"Credit Card Payment"
It still amazes me how many bright online business owners
will spend countless hours working on their web sites and
developing their offer only to neglect one of the key
elements of closing the sale...
Making it EASY for customers to buy.
The most popular online payment method, by far, is by credit card payment and that's why, in this article, I am going to show you how you can quickly get set up to automatically
accept credit card payment right on your web site.
In addition, in response to the many questions I have
received from readers wanting to know about additional
payment options, you will be learning about the benefits
- Online checks
- Debit cards
- Digital cash
- Person-to-person e-mail payments
As you read this information, think of choosing those
payment options that will be just the right "fit" for your
Offering one or more of these "extra" choices in addition
to accepting credit card payment could become your
SECRET WEAPON, a competitive service advantage that
you offer and your competitors don't.
Neglect these potential buyers, the ones who never use
credit card payment online, and it's the same as taking a 10% cut
So let's begin by looking at...
Payment Option #1 -- Accepting Credit Card Payments
Since 90% of all Internet payments are made by credit card,
your first priority should be to get set up with this payment
option as quickly as possible. We've seen businesses
increase their sales by as much as 400% simply by giving
their buyers this convenient way to pay.
Let's face it; the entire mentality of the Internet is
"instant" access to information, products, and services.
If your potential buyers have to stop surfing and free
up their phone lines, call in their orders or, even more
time-consuming, hunt around for their checkbooks, envelopes,
and stamps... your order process will discourage all but
the most hardy shoppers.
For you, the merchant, accepting credit card payments:
- BUILDS CREDIBILITY in the minds of potential buyers
since you look like a "real" business,
- Makes it easy for buyers to MAKE IMPULSE PURCHASES,
- And provides you with a FULLY-AUTOMATED PAYMENT COLLECTION
and tracking system, which means no more trips to the bank,
no more bounced checks to deal with, and no more hours spent
manually processing orders and paperwork.
The first step to being able to accept credit card payment on your
web site is to become an authorized CREDIT CARD MERCHANT.
You can apply by contacting a MERCHANT ACCOUNT PROVIDER (also
known as an Independent Service Organization), which provides
the hardware and software you need to accept credit card
payments right on your web site.
Merchant Account Providers fall into three main categories:
1. Direct Processors
Direct processors, such as banks, offer direct access to the
credit card processing centers. The completed order form is
sent from your site through a "PAYMENT GATEWAY," which is
a secure server that takes the credit card information and
passes it along to the bank.
Banks are generally cautious about granting CREDIT CARD
MERCHANT status to any business that does not have the
large majority of transaction slips personally signed by
That's why many banks will charge a hefty deposit of several
thousand dollars in addition to a minimum monthly fee,
whether you have any sales that month or not.
A broker acts as an intermediary between you and the direct
processors. I recommend using a broker to match your needs
and situation to the right supplier.
I have found one who has a 98% APPROVAL RATE for online
businesses, even for applicants who have been bankrupt or
reside outside the United States and wish to get US merchant
accounts. You should be able to get a discount rate between
2% - 3%.
QUICK NOTE: The discount rate is the amount of each sale
that you will be charged by the supplier for providing a
payment service. For example, if you were to be charged
a 5% discount rate, and your product sold for $100, the
merchant account provider would receive $5 of every sale
you made and you would keep $95.
3. Third Party Processors
Third party processors send the credit card payments through
from your web site's order page to a direct processor. They
often provide "extra" services (such as the ones listed
below) beyond those offered by direct processors and can
be divided into two categories:
a. Fulfillment Houses
A fulfillment house will take orders for your products
through their 1-800 number, provide a "live" operator for
your buyers, package your goods, and then ship them... all
while providing you with a complete online record of the
Many netrepreneurs start out doing all of the work
themselves and then, once their business is thriving and
reaches a point where their time is better spent focusing
on the promotions rather than the chores, the order
processing is offloaded to a fulfillment house. Fulfillment
houses typically charge around a 5% discount rate.
When you sign up with a service provider, the payments
your buyers make are actually being processed through the
service provider's credit card payment account. In other
words, you do not have to qualify for credit card merchant
status on your own since the service bureau is the legal
retail seller and you, the merchant, are their "agent."
