Should I accept credit card for my small business? Most business owners ask this question when they decide to start their online business.
Did you know that 20%-70% of the online transactions were credit card based in 2010? Even though people might claim the stats are declining, those numbers are still huge considering the number of people online!
Why You Should Accept Credit Card for your Online Business?
Reason #1: Convenience
Nothing beats being able to pay conveniently. The fewer barriers you have for your customer to pay you, the more chances that they will actually buy something from you.
From a customer’s viewpoint, it takes an awful lot of time to write out a check, sent it to you and wait for your confirmation. From a seller’s viewpoint it takes more time to get the check, take a trip to your bank, process the check and give a confirmation to the buyer.
Suppose you give your customers two choices. One will take you less than 10 minutes to complete and the other 10 days. Which do you think the customer is going to opt for?
Reason #2: Buying Power
Many business owners accept credit card for one simple reason. People buy a whole lot more with credit cards than they do with cash in their hand.
It’s human logic. When you hand out money physically, you see the money going out, which automatically stops you from making more purchases. On the other hand, when you use a credit card, you don’t actually see that you are spending money. So they spend more than they actually need.
No wonder why many people get into credit card debt.
Reason #3: Impulse Spending
Most of us are impulsive buyers. We see an advertisement on the internet which really attracts us. We are all fired up and ready to make a purchase. If you have immediate access to buy the product and there is a convenient way to make payment, you buy it.
If you happen to have a credit card, you can purchase the product or service even if you do not have any money currently. Most credit card companies allow a certain number of days to repay the money. So you can even make sales to those who do not have money to immediately hand out to you.
Reason #4: Increased trust
Trust is a very important element when it comes to selling and buying. A customer buys from you when they feel that they can trust you enough.
Accepting credit cards means that you value your customer’s time. Not only that, it also helps them to reassure themselves of the quality of your product or service. If they feel that your service or product has not lived up to its claims, they can always initiate a chargeback to get back their money.
Reason #5: Reach more customers globally
When you decide that you will be accepting credit card for your business, you are inviting a global audience to try out your product or service.
If you have an online business, most likely, your customers include overseas people as well.
Accepting credit cards means that it automatically takes care of foreign currency transactions and other hassles of making payments to international merchants.
If you want to increase sales, then accept credit cards on your website.
How to Get Started with Accepting Credit Cards on your Website?
I’m glad that you have decided to accept credit cards on your website. You took the right decision.
In order to get started, there are two ways for accepting credit cards.
- With merchant account
- Without merchant account
Using a Merchant Account
If you already have a local business and have people swiping their cards at your store, then you already have a merchant account.
In case you don’t, a merchant account is nothing but your local bank account which can process credit card payments and debit it onto your account. At the end of the month, you can withdraw the money in your account.
For small business owners without an internet presence, this the most accepted mode of credit card transaction.
But, it’s not as easy as it sounds. Different banks have different requirements for opening a merchant account. Some will require a high initial deposit, and some might require that you maintain a certain minimum balance each month. It can also take a few days and a lot of paperwork to open a merchant account with your bank.
If you cater only to local customers, then using a merchant account is the best way to go ahead. The reason is that, using a merchant account, you are not involving any third party to handle the funds. Also, the commission rates are pretty low compared to payment solutions without using a merchant account.
The downside is that, you will be handling the credit card transactions.
Note: Even if you have a merchant account, you still need a payment gateway to act as a virtual credit card station. I will cover payment gateways in the next section.
Accepting Credit cards without a Merchant Account
A word of warning: It’s always recommended to have a merchant account and not let third party handle your credit card transactions.
In this method, we use a third party for collecting and processing credit card payments.
We refer to them as payment gateways in general. Note that some payment gateways will collect money on your behalf without the need of a merchant account. Still, some gateways will require a merchant account and will only act as a virtual credit card station.
Payment gateways are very popular for online business owners who are just starting out, or if you do not have a colossal volume of transactions each month.
It’s also much easier to get started with. You don’t need a lot of paperwork or worry about all the technical details.
It’s as easy as signing up and integrating a few lines of code onto your website (For non technical business owners, you can always pay a freelancer to integrate the solution to your website).
Some of the popular payment gateways and services for accepting credit cards payments online
Although I’d love to list every available payment processing solutions on the internet, it’s not practically possible. So I have chosen some of the most popular gateways and related services.
I have arranged them in alphabetical order and not on the order of their usefulness. There is a reason I did this. There is no “one size fits all” solution in the digital world. Each business has its own needs and so the best option for them will vary.
Take your time to read what I have to share with you and also spend some time on the official website. Check out the FAQ’s and see if you can get all the answers. If you can’t find an answer, send them an email or use the contact form.
One advantage of contacting payment gateways and services is that, you get to know about their customer care program. If they take a lot of time to respond, don’t go with them. If they are quick to respond and is patient enough to clear your dumb doubts, then you know you can trust them if you have any issues.
