Gateway Monthly Fee:
Because Bill will also need an internet payment gateway for his merchant account to work
online with his website, he will also be paying $15.00 a month for his Gateway Monthly
AVS Fees: The AVS fee stands for Address Verification Service.
Bill will want to use this service, to help reduce potential fraud, and customer
chargebacks to his merchant account. He will now pay an additional per transaction fee of
.10 per transaction.
Lets see the numbers behind processing with a merchant account as
opposed to a third party processor:
$30 (Per Membership Sold) x 150 (Memberships Sold) = $4,500.00
$15.00 (Merchant Account Monthly Fee) - $15.00
$15.00 Gateway Monthly Fee) - $15.00
2.35% (Discount Rate) x $4,500.00 - $105.75
.30 cents (Per Trans Fee) x 150 (Memberships Sold) - $45.00
.10 cents (AVS Fees) x 150 (Memberships Sold) - $15.00
Total Fees (With Merchant Account) = $195.75
$4,500.00 (In total sales)
- 195.75 (Total fees)
= $4,304.25 (Net profit after all processing fees have been deducted)
With the merchant account, Bill was able to keep substantially more of
his sales for himself, as profit. Bill could use these extra resources to advertise more,
expand his operation, and even hire someone to work for him, even if only on a part time
basis. The point is that that the better deal in credit card processing is always with a
merchant account as opposed to using a third party processor.
Most third party processors leverage the high levels of risk and chargebacks they must
face everyday, by charging enormous fees and rates to their entire customer base. Third
party processors are synonymous with Adult related websites. This is the reason for their
increased exposure to risk. They must charge high rates to overcome the losses they are
subject to by processing for a category of merchants that, unfortunate as it may be for
them, falls into a certain level of risk and fraud that most other merchants do not.
Because the merchant account company restricts its clientele to only companies with non
adult related content, they are able to offer an entrepreneur like Bill, selling online
content through his membership based marketing website, a much better deal in credit card
$4,304.25 (Net Profit with Merchant Account)
- 3,892.50 (Net Profit with Third Party Processing)
= $411.75 (Total Savings with Merchant Account)
This experiment has shown that the average website owner can save
substantially by choosing wisely when it comes to their credit card processing solution.
We have proved that most any entrepreneur can and will save substantial amounts of money
by using a merchant account for their online credit card processing, as opposed to
processing with a third party processor. In our little test, Bill saved $411.75, and that
was just in the first month alone. Remember, that the third party processor will charge
more, 15.0% to be exact, per transaction, once the customer is charged on a recurring
basis. This means that for the second month, Bill would have paid even more to his third
party processor; $675.00 to be exact! And that is just on the first months returning 150
customers. Every time Bill has a recurring payment processed through his third party
processing account, he would be subject to a 15.0% transaction fee on all those sales. Not
a very thrifty choice for credit card processing.
As with any business decision, be smart. Compare rates and plans, and
make sure the "simple" setup is really worth the cost. In most cases, your
Merchant Service Provider can setup your merchant account in as little as 24 hours. This
is faster than your third party processor, and adds even more value to the otherwise
already vastly superior deal you are receiving with your very own merchant account.
Make the decision that is best for your business, and best of luck!
About The Author
Josh Greth draws upon his 20+ years of Credit Card Processing/Executive
experience in the field of Merchant Services. He developed, owns, and is the reigning CEO
of CardStreet Cardservice Corp., a company that has been processing credit card
transactions for over two decades.