How to set up -- and save on -- your online merchant account
By Jay MacDonald • Bankrate.com

Setting up a merchant account is essential to e-commerce. It's what enables your company to accept credit cards, the preferred payment method online. While the mechanics are similar to setting up a storefront merchant card account, there are differences:

• Separate account: An Internet merchant account is separate from and more costly than your regular merchant account because it is riskier. There is no physical card present, thus increasing the chance of fraud. To cover this risk, your bank or account issuer may charge a 3- to 4-percent discount rate per transaction, vs. the 2- to 3-percent rate for regular merchant accounts. (See chart for sample of online vs. in-store merchant account costs.) They may also ask you to estimate your average order size and monthly billing amount, then ask you to place that amount on deposit. Tip: Try your bank first; fees will likely be lower there.
  
  
• E-commerce engine: Before you open your virtual doors, you'll need an e-commerce engine to connect your Web site to your merchant account. Its fee is in addition to your account fees. Tip: If you purchase your e-commerce engine through your Web host, they may waive the fee.
  
  

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• Security: In order to accept plastic, you'll need an order form that is secure. In most cases, a Secure Sockets Layer (SSL) is included in your e-commerce setup, but you may have to spring for the certificate from the issuing organization such as Verisign.
  
  
• Linkage: If your bank, your e-commerce engine and your Web site are not linked properly, your system won't function. Get the bugs worked out before going live.
  
  
• Batching vs. real time: Smaller companies may benefit by batching, in which orders are processed manually offline as a hedge against fraud. With real-time processing, credit card purchases are approved or denied immediately. Real-time processing is more expensive and if your system goes down, you can't accept orders.
  
  
• E-checks: Although not widespread yet, online check system software allows merchants to send their customer's checking information directly to the bank for payment, or alternately, print a check for deposit into the merchant's account. Some customers may prefer this to using credit cards.

Jay MacDonald is a contributing editor based in Florida
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-- Posted: May 5, 2000