Free Online Merchant Account

A free online merchant account provides a relatively inexpensive way for a small internet business owner to accept credit cards from the website's customers. Otherwise, the owner will need to set up separate accounts with the major credit card companies. This can be a costly expense for a start-up venture, especially in comparison to the number of sales that are transacted when the business is just starting out. Along with major up-front expenses, the need for a secure server can be avoided by contracting with a third party credit card processor. The tradeoff is this: a so-called free account has no setup fee, but charges a higher percentage per transaction than the business owner would pay with his own account. By setting up a direct account, the business owner pays less of a transaction fee percentage per sale, but incurs a large setup fee. Most entrepreneurs and small business owners find that, especially when first starting out, the cheapest merchant account vendor is a better option than contracting directly with the major credit card companies.

Since a percentage of each transaction goes to the third party credit card processor, a free online merchant account isn't really free. But the processing company offers several services at no cost to their clients. The cheapest merchant account vendor may not be the one that charges the smallest percentage per transaction, but the one that offers the most useful additional services at no cost. The small business owner will need to consider the entire package of transactions percentages and additional services when choosing between the many third party credit card processors competing for her business. Most, if not all, of these vendors will set up a credit card processing account for no fee. But the vendor may have other limitations. Some processors cater to companies that only sell tangible goods online. This means that the accounts they serve are for online stores that sell actual products and not services. A tangible good is an item that can be touched, such as a book or a ski jacket. The store owner physically ships the purchased item to the customer. Other processors set up accounts limited to online companies that only sell software and shareware. Instead of targeting selected industries, the processing company may have different limitations; for example, the vendor may only accept accounts that charge either a minimum or a maximum price for their goods and services. The entrepreneur seeking the cheapest merchant account vendor will need to be aware of these limitations and conduct her research accordingly.

There are additional factors to consider when setting up a free online merchant account besides those already discussed. The entrepreneur needs to realize that she may only get the proceeds from her credit card sales from the third party processor once a month. The processor will send out a monthly check to its clients of the total credit card sales less the agreed-upon percentage of the transactions. The small business owner should also be aware of the processing company's policies regarding keeping funds in reserve and for loss due to fraud. The processing vendor may reserve funds to accommodate customer returns and charge-backs. (A charge-back is a customer-initiated dispute with a merchant, perhaps over the quality of an item or an unauthorized purchase on the credit card.) The fraud policies should clearly spell out the obligations and responsibilities of both the processing vendor and the business owner to avoid future problems and, perhaps, unfortunate litigation. As the psalmist writes: "It is better to trust in the LORD than to put confidence in man. It is better to trust in the LORD than to put confidence in princes. . . . The LORD is my strength and song, and is become my salvation" (Psalm 118:8-9, 14).

The third party processors often will add a shopping cart feature to their accounts' online stores with what is known as plug and play integration. This integrated technology allows customers to place the items they wish to purchase in the virtual shopping cart. When the customer is ready to check out, the vendor's software application handles the transaction, behind the scenes so to speak, by processing the credit card information provided by the customer. However, one of the largest and best-known processors takes the customers from the merchant's website to its own website when the payment is transacted. After the transaction is completed, the customer is returned to the merchant's website for further browsing and, hopefully, additional shopping. Along with the plug and play shopping cart, vendors may provide payment buttons that give customers several options with just the click of a mouse. The most prominent buttons may say "Buy" or "Add to Cart." Other button choices may be "Gift Certificates" or "Subscriptions." Non-profit organizations can choose a button that says "Donate." Some processors may set up the account so that orders can be placed, not only online, but also via phone, fax, or mail. These options give customers much more flexibility in placing orders to the online store.

The free online merchant account vendors may assist clients by offering software that calculates state sales tax, when necessary, and appropriate shipping and handling charges. The entrepreneur will also want to consider the vendor's cancellation fees, guarantee programs, and technical support. Third party processors may offer affiliate programs that allow clients to promote their online stores on the processing company's website. Some processors offer gift and loyalty card programs to their clients, providing a valuable way for the clients to reward frequent customers. When all these factors are taken into consideration, the small business owner can evaluate the third party vendors on her short list and make a smart decision on whether the cheapest merchant account is the best merchant account for her company's needs.



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