A few weeks ago, one of my clients emailed me to ask about online payment processing.  It’s a great topic so let’s go over the options.

As luck would have it, I am knowledgeable in this area :-)

Online Payment Processing

When it comes to accepting credit cards online, there are options to suit the new online business owner, a mid-sized business owner, and all the way up to mature business owners with established online businesses with hundreds of monthly transactions.

The easiest option to set up is PayPal and many new online business owners opt to use PayPal as their online payment processor of choice.  You can create payment buttons within PayPal and just paste the code into your pages and you’re good to go.

They take a small percentage of the fee as a processing fee but other than that, there are no other charges.

A potential downside is that people think they need to have a PayPal account open in order to pay you (they don’t in most cases they can just pay directly with a credit card without opening a PayPal account).  Another downside is that if someone pays by bank transfer or echeck – there could be a delay of up to three days before the funds are actually confirmed to be in your account.

I’ve been using PayPal for close to a decade and almost all of my clients offer PayPal as an online payment option: either as their only option or alongside a traditional merchant account.  PayPal integrates with many third-party services like 1ShoppingCart and Freshbooks, a popular time tracking and invoicing system.  If you’re just getting started and don’t anticipate having a lot of transactions straight out the gate, PayPal is a good way to get started with online payment processing.

The next level up would be 2Checkout.  This eliminates the need to have a PayPal account (and the confusion that comes with that).  There is a $39 set up fee to get the account opened (and an application you have to fill out).  There are also a few requirements for your website (which are good and should be added anyway no matter what payment option you choose).  I think a privacy policy and terms page.  They provide samples to model if you don’t have any.  Like Paypal, they keep a small percentage of the transaction as a fee (most companies do – even Visa, MC etc all keep a fee).  You can set up an automatic transfer directly into your bank account weekly after a certain level of funds is reached (you can set that amount yourself).  There is no monthly statement fee.  Again they give you the codes you need to paste into your site and you can do things like add product pictures and descriptions, etc.

Those would be the two options I would recommend when you’re starting out unless you already happen to have an offline merchant account (like an account with Visa or Mastercard).  If you already accept credit cards manually, then I’d recommend speaking to your bank about adding online capability to your account.  But be aware that with a regular merchant account, there are monthly statement fees (anywhere from $25-$50 a month depending on the merchant) as well as the per transaction fee.  So that’s why if you don’t already have an account, it’s not worth getting one unless you anticipate having a large volume of transactions in any given month to offset the monthly statement fee.

A final note: with all services, the more transactions or dollar amount you collect in a month, the lower the per transaction fee.