IT DevWorks specializing in ecommerce sites and Authorize.net integration.

Page 3—How to Build Your Own Shopping Cart

On the previous pages, we discussed the ecommerce payment process, digital certificates, and payment gateways. Here, we talk about merchant accounts.

Merchant Account

Customer payments are processed through a special bank account, called an Internet Merchant Bank Account. When you deposit a check from someone into your regular bank account, your bank verifies the funds at the issuing bank and coordinates passing the funds to your account. Likewise, when a customer pays at your website, the merchant account interacts with the issuing bank and other parties to ensure the funds are available and to deposit your money into your regular business account at the end of the day.

Merchant accounts are big business and there are lots of vendors. Merchant accounts are often bundled with other products or features. You'll want to consider your customers, how you expect them to pay for your products, and the features of your site, when assessing your options.

Where to go

Banks, credit card companies, and pretty much every large financial institution offers merchant account services. Just try googling “merchant account.” Various comparison charts, guides, and reviews can be found on the web that may help narrow your search. For example, consumer guides contains a list of merchant accounts as does .

Information you’ll need

When purchasing a merchant account, you’ll need to prove you are a legitimate business and give some idea of your expected sales. Plan to provide the following information:

business license (even if you are a sole proprietor)
domain name or other verification of your online store
products you're selling, prices, and expected sales quantities

You may also need to deposit some minimum amount in your new merchant account.

Cost

Merchant accounts typically charge discount rates for each transaction along with other monthly or transaction-based fees. The primary cost consideration is the qualified discount rate, the percentage you will typically be charged for each transaction. Generally, transactions are charged one of three percentage rates, depending upon the type of transaction. These charges may be assessed at different rates for credit cards versus debit cards:

Qualified rate—percentage charged for “normal” transactions where the customer uses a standard, major credit card and the transaction proceeds normally. This is the lowest rate for a transaction and the one usually quoted by vendors (known as the discount rate). They range anywhere from 1.5% to 6.5%.
Mid-Qualified rate—percentage charged for non-standard cards. Usually 1.5%-2% higher than the qualified rate.
Non-Qualified rate—percentage charged under special circumstances, such as if a business card is used; if all required information for a transation is not supplied; if the end-of-day settlement isn’t completed on time, and so on. Typically 2%-2.5% higher than the qualified rate.

Among the other fees you can expect:

Authorization fee—charged each time a transaction is sent for authorization (average 10 to 20 cents per)
Statement fee—charged monthly for your bank statement (typically $5 o $10)
Monthly minimum fee—may be adjusted if qualified fees meet minimum requirements. (See qualified rate above.)
AVS (address verification system) fee—added anti-fraud protection (recommended)
Batch fee—assessed once a day when transactions are sent and monies deposited into your regular business bank account
Gateway fees—may be charged for interacting with your payment gateway
Annual fee—charged by some merchant accounts
Chargeback fee—assessed if you need to chargeback an amount to a customer’s account, usually quite hefty

In addition to all of the above, there may be setup and/or termination fees. Remember, when researching merchant accounts, to contact the financial institution and determine all of your costs before making your decision.

Next: Building Your Checkout Pages