These services are popular with small online businesses,
especially those just starting out. Yes, the transaction
fees are usually higher than dealing with a direct
processor, but there is frequently no minimum monthly
service charge and no hefty deposit requirement so
YOU ARE ONLY CHARGED ON THOSE SALES YOU MAKE.
Since these services offer different packages, they may or
may not include:
- A fraud control service
- Online sales and transaction reporting
- Shopping cart functionality
Service providers such as iBill can get you set up to accept
not just CREDIT CARD payments, but also ONLINE CHECKS and
PAYMENTS BY PHONE (http://www.marketingtips.com/ibill).
Choosing whether to go with a direct processor or a third
party processor primarily depends on your monthly sales
volume. Since rates and services are constantly changing,
it will be a wise investment of your time to compare current
discount rates, monthly charges, and other fees.
As a very general guideline, if your monthly sales are under
$750 to $1,000, and you don't want to pay for a merchant
account, then a third party processor will probably best
suit your needs.
Once you've reached $750 - $1,000 a month in sales, you may
want to look at switching to a direct processor that offers
a lower discount rate, reduced processing costs, and shorter
ONE FINAL CAUTIONARY NOTE: Before you sign any long-term
lease, I suggest you wait until the profits from your
business are in your hands and you can accurately forecast
Payment Option #2 -- Accepting Checks Online
It's interesting to note that "traditional" checks are
used for 11% of all online purchases. Since these online
shoppers are willing to go through the hassle of mailing
checks, offering them an option of paying by online check
through your web site should be an instant profit booster
for you, provided you...
Have a special section on your site explaining how online
check payments work and that buyers' personal information
ONLINE CHECKS (also called e-checks) are virtual checks that
allow consumers to pay by check through the Internet. The
buyer fills out a form (that looks like a check on the
screen) with his or her banking information, date, and
amount, and then clicks the "send" button.
That information will then either go to your computer or to
a transaction service, depending on which of the following
two ways you choose to accept check payments:
a. The "Print & Pay" Method
This method is called "Print & Pay" because you need to
buy software that allows you to print the checks, such as
that offered by CheckMan (http://www.checkman.com), and
deposit the checks at your bank to receive your "pay."
The checks are processed just like regular checks, so you
have to wait until each check clears to be sure that it is
good for funds, etc.
This method is LESS EXPENSIVE but more labor-intensive and
b. A Transaction Service
Using a transaction service is similar to using the "print
& pay" method for the buyer in that they enter all of their
check information on an online form. That information is
encrypted and transmitted directly to a clearing house and
generally settled within 48 hours.
The funds are then withdrawn from the purchaser's account
and deposited into the merchant's account with a receipt
e-mailed to the buyer and an online report available for
Using a transaction service is faster than the "print &
pay" method since they confirm that all the required
information is input online by the customer right at the
time of purchase and, for a fee, will guarantee that the
check is good for funds.
Most services such as XpressChexOnline:
... deal with US checks only and there is a set-up fee
and a per-check charge.
Both the "print & pay" method and transaction services allow
you to ACCEPT PAYMENTS ONLINE, by PHONE, or by FAX, since you
can take the buyer's checking information and manually input
QUICK NOTE: Before you decide to go the "print & pay"
route, make sure your bank will accept these checks and find
out if you need to purchase any special paper for printing
the checks on.
Payment Option #3 -- Accepting Debit Cards
When a payment is made through a DEBIT CARD, the funds are
immediately withdrawn from the purchaser's bank account.
The advantage to you, the merchant, is that you know the
buyer has the funds to make the purchase and that it will
not be charged back to you (like a check with insufficient
The advantage to consumers is that purchases are paid for
right away, so there is no "credit card shock" when the
statement arrives in the mail.
Contact your merchant account provider and ask them if you
are able to accept debit card payments as part of their
While debit cards are still not widely used by online
shoppers, who prefer to protect themselves with the $50
liability limit offered by most credit card payments, this
method IS gaining popularity, so it's worth at least being
Payment Option #4 -- e-Wallets (Digital Wallets)
Right now, there is disagreement on what exactly an
"e-Wallet" is. Many companies are calling their products
e-Wallets, yet since there is no standard, their
interpretations vary widely.
