merchant account important for a site that might need to feel non-bargain-basement?

March 10, 2008 11:27 PM

Merchant account versus just paypal/google checkout, for a handcrafts site that will offer some high-end items (c. $20 to $180 range)?

I want to sell my "fine handcrafts" online (from my own site, not through Etsy/etc.). I might sell other people's too, like an online high-end crafts gallery with sales.

My stuff has been selling well in person at some shows/fairs -- and I'm good with HTML -- but I have no experience with selling anything online.

For my existing sites, I have a web hosting package that happens to include one SSL certificate I'm not otherwise using (GeoTrust QuickSSL Premium Certificate).

The question is whether to consider getting a merchant account (and dealing with potential chargebacks, fraud, etc.), because I already have SSL... or to forget that and stick with just Google Checkout & PayPal as dual checkout options. Or am I missing some hybrid solution in the middle?

posted by lorimer to computers & internet (10 comments total)

In the UK at least the banks seems to push merchant accounts for small businesses pretty strongly; I've got a sideline importing MP3 players and other electronic stuff from China and thus far have resisted taking charge cards directly.

I've been leery of setting one up, not only due to chargebacks but also because of the fees involved - auth fee, statement fee, minimum monthly fees, customer service fee, annual fee - the list seems to go on and on. I'm doing about £50K Sterling presently and I've decided that once we've broken 100K in sales the business could justify the fees, but run your own numbers to be sure.

One thing you might consider is letting folks wire money directly to your account; I know some guys doing a similar business to my own, they take direct payments.
posted by Mutant at 1:29 AM on March 11, 2008

My wife sold her stuff at shows for years, but not really online, do I can only speak to the merchant account part.
Are you going to continue to do shows? I assume you don't take credit cards there if you don't have a merchant account. My wife got one so that she could take credit cards at shows, after seeing many sales disappear when people pulled out their cards.
She hated the credit card company, especially surprise chargebacks. She hated having to track down bounced cards (we called the charges in at home after the show instead of using a mobile unit- more charges). She hated the bite they took out of the gross.
But there was no question that we sold 50-100% more with the cards than without.
(She was doing $40-60K in business a year and the merchant account was worth it)
She had a website, but sales were transacted by check(mail) or credit card(by phone).
If you're just going to do it online, PayPal takes some of that hassle away. (Though not the 'bite')

One consideration about a website- do you have a small number of products? My wife had hundreds of different designs, and I was just not up to putting up hundreds of pictures and changing prices constantly. It's a lot of work to keep a site current.
posted by MtDewd at 4:23 AM on March 11, 2008

From my experience with Paypal and my merchant account. It's much easier to defend yourself against fraud/chargebacks with the merchant account. At least you can deal directly with the merchant account folks. With Paypal, it's always been, "sorry the buyer did a chargeback and our hands are tied."
posted by moosedogtoo at 7:04 AM on March 11, 2008

Merchant accounts bill on multiple principles, from bulk to the type of card used and a few other things. Do you have everything mapped out yet? Are you going to take information under your SSL and pass to their gateway, are you going to simply forward their order through SSL to the bank's processing page, etc.

Furthermore, any transaction done w/o a signature present is an unsecured transaction. In many cases, this means that if there's a chargeback issue, YOU LOSE. Each chargeback makes your rates go up significantly. Of course, there are contracts with ways around this for online-only merchant accounts (why not get a terminal too, to take to trade shows?), but you need to negotiate that in advance.

Also, is your SSL "free with your site", or is it actually certified to you, your business, etc. Do you have a business bank account?

I would start by going to your local bank and talking to them. Just say "I want to talk to someone about possibly opening a merchant account." Then talk to that person and away you go.

FYI, merchant transactions charge a per transaction fee (20-50 cents) plus a percentage (1.9 - 8%). If you do this and you want to get a manual terminal too--I suggest adding a check scanner. We have one---it basically turns checks into debit cards and you get your money at midnight. No bounced check issues.
posted by TomMelee at 7:29 AM on March 11, 2008

My experience was that PayPal was much easier and a lot cheaper than setting up a merchant account and it worked flawlessly for the three or so years that I ran my online business. I'm currently in the process of launching another venture and wouldn't hesitate to use them again.
posted by zeoslap at 7:35 AM on March 11, 2008

I don't want to hijack but I have a very similar question but UK based. I'm wanting to take credit card payments online, and again want to look more upmarket than paypal/google checkout - does anyone know of any merchant accounts that let you take card payments online (from the start of your business) preferably with an API rather than taking visitors off-site. I wanted to use HSBC but they require you to have had a business account with them for at least a year.
posted by missmagenta at 10:42 AM on March 11, 2008

When I was looking into this a while ago, one of the 'hybrid' solutions I found was that many of the ecommerce programs (oscommerce, zen cart, etc) have add-ons where you can have the customer enter their credit card information directly on your site, then the info is encrypted and stored for you to manually process the credit card later (using, for example, propay). The percentage that propay charges is a little higher than full merchant services, but the upfront costs are small and there's no monthly fee, so it might end up a better deal in the long run, depending on your volume.
posted by logic vs love at 12:02 PM on March 11, 2008

This is all outstanding advice, thank you! Please keep it coming!
posted by lorimer at 2:20 PM on March 11, 2008

Just wanted to point out that what "logic vs love"'s suggestion is generally considered bad mojo. The absolute LAST thing you want to be responsible for is safe storage of other peoples card information, especially without an IT team to protect and back you. You'll already be a target for thievery---I don't want to think about what could happen storing card numbers locally. Besides, instant processing means instant approval or declining---no need to worry about prepping orders or sending them when the card failed. (also not your customer service issue..."sorry, paypal says no! I can't do anything about them."

The big thing with paypal is that they can decide that you can't have your money. Too many deposits, too few, it's raining---whatever. Lots of people have horror stories about getting locked out. With a merchant account, you have your money at midnight, in your bank account, signed sealed and delivered. Sweet.
posted by TomMelee at 5:53 PM on March 11, 2008

In short (and experiences I have seen), the merchant account will cause you far less headaches in the long run.
posted by Todd Lokken at 8:54 PM on April 11, 2008