Setting Up a Credit Card Merchant Account

Setting Up a Credit Card Merchant Account

You’ve finished your store, at least the piece that’s visible to the buyer. Now there’s plenty more work to do. The first thing you may want to do is get started on setting up a creditcard merchant account, so you can process credit-card orders. In fact, Yahoo! won’t allow you to open your store until you have a merchant account working. In this chapter, you’ll learn what a merchant account actually does and how to get one. You’ll also learn how to set up payment processing in Merchant Solutions and configure the credit-card antifraud tools. Fraud is a huge problem for many businesses, so it’s important to understand what you can do to minimize it. In addition, you’ll see how to set up various order-form options, and how to ensure you receive order notifications so that you know when you have an order waiting to be processed. Setting Up a Credit-card Merchant Account Before you can open a Merchant Solutions store, you must have a credit-card merchant account; Yahoo! won’t allow you to open until you do. You cannot set up the merchant account until, in theory, you are ready for business. You must be “ready for business with clear product and pricing information available for viewing.” We recommend you set up the account as soon as possible, as it can take a little while to get sorted out. So, as soon as your store appears to the outside world to be ready, you should begin the process. Credit-card Transactions Explained Here’s how a credit-card transaction works, as you can see in Figure 18-1. When someone purchases something with a credit card online, that information is sent to a payment gateway. The gateway sends the information on to one of the credit-card networks. There is just a handful of different networks—when your card is swiped at a store, the credit-card swipe terminal sends the information on to one of these networks. In effect, the payment gateway in an online transaction takes the place of the swipe terminal in a brick-and-mortar store transaction.

Your merchant account identifies you as the merchant. The buyer’s credit-card number, of course, identifies the buyer. The credit-card network sends the information to the appropriate credit-card company, which checks the credit card to see if it’s valid and has sufficient funds for the purchase. If everything’s okay, it authorizes the transaction, holding the funds temporarily. Later, usually at the end of the day, the transaction has to be settled; at that point, the credit-card company takes the money from the credit card and transfers it to your bank account (or, at least, begins the process; it actually takes a day or two—perhaps as many as five days—before the money appears in your account). So, you can see that a merchant account is required to identify you and tell the credit-card companies where to put the money. Already Got a Merchant Account? If you’re setting up an existing business online, you may already have a credit-card merchant account. You may be able to use it with your store, depending on a couple of things: the network compatibility and the account policies.

Merchant accounts are set up to work with a particular credit-card network, of which there are several. Yahoo! Merchant Solutions sends transactions out over a First Data Corp. network, known as FDMS Nashville. If your current merchant account sends information over a different network, you will not be able to use it with Merchant Solutions—you’ll have to apply for another one. However, even if your merchant account does work with FDMS Nashville, you may not be able to use it. Some accounts are restricted to specific types of transactions. If your merchant account only allows “swipe” or credit-card-present transactions, you are not supposed to carry out transactions in which you do not see the credit card. Check with the bank or company that set up your merchant account. Merchant Account Fees There are all sorts of fees associated with merchant accounts. Compare carefully and make sure you are absolutely clear about exactly which fees are going to be charged. ■ Setup Fee The fee charged for the privilege of setting up an account. ■ Discount Rate The percentage fee that you will be charged for a transaction; if the rate is 2.29% and the transaction (including shipping and handling) totals $100, you are charged $2.29. The discount rate varies depending on the card type used. (The rate typically quoted is for Visa and MasterCard, but American Express, Discover, and others have different rates.) ■ Termination Fee Watch for this one! Most merchant accounts charge a fee— sometimes hundreds of dollars—to close the account. ■ Transaction Fee A fixed sum charged, in addition to the discount rate, for each transaction. Usually around 15 to 25 cents, but again, it varies depending on the card used. ■ Monthly Fee Sometimes called a statement fee or service fee. You’ll pay this every month, regardless of the number of transactions. ■ Monthly Minimum The minimum discount-rate fee you’ll pay; if your transaction discount rates don’t total this or more, you’ll still pay the minimum. ■ Chargeback Fee The fee you’ll pay if a transaction is charged back to you; if someone claims they never received the product, for instance, or that the card was used fraudulently, your account is charged for the transaction and the chargeback fee. ■ Online Access Fee There may be a fee to use a merchant account’s online tools. If you’re setting up an existing account to work with Yahoo! Merchant Services, the bank or company that provides the merchant account must now provide MID (merchant ID) and TID (terminal ID) numbers. You’ll have to provide the company with information about Merchant Solutions: the product name and ID, and the vendor name and ID. (To find this information, click Pay Methods in Store Manager and then click the Set up processing through FDMS link; you’ll find the information in the Setup page.) ■ Equipment Lease or Purchase Some unscrupulous companies charge for “equipment,” claiming that they are providing the equipment that transmits the transaction to the credit-card network (the payment gateway). These charges can sometimes amount to thousands of dollars (although this practice is probably dying out). ■ Other Stuff! Ask for a full schedule of fees, so you know what else you may be charged for—there are different rates for different types of transactions, for instance— sales, credits, authorizations, and so on. Some companies will provide a list of five different fees and claim that’s the full list; it isn’t. A full schedule includes many more fees, but some companies (such as 1st American, mentioned in the next table) won’t show you the list until after you apply. Merchant account rates vary tremendously. If you are a long-term brick-and-mortar merchant and have never sold online, you may be used to paying way too much for your merchant accounts. E-commerce has led to great price competition, so it’s now possible to get relatively cheap merchant accounts. Whichever company you are already using or plan to use, compare pricing!