Also, I am not giving you any “figures” or “costs” associated with any gateways or services. The reason is that payment rates change over time. You may be reading this article several years after it was written. So, it might be even more difficult to figure out whether the costs hold true or not.
You should get an overview of the features and the quality of service from this page. Then you should check out the business home pages for the latest information.
2Checkout
2CheckOut, founded by Alan Homewood in 2000, is a popular and leading ecommerce payment solution online.
They are a BBB accredited business since 08/21/2001 and have an A+ rating. Many people report positive experience with them as well. I haven’t used 2CheckOut personally as a seller. However, I have used them as a buyer.
They offer all standard features most payment solutions provide including invoice, history, fraud prevention etc. To be on the safe side, make it a habit that you call the number on the order form to confirm they did indeed place the order.
2Checkout offers recurring billing, hosted payment and also non-profit solutions. One big addition to this list is affiliate payments. With affiliate marketing, you can reach more customers. The downside is that you need to give your affiliates a percentage of your earnings. This is their incentive to promote your product or service.
One downside I noticed with 2checkout is that once I raised a complaint regarding my purchase and I did not get any reply. It must be some 2 years back. I must say that I am very patient!!! So, if your customer has some complaints it’s better to ask them to contact you instead of 2CheckOut.
Head over to 2CheckOut.com and explore their features and see if it is the right solution for your business.
Amazon Checkout (Officially: Checkout by Amazon)
Checkout by Amazon is a payment solution provided by amazon.com.
One definitive advantage you have with checkout by Amazon is the brand value and trust associated with amazon.com. You are making it even easier for users who have an amazon.com account. They can readily pay by logging into their account. No need to re-enter credit card or shipping address. This definitely takes one more barrier away from online sales.
They offer integrated solution, meaning your users can make payment without leaving your site. It’s a more streamlined and positive experience for a buyer.
“Familiarity breeds contempt”. The idiom is not applicable in online sales. The more familiar people are with a website or a method, the more they tend to use it. Not many people will want to sign up to another provider and start all over again.
You can browse checkout by Amazon site for more information and how-to style guides.
Amazon Simple Pay
Amazon simple pay is another offering from Amazon exclusively for people having a game marketplace. You have the option of choosing single time payment, subscriptions, donations and more.
Head over to Amazon simple pay homepage and browse the latest features and their pricing.
Amazon PayPhrase
Note: This Payment option will be retired on February 20, 2012.
Amazon PayPhrase is yet another payment solution from amazon.com. This one is quite interesting if you ask me.
PayPhrase lets you speed through checkouts with a unique phrase. You have to enter your PIN on the second step as an added security measure. This lets you save time and you need not log in to your account. “I love Yahoo” can be considered as a phrase that you use to checkout.
As a customer, if you need to allow your children to make purchases online, you can allow them a PayPhrase with a spending limit. This ensures that they do not spend more and also your credit card information is safe.
As a seller, you are providing convenience for your buyer. It does not work well with all online businesses though.
Authorize.Net
Founded by Mr. William McKiernan in 1996, Authorize.net is a BBB Accredited Business since 11/05/2009.
Authorize.net provides the standard options all other payment gateways provide. You need a merchant account to work with them though. They also provide electronic check facility.
Personally, I haven’t used their service neither as a buyer nor a seller. From what I have heard (directly from people who used the service) and seen (on forums and social media sites), not many people recommend using them for your business as their customer service seems to be very poor.
Alertpay
Alertpay is a great alternative to PayPal. It’s a complete payment solution. Meaning, you don’t need a merchant account to receive money.
You can use e-wallet service or accept payments through credit card. Since this post is about accepting credit card, I’ll dig into the credit card features of Alertpay.
They do allow credit card payments to be processed and the money stored in your online account. You can then later withdraw it into your bank account. No need of merchant account, any account will do.
Alertpay has three different account modes. Personal Starter, Personal Pro, and Business account. Each of them has different fees and features. Select one which best suits your needs.
One added advantage is that Alertpay does not force people to sign up for their service in order to pay. They can just enter their credit card details and pay you.
CCAvenue
CCAvenue is a popular payment solution for people from India. One advantage of using them is that they accept a lot of local banks and almost all credit cards. So that’s a plus point.
However, the downside is that it’s incredibly difficult to get started with them. They also have huge set up fees and no live testing feature.
I have asked a number of my friends who has used or are using this service and they warn me to stay away due to the pathetic customer care service. Also some time back, it was in the news that their site got hacked through a simple SQL injection hack and the database published. What’s more shocking is that they stored user information using simple plain text. It resembles the hack that happened to SonyPictures.com.
You should choose CCAvenue only after trying all the other payment options available to you.
