How Does E-Commerce Work This is our most-frequently asked question. We all know people are buying online and that we have to accept credit cards if we want to stand a chance in this new digital age of computers. So let's take a look at the key components of E-Commerce.
1. A product or service to sell online
2. A Web Site to let people view the product or service
3. A Shopping Cart to hold items while looking around the site
4. A Secure web page for the checkout
5. A Method of accepting payment
- Cash (Mail In)
- Check (Mail In)
- Money Order (Mail In)
- Credit Card (Merchant Account)
6. A Gateway to verify the consumers credit card
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How Do I Accept Credit Cards Online Of all the methods listed above, accepting credit cards is the most recognized and wanted method of payment. Receive your money right then and there and don't wait for a check to arrive and clear before sending out your product. The key term to remember here is "Merchant Account". A Merchant Account will allow you to collect payment for your product via any type of credit card and allow the funds to be deposited into your bank account. Back to Top
What Is A Merchant Account As stated above, a Merchant Account will allow you to collect payment for your product via any type of credit card and allow the funds to be deposited into your bank account. The following describes the two types of Merchant Accounts and their differences.
3rd Party Merchant Account - A good example of a 3rd party merchant account is paypal. Paypal sits between a real merchant account and your web site, they collect credit card or electronic checks for you and deposits them into your paypal account. Here are some of the key points with this type of an account to keep in mind.:
- Paypal will charge you a higher transaction rate for each transaction than a real merchant account.
- The person buying from you will need to set themselves up in paypal. (No Cost)
- Paypal will not charge you any other fee except the transaction fee. A real merchant account has many types of fees.
- When you start making sales of around $1,000 to $1,300 per month you may want to switch to a real merchant account.
Real Merchant Account - A real merchant will allow you to interface directly with the banking network through a gateway (Authorize.net being the largest). A merchant account comes with a merchant identification number. If you just have a internet business without a brick and mortar storefront then what you get with your merchant account is the gateway account and a web based virtual terminal. The virtual terminal will allow you to login to the gateway via the internet and process charges manually or give credits for returns. If you also have a brick and mortar storefront then you will also need a point of sale (POS) terminal which is the little box that allows you to swipe credit cards. This POS terminal is usually hooked up to a modem and dials out to the gateway to make the transaction for you.
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Do I Need A Merchant Account This will depend upon the type of business your in and how you think your customers would react if you don't accept credit cards. We suggest you start out with a paypal account until your sales are great enough to support a Merchant Account. Paypal allows you to receive credit card payments via a E-Mail gateway with no upfront cost but a higher transaction fee. eDirectHost's web site has built in support for paypal.
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Can I Go Directly To Authorize.net and my Bank? Yes you can but what you will find out is that by going directly to Authorize.net they will charge you a $199 setup fee compared to our negotiated rate plus your bank will charge you a setup fee between $40 and $80. The banks direct rate is usually higher also.
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