To earn any substantial amount of money from an Internet business website, you simply must accept credit cards, and probably online checks, for your customer's convenience.

Third party credit card processing companies are easy to find, and their services are available to practically everyone. Set up fees, if any, are reasonable and often you can begin immediately to accept credit card payments at your website.

But before you choose a third party processor, there are some things you need to know to protect yourself and get the best possible advantage for your Internet business.

Essentially, there are two methods by which you can accept online electronic payments for products and services sold at a website:

• set up a full blown credit card merchant account with a bank
  
• employ the services of a third party payment processor

Do You Really Need a Merchant Account?

Typically, a full blown merchant account costs a minimum of several hundred dollars to set up. Still, you may feel the need to have your own merchant account, as the fee per sale is often considerably cheaper than a third party processor, and it leaves you in full control of each sale.

But beware - there normally are binding contracts involved with opening and administrating a merchant account. In many cases an investigation of your personal credit history is required. And you can find yourself obligated for monthly lease payments on sales processing software, whether or not you make any sales that month.

You may also be required to validate each credit card submitted for payment by a customer, and manually process each payment yourself. This could turn into a tremendous work load for you. And the less expensive fee per sale may not compensate for the monthly lease payment, unless your monthly online sales are already at a substantial level.

If you are starting up an Internet website business, we strongly suggest you investigate using third party credit card processing, at least until your business profits can support the cost of a full blown merchant account.

Don't Get Burned!

I've received emails from several of my own clients who expressed regret at jumping into a 12 - 24 month merchant account contract, with no recourse to cancel it. It was a costly mistake for each of them, as their website profit had not yet grown to offset the monthly contract payments. Just remember this - those payments are due every month, even if you don't sell a nickel's worth of your own goods.

Now my intention is not to bash that type of payment processing service, or the reputable companies who offer it. I only to wish inform you, so that you may be better able to make a wise business decision in this area.

If you wish to investigate further into opening your own merchant account, I suggest you search Google or another major search engine using the search term "merchant account."

==> Google.com

Third Party Credit Card Processing

This is by far the safest way for a beginning online business to accept credit cards and electronic checks. A third party processor maintains their own merchant account and will process your sales through that account. In return for their services, they will keep a set percentage, and sometimes a small transaction fee, from the amount each sale you make. The percentage and transaction fee varies widely, from as little as 2.75% to as much as 15% to 20% - depending on which service you decide to use.

Your first reaction may be, "Why should I give away a percentage of my sales?"

In truth, the third party processor will probably end up being much less costly and troublesome than managing a costly merchant account. Typically there are no binding contracts, no monthly fee (unless you sell something) and all sales are automatically processed for you - leaving you with more time to devote to the critical task of marketing your products and your promoting your Internet business.

Here I'm suggesting only the third party processors that I currently use in my own business. Others are available, of course. These three I know and trust.

2CheckOut

I've found many substantial advantages to using this company as my primary payment processor at all of my websites. Here are some of those advantages.

- Reasonable deduction - 5.5% & 45 cents (as of this writing) from each sale. Some others take as much as 15% to 20% off the top of each sale.

- Accept all major credit cards and echecks.

- Outstanding credit card validation and fraud protection system.

- Sell digital products (ebooks, software) OR hardgoods/auction goods. Some others accept digital products or hard products only. Also recurring "subscription" payments can be handled and processed for membership sites.

- Download page cloaking. Rather than being redirected right to your download page, allowing your customers to copy your URL and give it to all their friends, they receive an email receipt direct from 2CheckOut, containing a cloaked expiring link with which to access the product.

- Built-in fully functioned shopping cart.

- Allows recurring billing for membership sites, subscriptions, and ongoing services.

- No page restrictions and no price limits. No limit to the number of products.

- Quick configuration for new products - about 2 minutes and you're ready to sell.

- Electronic deposits to your own bank account every two weeks, within 2 days after close of each sales period.

- One-time $49.00 US set-up fee. No other fees unless you sell something.

- Go live and start accepting payments within 10-15 minutes. No waiting period and no laborious approval process.

==> 2CheckOut.com

Clickbank

Clickbank is one of the oldest and most well known credit card processors on the Net. Their affiliate account is free, but there is a one-time $49.95 charge to set up a vendor account - allowing you to sell directly from your website.

The main advantage here is that you can quickly start running your own affiliate program through the Clickbank server using their exclusive "hoplink" process.

Clickbank will track all sales your affiliates send to you, and distribute commission payments automatically every two weeks, direct to the affiliate.

However, there are some disadvantages to using Clickbank as a primary payment processor. These details are correct as of this writing (Winter 2003/2004.)

- Higher deduction rate (7.5% + $1.00 per sale)

- No download page cloaking. Your download URL is fully open for copying and illegal redistribution.

- Paychecks sent twice monthly by postal mail - no direct deposit available.

- Holdback of sales funds for two weeks AFTER close of the sales period (while they presumably earn bank interest on YOUR money!)

- Restrictive salespage/download page requirements and site inspection/approval process.

- Restrictive price limits. Number of products restricted to 50.

- Customers can use their own Clickbank hoplink to buy your products and get a commission "rebate" - essentially cheating you out of a portion of the sale.

==> Clickbank

PayPal

Big changes have happened at PayPal since that company was bought by eBay. As a result, I've been required to change my own thinking toward PayPal and the services they now offer.

Even though they claim 60 million users worldwide, and no longer require a customer to have an active account to make a payment, I still don't recommend using PayPal as your only payment processor. I do strongly suggest you use them as a secondary payment option for your customers. Fully 40% of my own digital product sales are (at the customer's option) processed through PayPal. I believe that at least some of those sales might be otherwise lost.

There is no set-up fee to open a PayPal account, but the verification process is somewhat laborious. Still, the advantage of added sales by offering your customers a PayPal option far outweighs the initial hassle of set up.

Here are some other details about PayPal, correct as of this writing.

- Lowest per sale deduction available - 2.9%

- Immediate availability of funds - you can withdraw your sales receipts direct to your own bank account at any time, or spend those funds directly using a PayPal debit card.

- Sell digital goods, hard goods, or at auction.

- Recurring billing (subscriptions, memberships, etc.) and mass billing functions.

- Much improved sales link configuration that now produces a fully secure link code for your website. That alone eliminates much threat of product theft.

==> PayPal