Why You Might Need A Third Party Credit Card Processing Service
There are basically two reasons why you might consider third party credit card processing as a viable alternative to traditional credit card merchant account services:
- If you are a new business with a low volume of sales, and you are selling physical or digital products, as opposed to selling services.
- If you are a high risk merchant.
Advantages of Third Party Credit Card Processing
- It is much quicker and easier to apply for this method of processing credit cards.
- There are no startup fees, and no charges if you don't make any sales.
- You get a refund of your fees if the customer cancels his purchase or refunds the merchandise.
- Most of the customer support, as far as the payment is concerned, is handled by the processor, so you can sit just sit back and collect your money.
Disadvantages of Third Party Credit Card Processing
- Processing fees are higher than a traditional processing account, ranging from 4 to 20%. So if your sales volume increases, you should consider changing to a regular credit card processing / merchant account.
- Payment for sales is only made every 2 to 4 weeks, so you must wait to get your money.
- Some third party processors have a reserve account that is held back from your payments, to protect them against chargebacks
- You may not have access to all the customer information, if that information is collected at the processor's website.
- Some customers will abort the sale when they are transferred to a different website, since they may perceive that as an lack of credibility. However, this can be minimized if you explain carefully in advance how the sale will be completed.
PayPal and ClickBank are the two best known third party credit card processing services. They have been in existence for a long time, and have attracted a large customer base. ClickBank only deals with downloadable digital products, and they have over 100,000 affiliates to help promote your product. PayPal provides the ability for customers to pay by debiting their checking account, as well as by credit card.
High Risk Credit Card Processing
Accepting credit card payment from certain types of businesses is considered a high risk. This may be because that type of business has a history of attracting customers who back out of sales, or who try to use a stolen or counterfeit card.
Some high risk businesses don't sound like they're a risk at all, such as electronic companies and travel agencies. But their customers frequently change their mind. Other businesses are obvious risks: adult products, offshore pharmaceutical products, check cashing services, gambling sites, and escort services.
So if your business is in this category, you will find it necessary to use a high risk credit card processing company, since traditional credit card merchant account services will not even consider your application.
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