Getting setup to accept credit cards with a credit card merchant account is a relatively easy process and can be done without much hassle. I've put together this brief guide to introduce you to a few components of internet merchant account pricing and a couple of comparisons to Paypal which has a good service as well.



Pricing merchant accounts starts with the discount rate. Everybody always asks for this rate when comparing merchant accounts. For internet based transactions, the discount rate will typically be about 2.1 to 2.5%. Paypal is a merchant account provider that charges a flat rate of about 3%. Even though this may seem to be easier to reconcile, it will ultimately cost most merchants more money simply because 80% or more of your transactions should go through at that lower qualified rate.

A non-qualified or mid-qualified rate will usually add on an additional .5% to 1.5% for these transactions that are "downgraded" because they are either a rewards card which cost more to process or a government or business credit card.

Both merchant accounts and Paypal charge a per transaction fee. This is usually about $.20 to $.30 for each transaction. Merchant accounts add on an additional $.05 usually for what's called an AVS fee. Even with that $.05 for AVS, most merchant account per transactions can get to be as low as $.25 or less.

Unlike Paypal, traditional merchant accounts have a batch header fee. This is basically a daily processing fee. For every day of the month you process transactions, whether it is one transaction or 100 transactions, you'll have a batch header fee. This is usually negotiable, but something that most merchant service providers don't talk too much about. A lot of pricing is on a "don't ask, don't tell" meaning if the merchant doesn't ask, the merchant sales person doesn't tell. Don't get me wrong, the pricing is all over the application, but unless the merchant asks, certain assumptions are made which may cost as much as a couple hundred dollars per year. When in doubt, ask what each fee is and when it will apply so that you aren't caught off guard.

Merchant accounts have monthly fees. Paypal has a monthly fee if you use their merchant services. If you're just accepting payments from other Paypal customers, you won't have a monthly fee. But if you use them as you would a traditional merchant account where the payments can come from either Paypal customers or individual cardholders without a Paypal account, you'll have a $25 monthly fee. Traditional merchant accounts can be as low as $10 to $15 per month including the gateway fee. If you're an internet business just getting off the ground, try to get your monthly minimum waived. This is usually a $25 minimum and can be pricey especially when you're just getting started.

If you're processing over the internet with a traditional account, you'll need a gateway. Authorize.Net is one of the more popular gateways and although some providers give this away for free, they have costs associated with this and will usually hit you with an annual fee or some other fees along the way to make up for this. Try to negotiate your monthly rates so that they are lower even if you end up paying a little more for the setup. Authorize.Net shouldn't cost more than about $100 to setup. I'd recommend against leasing as you'd end up paying 5 times as much for the setup over the 48 month lease you'd be stuck with.

There are some advantages to Paypal over your more traditional merchant accounts. One such advantage is ease of use. Paypal is very user friendly and Authorize.Net as a gateway would be a close second. Most shopping carts are compatible with both and include modules to be able to install both or either. Accepting credit cards is a necessary evil in today's internet world, but can be done with very little hassle or headache.