By Greg Holden

You’ll need multiple payment options available if you want to attract different types of customers. Having the ability to accept and process credit card transactions makes it especially easy for your customers to follow the impulse to buy something from you. You stand to generate a lot more sales than you would otherwise.

But although credit cards are easy for shoppers to use, they make your life as an online merchant more complicated. You have two options:

  • Let your customers pay with a credit card through an online payment service. This requires them to sign up with the same online payment service. But they gain protection from the payment service’s security methods.

  • Sign up with your own merchant account. This lets you shop around and choose the service with the lowest fees or the best service. But you have to jump through some hoops to get such an account.

You need to be aware of the steps (and the expenses) involved with being credit card ready, many of which may not occur to you when you’re just starting out. For example, you may not be aware of one or more of the following:

  • Merchant accounts: You have to apply and be approved for a special bank account called a merchant account for a bank to process the credit card orders that you receive. If you work through traditional banks, approval can take weeks. However, a number of online merchant account businesses are providing hot competition, which includes streamlining the application process.

  • Fees: Fees can be high, but they vary widely, and it pays to shop around. Some banks charge a merchant application fee ($300–$800). On the other hand, some online companies, such as 1st American Card Service, charge no application fee. But other fees do apply.

  • Discount rates: All banks and merchant account companies (and even payment companies such as PayPal) charge a usage fee, deceptively called a discount rate. Typically, this fee ranges from 1 to 4 percent of each transaction. Plus, you may have to pay a monthly premium charge in the range of $30–$70 to the bank.

  • American Express and Discover: If you want to accept payments from American Express and Discover cardholders, you must make arrangements through the companies themselves. You can apply online to be an American Express card merchant by going to the American Express Merchant Homepage and click Apply Now (or something similar) link.

    At the Discover Card Network merchant site click the Start Accepting link and find your existing “acquirer” or bank that you use for other credit cards, so you can expand your account with that bank to accept Discover.

  • Software and hardware: Unless you depend on a payment service such as PayPal, you need software or hardware to process transactions and transmit the data to the banking system. If you plan to accept credit card numbers online only and don’t need a device to handle actual “card swipes” from in-person customers, you can use your computer modem to transmit the data.

    1st American Card Service lets you use software dubbed Virtual WebLink for processing transactions with your browser, but you have to purchase the software for $39.95 and pay the usual discount rate and fees. This particular package includes a Virtual WebTerminal that lets you enter information manually and send it to the credit card network.

    Other systems require you to get a hardware terminal or phone line, which you can either purchase for $200 or more or lease for anywhere from $17 to $26 per month, depending on the length of the lease.

As the web’s second decade progresses, the payment landscape hasn’t changed dramatically. But things have shifted a bit. The changes actually give buyers and sellers more options:

  • More and more people are paying bills online. This change has been taking place over several years and consumers are increasingly at ease with the process.

  • PayPal is not the only game in town. This payment service is owned by eBay, but it can be used by anyone who wants to send or receive money online. PayPal is used by millions of auction sellers every month, but e-commerce store owners can use it, too.

  • Google is gaining. Google Payments charges fees that are no lower than PayPal. Yet, shoppers and sellers alike flock to it. It provides an alternative to PayPal, which isn’t popular with many buyers and sellers.

  • In-person payments are a square deal. Lots of sellers also sell at flea markets and art fairs. They can accept face-to-face credit card payments thanks to a device that connects to a smartphone and processes the payment by connecting to a credit card service. The best-known service is called Square Register. Similar options are springing up, such as LevelUp, Bank of America Mobile Pay on Demand, and PayPal Here.

  • Overseas consumers are using new and innovative payment systems. At some point, if you accept payments from overseas, you might be asked to accept Western Union money transfers or other payment schemes. It’s the wave of the future as e-commerce becomes globalized.

Creating your own merchant account are useful if you run a brick-and-mortar business that is tied to your online store. But if you don’t want to go through the trouble, you might consider a payment service such as PayPal or Google Payments.

Watch for credit card fraud — criminals using stolen numbers to make purchases. You, the merchant, are liable for most of the fictitious transactions. Cardholders are responsible for only $50 of fraudulent purchases. To combat this crime, before completing any transaction, verify that the shipping address supplied by the purchaser is the same (or at least in the same vicinity) as the billing address.