However, with that said, e-Wallets can be placed into
two broad categories based on their capabilities:
a. e-Wallets That Store Card Numbers
The easiest way to think of an e-Wallet is as a virtual
wallet that can store credit card and debit card information,
passwords, membership cards, health information, and all the
numbers of cards that currently get stuffed into your real
Some e-Wallets make it easier for consumers to buy from you
since credit card numbers, for example, can be copied from
the e-Wallet and pasted into the online order form.
To see an example of this kind of e-Wallet, check out Ilium's
software at: http://www.iliumsoft.com/wallet.htm
To accept online credit card payments from this type of digital wallet you do
not need to add any additional software or change your
Other e-Wallets, such as Microsoft's Passport, automatically
fill out order forms with the consumer's credit card and
contact information, saving buyers time and hassle.
As a merchant, you can visit Microsoft's web site and
download a version of their Passport software so that
you can accept payments from their subscribers at:
b. e-Wallets That Store Card Numbers and Cash
The second concept of a digital wallet has been around for
several years but has not really taken off with either
merchants or consumers. In this version, consumers store
digital cash, which has been transferred from a credit
card, debit card, or virtual check inside their e-Wallets.
Digital cash is like having a virtual savings account
where charges are made for ongoing purchases, particularly
micropayments -- small payments from a penny to ten dollars
that can be used to pay for access to digital information
such as newspaper articles or software.
e-Wallets that store digital cash require both the merchant
and consumer to download and use the same software. As a
result, acceptance has been poor, so there is no need for
you to be concerned about accepting digital cash at this
time. I just wanted you to be aware of it since it could
become more widely accepted in the future.
Payment Option #5 -- Person-to-Person E-Mail Payments
Person-to-person (P2P) e-mail payments allow individuals to
use their credit card payment or bank accounts to pay through
e-mail. This process is similar to sending a greeting card
over the `Net.
For example, when you send a greeting card, you select a
card, add a personal message, and then e-mail the link to
the recipient to let them know where the card can be viewed.
You don't actually send the card via e-mail. Likewise, with
P2P, you don't send the payment through e-mail; rather you
send the link where the recipient can redirect the funds
to his or her bank account or credit card.
To transfer money by e-mail, the sender:
1) Logs onto his or her financial institution's online
2) Clicks the e-mail payment feature;
3) Inserts the recipient's name, e-mail address, the
amount, and the credit card number or account where
the funds are to be taken from; and
4) Has the option of adding a personal note for the
The recipient then:
1) Receives notification that the funds have been sent;
2) Is given a hyperlink to accept the funds and then;
3) Chooses where the funds will be deposited (i.e. their
bank account, their credit card, etc.).
Here's the big advantage of P2P...
NEITHER PARTY HAS TO REVEAL THEIR ACCOUNT INFORMATION TO
THE OTHER PARTY, nor is any money actually transferred
If you sell a service where your clients may WISH TO MAINTAIN
THEIR PRIVACY (such as for investment counseling), or if you
sell a service where the client pays after the work has been
completed (such as freelance web design), then this payment
method might be especially attractive to your clients since
it's less expensive than wiring funds bank-to-bank.
Person-to-person e-mail payments are offered through Yahoo!
the US Postal Service, and Citibank. For Canadian readers,
this service is available through CertaPay
MasterCard offers P2P payments using a digital wallet
to make payments from a MasterCard credit or debit account
to any person in the world, in their local currency, directly
into their bank account or as a check mailed to that person.
To learn more visit:
Final Thoughts- Credit Card Payments
With 90% of all online purchases made with credit card payments, you
literally cannot afford NOT to add this payment option to
your web site.
If you have been hesitating to accept credit card payments
online, the good news is that as soon as you give your
customers this option, you should see a NOTICEABLE JUMP IN
However, that still leaves over 12 million U.S. households
that do not have a credit card and the many other potential
buyers (approximately 10% of online purchasers) who would
prefer an alternative payment method.
Making it easy for your potential customers to do business
with you is an essential ingredient of your online success.
You don't need to offer ALL of the payment options mentioned
in this article, but it's a good idea to match the payment
choices you offer to your type of online business and customers.
You will close more online sales and gain a real advantage
over your competitors by offering your buyers easy, simple,
secure options for giving you their money!