must reach? Is there a
maximum product price you can set? Does the company
restrict what the type of content you can sell? Do
they handle only tangible or intangible products?

* Customer service. Does the company respond promptly
and helpfully when you contact them?

* 'Extras'. For example, are there reporting or tracking
capabilities? Free use of a shopping cart?

Finally, here's a short reference list of several third-
party processing companies:

* Clickbank, http://clickbank.com/
* GloBill, http://globill.com/
* Digibuy, http://digibuy.com/
* Revecom, http://revecom.com/
* iBill, http://ibill.com/
* 2Checkout.com, http://2checkout.com/
* Verotel, http://verotel.com/
* CCNow, http://ccnow.com/

As you can see, there are many options, so don't let a
tight budget prevent you from taking orders online! Third-
party processors are both convenient and affordable -- even
for startup businesses.