MetaToast.com

If you ever get serious about selling anything on your site you will probably want to accept credit cards. Of course you could use pay pal or some other third party solution, but if you want to project a confidence inspiring professional image you need to go for the real deal. The way the system works is pretty convoluted, and dealing with the individual players can be extremely frustrating. If you ever have an issue you might find that everyone you talk to claims that it isn’t their fault, and may pass you off in an infinite loop of tech support line hold. However, by having a basic understanding of how the system works, and who the players are you can be one up on the game from the beginning. Also, when you’re shopping for service you will at least have a better idea of what questions to ask, and what kind of answers to expect.

Here’s the sequence of events that happen from the customer placing their order to you getting paid:

• The customer places an order on your website by filling out a form. The customer’s browser encrypts their info and submits it to your site via SSL – Secure Socket Layer. They then click a “Submit Order” button. This usually happens on a part of the site that uses the https (secure) protocol.
• Your website submits the customers card number along with verification details (billing address for example), and your merchant id number to the Gateway via SSL.
• The Gateway routes the encrypted data to the Processor/Merchant bank.

Note: When you sign up for processing services (via a Reseller) you will be paying for the services of the Gateway, and the Processor/Merchant bank in the form of monthly fees – these are your actual service providers. The Reseller, which is the entity that you will usually purchase the plan from doesn’t really have anything to do with the day to day processing of credit cards, but if you get a good one they will give you customer service, and help to mediate any problems you have with the Gateway, Processor, or website integration. Some processor’s service is so poor that you will be hard pressed to just contact them once they have your money. Look for customer service user ratings when shopping. Moving on..

• The Processor passes your data onto the appropriate Card Network (Visa, MasterCard, Discover…)
  
• The Customer’s issuing bank responds with an authorization code via the card network to the Gateway that the transaction is either accepted or rejected – in the case of a rejection a reason such as “insufficient credit” is also sent. No money changes hands yet, but the funds are “captured” subtracting the amount from the customers available credit.
• The Gateway forewords this information to the merchant (your) website. So far this process has taken 2-3 seconds.
• Once you have shipped the order the transaction is added to a Batch for processing once a day - usually in the evening.
• Your Website submits the batch to the card network which then actually transmits credit for the funds via the Federal Automated Clearing House to your bank account. I usually have my money before midnight of the day of purchase.
• Once a month (usually) your bank account is charged by the Processor (usually about $10-20), the Gateway (also usually $10-20), the Merchant bank charges you a per transaction fee (less than 25 cents in my experience) and the “Discount Rate” which is a percentage of transactions in the range of 1-3%. Somewhere in all those fees, the reseller, and card network get a cut as well.

A few tips for shoppers

You will usually be dealing with a Reseller, and you want a reputable one who will give you good customer service when you need it, this is probably at least as important as how much it will cost. Having your system go down when business is up really sucks, and you’ll want to get it fixed post haste. Luckily in this case cost is not necessarily an indicator of quality. The best service may also be the least expensive. Do your homework.

Know your fees

• Discount rate – the percentage of your sale price that you will be paying for service. Usually between 1.5% and 3%
• Special Discount rate – the rate you will be paying for alternative cards, or for other special situations – always higher than the regular discount rate.
• Transaction fee – In addition to the discount rate you will be paying a fee for each transaction – about 20-30 cents.
• Gateway fee – for the payment gateway – usually about $10-20 per month.
• Processing fee – also around $10-20 per month
• Setup fee - $100-$200 dollars for each of the gateway and the processor. Negotiate for these. Some high quality resellers don’t charge either of these fees. You probably don’t have to pay them.
• Application fee – usually non refundable whether you are accepted or not. Don’t do business with a company that is going to charge this fee. Some don’t. Shop around
• Billing/Invoice fee – another bullshit fee that you don’t have to pay. Just say no.
• You should be able to get credit card service for only the discount rate+transaction fee+gateway fee+Processing fee. In other words you should pay $20-30 per month plus the discount rate of around 2-3% plus 20-30 cents per transaction. That’s it. All of those other add on fees are bunk. Don’t agree to pay them.

Tags: Setting up Shop //