After 4˝ years online, I still use a third party merchant account. I know people wonder why a "professional organization" would do that, since it is considered by some to be UNprofessional. So, I'll tell you!
When I opened my first web site, I researched regular online merchant accounts. Talk about a headache! It was gruesome. There was SO much difference in what they offered – there was SO much hype – and, it was expensive for someone just starting out.
I decided I would wait until my new business was two years old (that was the requirement), and just get a merchant account with my own bank. When the time came, I checked it out, and found that I would STILL be paying over twice the amount I was paying a third party merchant account to process payments.
That didn't make good business sense to me! And, by that time, I had heard the horror stories of having your own merchant account for an online business. There are major problems.
The main problems are fraud issues. Affiliate programs are especially susceptible to fraud. Any expensive products that can be resold are also at risk.
If you have your own merchant account, YOU will be expected to check every order for fraud. By this, I mean some thief using stolen credit card numbers. IF fraud gets by you, YOU will be liable to return the money to your merchant account provider, since they paid you. And, you may not HAVE it by the time the fraud is discovered.
Then, What Happens?
Your merchant account provider places a "freeze" on your checking account! I've heard of providers leaving this freeze on bank accounts for up to NINE (9) months. You will also lose your merchant account – as if YOU committed the fraud!
Now, mind you, you may have funds in that account over and above the amounts of the fraudulent transactions. Doesn't matter. They freeze the ENTIRE bank account at LEAST until they have every cent of their money back – PLUS the time it takes them to release your account. I've heard of the freeze staying in place for six months, EVEN if they got all their money back in the first 30 days!
Do not believe for a minute that they give a damn about any other funds they have tied up. They don't! How are you going to operate your business without money? In fact, how are you going to LIVE without the money they tie up?
I know people who have been completely wiped out because they spent money paid into their bank by the merchant account provider. Then, MONTHS down the line, it becomes apparent that fraudulent transactions accounted for some huge amount of the sales, and they had to cough up thousands of dollars – already spent.
Thieves Checking for Good Credit Card Numbers
Then, you have the credit card scammers using your order page to check for good credit card numbers! They use some routine to input random numbers – just like the telemarketers dial random telephone numbers.
They may only put through sales of one dollar, or less. All they are doing is noting which numbers go through. THOSE they know are valid credit card numbers to be used in one scam, or another.
How does that hurt you? YOU are paying your merchant account provider a FEE for every transaction! When the thieves are running through hundreds, or even thousands, of numbers, that can add up FAST.
Do you think your merchant account provider will refund those fees to you when it becomes apparent what's going on? If you guessed yes – guess again! They don't CARE! The transaction happened – you PAY!
Not So With a Third Party Merchant Account!
Now, I can't actually vouch all third party merchant accounts. And, I'll be honest and tell you that, in two years, I went through four of them that didn't work out. But, for the past 2+ years, I've had one that works beautifully.
THEY check for fraud! They have people on staff who do nothing else. If someone started running numbers through, they'd catch it in a flash. We do NOT pay for bad transactions!
They even send us a warning if the machine check flags a transaction., i.e., name doesn't match address, comes from a country known for fraud, etc. They warn us not to deliver until they have checked it out, always within 24 hours – usually MUCH faster.
Now, it's true – they deposit money into my bank account twice a month, rather than every day. But, so what? Do I NEED it every day? Nope. AND, for all this protection, I pay less than HALF what I would pay for a merchant account that gives me NO protection whatsoever!
So, while I watch many of my good friends online pulling their hair out, paying for fraudulent transactions, paying for the scumbags to check credit card numbers, so they can look "professional" - I rest well at night. I'm also protecting my business, my reputation, and my MONEY!
Sometimes, it just pays to outsource certain services! And, your merchant account is one of them!
Yes, I WILL tell you which third party merchant account I use. And, I'll tell you the link is an affiliate link. I've used this company for a long time, and recommended them constantly. I've just decided to finally take a commission.
Look here: i-Cop.org/creditcards.htm
jl scott, ph.d., Author Copyright © 2003, All Rights Reserved
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dr. jl scott is the Founder of the International Council of Online Professionals (iCop™) All iCop Members receive a complimentary copy of "Rules, What Rules?" - the eBook that teaches the FTC Regulations in simple language – and How to Use Them to Your Advantage! http://www.i-Cop.org/quickstart.htm
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