Should I choose a merchant account or 3rd party processor?
- by Jeff Cohen @ iMerchantNetwork.com

If you are a brand new business, have limited funds or you anticipate processing less than about $1,000 per month in credit card transactions, I do not recommend a credit card merchant account for your business. Why? The list of fees including monthly minimums, gateway/terminal fees and the cost of bank statements by accepting credit cards may not be cost effective for you. You may want to test your business model using a third party processor and switch to a merchant account when you are sure your business is expanding.

Standard merchant account fees:

Monthly minimums = $25 per month
Statement fees = $5 - $10 per month
Virtual Terminal / Gateway fees = $10 - $35 per month

Other merchant account fees include the following:

• mid and non-qualified rates
• batch fees
• charge back fees
• AVS fees
• gateway fees
• terminal programming fees
• customer service fees
• annual membership fees
• and more...

(remember to always read the fine print, especially for a merchant account agreement).

Third Party Processors

You'll find that the discount rate and transaction fees are higher with a third party processor but many people find it worth the price. Why? There are no other fees involved (maybe a one-time-startup fee). Even better, third party processors provide everything you need to get started in just a few minutes. Usually, all you need to do is insert a few lines of .html code into your web pages and you are all set to process credit cards.

Note: If you do choose a third party processor, save your monthly sales revenue sheets and statements. You will need these later on if you want a merchant account at competitive rates. Banks & merchant processors will insist on seeing a history of your processing transactions. It helps greatly in their decision making process (and your rates!). If you use a third party processor and don’t save anything, you will generally have NO leverage when applying for a merchant account later on.

A few third party payment processors: PAYPAL, 2CHECKOUT.COM & CLICKBANK.

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