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Online payment services

Online payment services are a viable option for smaller web-based businesses and online auction sellers. Opening an account is fast and easy, but there are a few negatives. Here is the typical sales process when using an online payment service:

1 - The customer clicks on a sales link or "checks out" with

     your shopping cart. The payment service authorizes the

     credit card or deducts the proper amount from the

     customer's online payment account if there are enough

     available funds in the account.

2 - The online payment service credits the transaction

     amount (less any applicable transaction fees) into

     the seller's online account.

3 - Both the customer and the seller receive emails from

     the payment service verifying the transaction.

4 - The seller ships the merchandise or provides a

     download link (if applicable) to the customer.

5 - The seller requests a transfer of funds from his online

     account into his bank account. This can take anywhere

     from a few days to a couple of weeks, depending on

     the particular service used. Some services will send

     the seller a check instead of initiating a bank transfer.

Advantages of online payment services:

  ·  They're quick and easy to open. Most accounts can be

     applied for and opened in a matter of minutes. You can

     begin using them almost immediately.

  ·  They're usually easy to qualify for. Typically, there are

     no credit checks or business requirements.

  ·  You can send money to and receive payments from

     anyone with an email account.

Disadvantages of online payment services:

  ·  They're still relatively unknown to consumers when

     compared to traditional merchant accounts which

     tends to lower the number of sales that you'll make.

  ·  The transaction fees charged by online payment

     services are typically much higher than those

     available from regular merchant accounts.

  ·  Getting your money transferred from the online

     payment service into your bank account usually

     takes longer than with a merchant account. And

     if you have to accept a paper check it takes

     even longer.

  ·  Before a potential customer can purchase your item,

     he usually must first open an account with the online

     payment service. This is an extra (and intrusive) step

     that will keep some customers from buying from you.

Recommended online payment service:

If you're considering using an online payment service (or if circumstances make it your only option), we very highly recommend PayPal . You can literally open your account in minutes with practically no qualifying required at all. You can be using your new PayPal account within minutes. PayPal is also very affordable as their rates are as low (and often lower) than many merchant accounts.

A big plus is that PayPal is owned by Ebay, the online auction giant. When compared to most of the other online payment processors, PayPal has very good name recognition.

Conclusion

Your choice between a traditional merchant account and an online payment service needs to be considered carefully. Of course your own circumstances may help you make the decision one way or the other.

Whichever option you choose, be sure to consider all of the factors involved, including the fees. A smart choice made at the outset will prevent a lot of headaches down the line.