co How to Choose the Right Merchant Account to Process Credit Cards for Your Small Business Online |

If you’re going to take your business online – whether you are planning to sell a product or a service – there’s an important thing to consider: how will your customers pay you?

Many who shop online will not want to send cash or a money order and wait for the product to be sent; after all, one of the reasons customers are drawn to shopping online is the convenience of paying for a product or service and, in many cases having it available immediately. But in order for that to work, starting a small business will mean having a merchant account that enables you to accept credit card payments on your site.

For small home businesses, the first cash management system that comes to mind is often PayPal. With PayPal, approval for the service is fast – your business will be able to start receiving payments the same day. There are no monthly fees, no start-up or cancellation fees and there’s no annual commitment to be made.

With PayPal, there are also benefits for your customers. They will have the ability to make secure payments whether or not they already have a PayPal account – they won’t even need to have a PayPal account to use the service – which they are likely to recognize based on purchases made from other businesses and auction sites.

It is also simple to add PayPal to your small business website; all you’ll need is basic HTML knowledge or a web designer who has that knowledge and you’ll be up and running in no time.

Of course, though a basic PayPal account offers a number of benefits, there are some drawbacks. There is a fee per payment, and in order to use the basic service your customers will be taken away from your website and to the PayPal site in order to purchase their product or service. This is not ideal, as you want to keep your customers at your site so they can take advantage of all you have to offer and potentially purchase additional products and services as a result.

Another option is PayPal Pro, a more advanced account that will enable you to activate a PayPal shopping cart on your own website. Many of the same benefits exist – recognition of the PayPal name, no start-up fees or cancellation fees. However, in order to use PayPal Pro, you will be required to pay a $20 per month fee as well as a transaction fee ranging between 2.2% and 2.9% + $.30.

If you’re looking for an alternative to the small business cash management services provided by PayPal, you may want to consider using a newer service, Google Checkout. Google Checkout offers fraud protection tools, just like PayPal. Likewise, there are no set-up fees, no gateway fees or monthly fees.

As an additional benefit to the Google Checkout service, Google is also offering merchants to accept credit cards through their services with no transaction fees – at least until 2008. But that isn’t the only additional benefit. Your AdWords campaigns can be integrated with your Google Checkout merchant services account, drawing in those buyers who have their own Google Checkout accounts for making payments.

As you might expect, though, even with its advantages, Google Checkout does have some drawbacks. Customers will only be able to pay using a credit or debit card and not with a bank account. Another major drawback for those who wish to make sales worldwide is that Google Checkout is only available in the United States.

For those who wish to look beyond PayPal, PayPal Pro and Google Checkout, there are additional services that will allow small businesses to be up and running online and accepting credit cards for purchases. One such service is Authorize.net, a payment gateway service.

When you sign up for the Authorize.net payment gateway service, the payments can be processed from a website, retail location, MOTO center or wireless device – making Authorize.net a great resource for brick and mortar businesses that intend to take their business online.

When a customer wishes to make a purchase, Authorize.net will receive the transaction information over a secure connection. Your bank’s processor will send the customer’s information to the Credit Card Exchange which will communicate with the customer’s credit card issuer. The transaction will be approved or denied, and the results will be relayed back to your bank through the Credit Card Exchange, back to Authorize.net and back to you and the customer.

Though this seems as though it would be a long process, it is typically completed in less that 5 seconds. The benefit is that if the customer does not have the funds available to complete the transaction, it will be denied; if approved, the funds will be sent to your merchant account.

The drawbacks, however, include the need to acquire the service through a reseller as well as needing to have a separate Authorize.net account for your retail establishment and your business website. While many resellers will offer the Authorize.net services, they offer others as well and the process can seem confusing or even overwhelming.

As many of the transactions ultimately involve processing and your banking account, it may be better for you to consult with your bank to determine the right credit card processing services for you. When you use your bank’s credit card processing services, however, be aware that they may have different rates applied to different credit cards – MasterCard, Visa, American Express, Discover and others. Bank rates may also be higher for credit card processing if it is not one of your bank’s primary activities.

Therefore, it is important to look at all of your options before choosing the best way to meet your small business cash management needs. Talk with small business consulting services; ask questions and get answers. The advice that you receive may be different if your business has been established in a brick-and-mortar location than it would be if you were just getting started with a small home-based business.

Remember, if you are just starting out with a small home-based business, it may be to your advantage to start with the basics. You may want to start with PayPal or Google Checkout, especially while you are getting your business up and running. Alternately, if you have established your business already, try talking with the company that currently manages your credit card processing; they may be in a position to give you the best advice.

Caroline
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