Ccnow
CCnow is a subsidiary of Digital River. You can use CCnow as an alternative for merchant account. They handle all the processing while you continue to develop your business.
They have received some criticism for bad customer care service, but that’s common with almost all online businesses.
If you want a simple credit card processing solution, then Ccnow can be a good solution to look into. Make sure you checkout their site before you finalize on your payment solution.
Clickbank
Ah. Clickbank is one of my favorites when it comes to online business. It’s not actually famous for payment processing. It’s famous for affiliate marketing.
Most people who use clickbank are info product marketers who sell information based products. It’s not ideal for online stores or other sort of businesses. They are great for selling ebooks, informational courses and other digital goods.
The per transaction fees is pretty high with clickbank. But they take care of merchant account, payment processing, affiliate management, paying affiliates and a whole lot more.
Although you can sell services via clickbank, their 60 day refund policy means that even after the customer users your service, they could ask for a refund and clickbank will give it to them even against your will whether you provided what you promised or not.
E-Junkie
E-Junkie is similar to clickbank. Only difference is that it does not manage your merchant account. You need to have a separate payment processor to facilitate collecting money for your sales. It can integrate smoothly with clickbank, PayPal and a lot of other payment processors.
You ask me, then, why did you include it in this list? Well, it is because E-Junkie is great for selling digital goods securely. They will host the files for you and also has a very low fee per month. Be sure to check out E-Junkie if you are into digital goods sales.
Who doesn’t know Google? Not many.
Google checkout is a payment solution from Google Inc. It’s very convenient for users to buy using Google Checkout. All they need to do is have an account with Google where they can store any number of credit card and shipping addresses.
As a seller, you are rewarded with a very easy to integrate system. There are no upfront fees to pay. The business model Google Checkout follows is per-transaction model. Google will take a small cut from each sale depending on your sales volume. Obviously, the more your sales volume is, the less you need to give Google per transaction.
If that’s not enough, Google checkout also gives you the ability to link your checkout account with your adsense account. If you make money via adsense, you can use it to offset the cost of transactions. That’s really convenient.
Now, here comes the downside. It’s integrated with Google, which some considers as “evil” even though their motto says otherwise. Some people don’t trust Google enough to give their credit card information and so you may lose out some sales from those “doubters”. No electronic check facility for you either. Lastly, if you are not from US or UK, forget it. You can’t sign up to sell using Google checkout.
Kagi
Kagi is an online store building application, payment processor, gateway, and merchant account rolled into one single product.
The stores are not pretty though. It’s best for small business owners who aren’t interested in an eye catching design, all the extra functionality, and want to set up the store in minimum time.
Pricing is competitive and they do not have many complains either. Check out if Kagi works out for you.
PayPal Standard
PayPal is the big daddy of online payments.
You can use PayPal standard to accept credit card on your website. The good part is that it’s very easy to use, secure and reliable in terms of uptime.
With PayPal, you don’t need a merchant account. All the money is collected in your online account and you can withdraw it to your bank account. Another advantage is that you can use the funds in your PayPal account to fund your other online purchases as well.
There are some shortcomings of PayPal too if you ask me. One thing is that, if you are using a standard account, your buyer needs to have an account with PayPal to pay you, even if they are using their credit card. In my opinion, it’s a huge minus point. You are increasing the roadblocks for your customer to pay you.
If you are from India, it’s best to avoid PayPal for your business payment processing. They have all sorts of crazy rules like
- You are required to withdraw funds to your bank account within 7 days of receiving money. Not very good if you don’t receive huge amounts each week.
- You cannot use PayPal balance to make any purchase online
- You are limited to 3000 $ transaction in one single transaction. That means you cannot sell anything above 3000$ without billing the customer multiple times (if you are selling high value items). Not sure how the user would feel if they see several charges on their credit card. Not pleased in my opinion
Not many people will want to create an account with PayPal and store credit card information if they are not familiar with it.
PayPal standard has three different accounts within it; Personal, premier and business. You can choose one depending upon your needs.
Don’t trust PayPal too much in my opinion. They are notorious for freezing your account for all sorts of reasons. Another downside is that if your customer raises a chargeback or dispute, most of the time, PayPal sides with the buyer no matter what proof we give. So use PayPal only as an additional mode of payment and not as your primary payment processing system.
PayPal Payflow Pro
Payflow is a payment gateway offering from PayPal which can integrate with your merchant account. The benefit is that your customer does not need a PayPal account to pay for your service. The best part is that if they wish to, they can pay with funds in their PayPal account too (not for Indians).
There is a set-up fee and monthly fee associated with this service. Also you get a set number of transactions with the fees. When you go over the number of transactions, you are charged a small per transaction fee.
I recommend that you use this option if you want to use the credibility, easy-to-use features and functionality of a payment processor. Check them out by going to their home page and see if you are good to go with PayPal Pay flow.
