Monday, June 17, 2024

Accepting credit cards through a reseller service

Looking for a way to accept credit card transactions online but can’t meet your bank’s requirements for a Merchant Account? One of the many ecommerce services that proliferate on the Net may be the answer to your problems.

Resellers handle the transactions on your behalf, then issue you payment for sales according to a pre-arranged schedule. You do not need a secure line, since the actual transaction occurs on their site, not on yours. Reseller services are easier to arrange than is a merchant account through the bank, and although you will probably be asked to pay a lump sum at startup, it will be much less than a bank would require.

However, caveat emptor applies. Not all reseller services are equal and not all are reliable. Horror stories abound about reseller services that don’t measure up. Before you sign on the dotted line, consider the following:

What happens if your reseller goes broke or shuts down? In most cases, you will lose the money you invested in their service, as well as any sales fees that are owing to you.

What’s their track record for transferring sale funds to their merchants? Do they transfer every couple of weeks or might you wait for months to be paid?

Do they collect any local taxes that may apply to sales? If they don’t, you will be the one who will have to deal with the Taxation Department.

Do they provide timely and accurate sales reports? Without proper reports, you won’t have the income tax information that you require come tax day.

Are they using the sophisticated technology that can intercept credit card fraud before it happens?

Do they have a good history of responding to email or phone messages?

What are the terms for canceling the contract? Are you locked in for an extended period? Is there a hefty penalty for cancellation?

So how do you find a service with a good track record? I’d be leery of the “Accept Credit Card” spams that fill your mailbox. In my view, the best way to find a good reseller is to subscribe to one of the mailing lists used by Internet Merchants, and ask list members what services they are using and what their experience has been. Be cautious of effusive testimonials. At least some of the glowing testimonials that you encounter are written by marketing professionals and given to associate resellers to distribute as their own opinions.

Most resellers charge an array of fees for their service. Since the reseller is essentially taking a risk on your behalf, expect higher transaction fees than a bank will charge for a Merchant Account. Shop around and compare rates, but realize that cheaper is not always better. A low-priced service may not be building the necessary financial reserves and therefore may not have long-term stability. Remember, if they go broke, you lose your startup fee and any other monies tied up in their service.

Here are the fees that you might reasonably expect to be charged:
– A set up fee.
– A monthly transaction fee
– Transaction fees per sale
– Credit card discount fees (a percentage of total sale)
– Holdbacks. As a safeguard against chargeback losses, many resellers will hold back a percentage of each month’s transactions for a period of several months.)
– Chargeback fees. (Can range as high as $50 or more per chargeback)
– Fees for refunds requested by the merchant.

One final thought on reseller services. Almost all of the services you encounter on the Net are available only to residents of the US. Residents of other countries may have to look hard to locate a service that is available to them. As a Canadian, I found only one service that met my needs when I started up two years ago.

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