Blue Note Web Services

Store owners frequently email in to ask just how they go about receiving money from their customers.  Here’s the skinny:

PAYPAL/WORLDPAY/2CHECKOUT/GOOGLE CHECKOUT

Many online stores start out with a service like PayPal or Google Checkout to receive payments. With those services it’s relatively easy to set up an account for your business and start receiving money.  These services have the advantage of being quick to set up, with no long-term contracts and minimal (if any) sign up fees or monthly fees.  When using any of these third-party processing services, the customer is forced to leave your website to complete a payment – you lose control over the purchasing process and can’t always troubleshoot if something goes wrong.  Occasionally communication between the processor and your shopping cart software can be delayed or fail completely, meaning orders are not processed in a timely manner.  While I see the use for these services for a new business or one that does not process a large volume of credit cards, as a business grows they should upgrade.

STEPPING UP

So where do you go? It’s time to get your own merchant account. If you live in a state with open records you’ll get inundated with sales calls and letters as soon as you register your business. Most (but not all) of these will be absurdly expensive. Do your research and find the one that fits your business. What fits one business won’t necessarily fit another.  Ask other business owners for recommendations of who to use and who to avoid.  Consider a local provider or the bank that holds your checking account, but compare prices carefully!

HOW IT WORKS

With PayPal, all received payments are sent to your PayPal account where you must manually go do something with the money (send to your bank account, pay someone else, etc). Transaction fees are deducted when the transaction is processed.  Google Checkout can automatically transfer the money to your bank account, but again the fees are all taken out before the transfer is made.

Using a standard merchant account, all of the day’s transactions are combined in a batch. When the batch is run (normally each night) the total amount is sent directly to your bank account. The EFT system can take a few days and could be slowed down by weekends or holidays, but in general deposits hit my bank account in 2-3 business days. At the end of the month your total fees are deducted from your checking account.  This difference seems very minor but can greatly streamline your accounting processes.

FEES

Processing credit cards can be expensive. You may not really think about it with PayPal since the fees come out of each transaction. However, add it all up at the end of the month – it’s not cheap. With a merchant account you can expect to pay a variety of fees:

1. Monthly statement/service fee – it doesn’t really cost that much to print and mail a statement, so many companies now call this a “service fee.” Expect to pay between $5 and $10. This is the biggest MONETARY difference between PayPal/WorldPay/2CheckOut and a merchant account.
2. Annual fees – watch out for providers who charge an annual fee on top of the monthly fee. One or the other is to be expected, but some providers do not mention the annual fee until it comes out of your checking account. Read that contract carefully!
3. Gateway fees – a monthly charge for using a gateway such as authorize.net (for online businesses only)
4. Equipment purchase/rental – your credit card machine. If your business is all online you don’t need one (use a gateway instead). Be careful of those leases, you could end up paying far too much for that machine. Don’t buy a machine from your merchant account provider. You’ll find much better prices elsewhere (try eBay).
5. Discount rate – a percentage of each transaction. Currently hovering between 2 and 2.4% for online or otherwise “high risk” businesses, much lower for physical stores.
6. Per-transaction fees – a small fee charged on every transaction. Expect between 10c and 35c.
7. Monthly Minimums – a minimum amount that your fees must reach each month. Many processors require this, they can run from $15 to $25. If you find a processor without one your other fees will likely be very high. This is not the amount that your SALES must reach – a $25 sale will count less than $1 toward that minimum. Calculating your break-even point requires some math to consider your average ticket size, average monthly volume and the various fees being charged.
8. Other fees – watch out! I’ve been charged $25 for switching the bank account where my deposits were sent. Beware the annual fee! Find out what makes a transaction non-qualified and how much the non-qualified fees are (some go as high as 5% discount rate). Consider the fraud screens.

Normally your per-transaction fees and discount rates will be lower than PayPal’s rates, but you do have to pay a monthly charge. These rates vary widely from one provider to the next! Some will charge you a high monthly fee, but a low discount rate. Some barely mark up the discount but have a large statement fee or an annual fee. Many charge you an arm for one and a leg for the other. This is where you need to do some math if you want to really get the lowest price. Figure up your average ticket size and the number of sales you have in an average month. If you’re serious about the comparing, set yourself up a spreadsheet and put in all of the different offers you receive to find what suits you best.

CONTRACTS

To the best of my knowledge, it’s a requirement of Visa that everyone have a contract. I’ve never seen one for less than 2 years, 3 years is the most common.

YOU GET WHAT YOU PAY FOR

Here at Blue Note we’ve dealt with several different credit card processors for our various clients – some great and some absolutely terrible.  Make sure you read your contract, and make sure the statements come in correctly! If you call a company on the phone and they sound like slimeballs, go with your gut and take your business elsewhere. Saving $5 on your monthly statement fee doesn’t help if you have to spend an hour on the phone making them correct it.

THE TECHNICAL SIDE
Since this is written for my clients with online stores, a short technical discussion is in order.

If you run a website, you need to use a gateway. Yes, it’s possible to simply capture someone’s card number and manually enter it into a machine. However, consider the benefits of a gateway:

1. Fraud screens – many gateways have extra checks that a terminal won’t.
2. Time – save time processing cards. When you use a gateway, the transaction is processed in real time. If the card is declined for whatever reason (address verification, typo in the card number, bad card) the customer finds out immediately and has a chance to fix it. The order is not placed until the card goes through. If you capture the card number and the card is declined you have to contact the customer, get a new card number and try it again. Time is money! It won’t take long to spend $10 in time calling customers for bad credit cards.
3. Security – don’t store card numbers in your website! It’s a huge risk. If someone finds those numbers you could be held liable for all kinds of mayhem. With a gateway nobody sees the card number except the customer and the computer.
4. Convenience – No need to file credit card slips and batch reports from your machine. No need to have a machine in the first place unless you also see customers face-to-face. All of the documentation comes in your email and you can look up transactions on the gateway’s website.

I think very highly of letting the gateway do the work. There are many out there to choose from, but I highly recommend authorize.net. I use them in my business and have set up many clients to use them. Integrating authorize.net with your website is easy, their interface is simple to use, and the price is right. I’ve worked with nearly every gateway for one client or another and none of them stack up.

BACKUPS

I’m sure you all know to keep backups of your data, but you need a backup for the gateway. All computer systems experience downtime, it’s a fact of life. Occasionally the gateways must go down for maintenance. Some have been hit with DOS attacks that took them completely offline. I highly recommend that anyone using a gateway have a backup system in place, even if it’s just as simple as capturing the card numbers and putting them in manually when the system is back up and running.

BLATANT ADVERTISING

Should you want to set up your website to accept credit cards using authorize.net, any other gateway or even manual processing, you can contact the good people at Blue Note Web Services and they’ll get you set up.

Frequently we receive requests from store owners asking about the security of their site. Whether from untrustworthy programmers, hackers, out-of-date software or any other reason, Blue Note is here to help!

Depending on the circumstance, a code audit can be a quick process or an extensive task. Stores with customized code are much more difficult to examine. If your store has been hacked, we suggest also reviewing any available log files to find the attack vector and changing all passwords to prevent future attacks.

Our basic code audit service is $100 and covers the first 2 hours of work on your site. We’ll review your code for potential problems and make recommendations on any necessary updates or repairs to your site to prevent future attacks (billed separately). Highly customized stores may be billed at a higher rate.

Contact us today to schedule your audit! When you’re ready to begin, click the button below to make your down payment.

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