PayPal Website Payments Pro
It’s a complete payment solution from PayPal. Website Payments pro is currently available only to users in US, UK and Canada. You don’t need to sign up for a separate merchant account.
Customers can pay without leaving your website with their credit card or PayPal balance. No need for users to have an account with PayPal.
It’s almost the same as Payflow but comes with a merchant account as well. Currently, you don’t need to bother about setting up a merchant account with Website Payments Pro. It’s all packaged as one for you.
Payoneer
Payoneer is not your usual payment processor. It’s more beneficial for people who are into freelancing on Odesk and selling services on other Payoneer partnered business.
You cannot integrate Payoneer service as a checkout option for users. However, you can use it to mass pay people on your site.
You are paid the money you make from other websites into your Payoneer prepaid MasterCard. You can use this to withdraw money using your local ATM or make local purchases. You can also use this as a debit card and make purchases from online sites.
If you are an Indian user, you are in for another shock. Payoneer has blocked users from withdrawing money through their ATM or making local purchases.
Propay
Founded in 1997, Propay is one of the oldest payment processing solutions found online. It’s an A+, BBB ACCREDITED business since 07/25/2000.
They provide a lot of payment processing solutions. It’s like a cross between PayPal and a normal payment gateway. You need to log into your propay account and request withdrawal of the money.
There are a lot of complaints online regarding them freezing account, double billing customers, and other bad business practices. So make sure you do a thorough study online before choosing them.
Regnow
Regnow is a subsidiary of Digital River just like Ccnow. This is supposed to be a software publisher oriented site.
All you need to do is upload your software and make a few tweaks. You don’t need a store, you can use Regnow store to display your product.
They are not accredited by BBB and have an “F” rating which is really bad (One one location. Other locations does not seem to have any ratings on BBB). There are also some complaints showing up online regarding their business practices. Be careful before you sign up with Regnow.
Shareit
Shareit is another subsidiary of Digital River just like Ccnow and Regnow. It’s also geared towards people who sell software and games.
They have two packages to choose from as is based on a pay-as-you-go model. I couldn’t find any reliable information online nor could I contact anyone genuinely using this service. Use due diligence when using this service.
TrialPay
When I first heard of TrialPay, I smelled scam. When I took a closer look, it’s not a scam at all. It’s a revolutionary method of selling online. They are a BBB Accredited business since 05/01/2007 and have an “A” rating.
Basically, they allow people to buy your stuff for free if they complete offers trial pay has in store for them. If you have ever heard of CPA or Cost Per Action business model, this should sound familiar. In CPA, people are paid to complete certain tasks.
As a seller, you will be credited the money you want. The revenue comes from the CPA offers your customer completed. On their site, they have a case study of Lavasoft who makes millions using TrialPay.
A word of warning: Not many people like the idea of buying something else to get your product. So you might lose out on sales if you make this a primary business model to collect money.
Here is a trick. If you detect users are leaving your site without buying, send a popup saying that you can get it for FREE using TrialPay. This way, you not only do not lose regular customers, but gain some “freeloaders” as well.
WorldPay
WorldPay is a BBB Accredited Business since 03/19/2010. Note that only 3 of 5 Locations of WorldPay are BBB Accredited. They are one of Europe’s largest payment services providers according to their website and offer most features a normal payment gateway would offer.
I was able to talk with a few people who used WorldPay and almost all of them asked me not to opt for this service. #1 reason most people gave me is that they shut down their accounts for no particular reason and that customer service is terrible.
It’s up to you if you want to use this service. However, make sure that you try out other payment gateways before zeroing down on WorldPay.
Accepting credit cards: What to look for?
In general here are a few tips which will help you decide which payment processor to choose when you are looking to accept credit cards on your site.
- Do they accept a wide variety of credit cards? (MasterCard, Visa, Amex, American express and so on)
- What are their rates per transaction? Is it too high or too low compared to other providers?
- Do they have a set up or monthly fee?
- How often do they do payouts? Monthly, weekly or quarterly?
- Do they allow checkout from within your website or do your customers have to go to their website?
- Do they allow people from your country to set up a business with them?
- Do you need a merchant account to work with the solution?
- Is it a complete ecommerce solution (including shopping cart, gateway, and merchant account), or a payment gateway alone, or a gateway + merchant account solution?
- Check out some of the live website using their service. Does it work well?
- Does the service offer easy payment for your customers? Or do they need to create accounts to pay you?
- Are they trustworthy websites and how long have they been in business?
Wrapping Up
When you want to start an online business, you must put some time apart for in depth research. You can’t take risks with your payment system.
The opinions discussed here are purely my experience or what I have heard from others. Try them out yourself and see if it is a good fit for your business. It does not always make sense to go with the most popular company just because they are popular. Likewise any company is bound to get criticized. So don’t just leave out companies just because you see a bad review!
