Setting Up Your Merchant Account


A merchant account is required before you can open up for business. This is in addition to opening a Yahoo! Merchant Solutions account. Yahoo! cannot process online credit card orders without a merchant account. The merchant account provider is the agent that acts on behalf of the merchant to facilitate credit card transactions between the issuing bank of the buyer and the merchant.

For you to accept credit cards and have the customer's card charged to your account, thereby collecting your money, you must establish a merchant account at a bank. Establishing a credit card merchant account can be tricky and fraught with problems if you don't do it right. In addition, there are thousands of what are called field agents who aggressively recruit small merchants into merchant account programs that sound great on the surface but have hidden costs that can drive up the costs of accepting credit cards. More of that later.

The Yahoo! shopping cart (or the shopping basket) is only one of two parts of a shopping cart. The second part is the cash register. The shopping cart keeps track of and tallies the order; the cash register records, processes, and charges the customer's credit card.

Here's how it works.

The customer's credit card information is transmitted through a Secure Socket Layer (SSL) to Yahoo!. After your customer has entered his credit card information into Yahoo!'s shopping cart order form and clicked Send Order, that information is sent from their SSL server to Yahoo!'s credit card processing server, or what's called the payment gateway. The payment gateway, or credit card processing agent, performs a very important function. The agent is responsible for verifying the customer's credit card information and confirming that there are sufficient funds in the customer's account to cover a purchase.

Caution: What's a Payment Gateway?

The payment gateway only verifies that a credit card is valid and that the cardholder has enough credit in his account to purchase the product he selected. A payment gateway is just an agent and does not verify that the card is stolen or being used by someone other than the cardholder.


The payment gateway then passes this information on to the bank where you have your merchant account, which then contacts the customer's credit card issuer that approves or denies credit. This notice is then passed back down the chain to the payment gateway and then to you.

Setting Up a Merchant Account

With Yahoo!'s Merchant Solutions packages, you can choose to apply for Paymentech (paymentech.com), Yahoo! Merchant Solutions's preferred provider, or any other compatible First Data Merchant Services (FDMS) Nashville platform merchant account (fdms.com). Yahoo! Store uses FDMS Nashville platform as a payment gateway to process transactions from your store with your merchant account.

Caution: Being Disapproved for a Merchant Account?

Some merchants will not be approved for a merchant account. Some of the reasons may be due to poor credit rating or the website not being finished. Some merchant account providers will verify your website before approving your merchant account. If you are disapproved for a merchant account due to credit rating, you may want to look into using PayPal.


In Chapter 10, we will show you how to apply for a merchant account with Paymentech and how to integrate your own FDMS Nashville platform compatible merchant account with your store.

If you chose to use a merchant account provided by your own bank or another solution provider, you must be very careful when choosing a merchant account. If you choose incorrectly, the costs incurred on each and every credit card sale you make could dramatically affect your bottom line. So, keep these possible fees in mind when evaluating which bank to use to process your credit cards. If your bank can't compete, move your business checking account.

Certain fees are associated with setting up a merchant account and processing customers' credit cards. It's not done for free. If you don't know what the required fees are, you can make a mistake that will cost you extra money on each and every credit card sale you make.

So, what's it going to cost?

First, there's the merchant account setup fee. This can run from a few hundred to a thousand dollars. Most merchant account setup fees are in the $400$600 range.

The second fee is what's called the discount rate. Using the word "discount" makes it sound like you're getting a deal, right? You aren't. This is the percentage of the sale that your merchant bank will charge you on each credit card charge. For example, if your customer has purchased $100 in merchandise from you and you're going to charge his card $100, you will have to pay your merchant bank a percentage of that sale to process the customer's credit card.

This percentage can range between 2% and 3% for Visa, MasterCard, and Discover and 3% to 5% for American Express. So if your discount rate for a Visa card is 2%, your Merchant Bank will take 2%or $2 of that $100 customer purchaseand deposit the remainder in your bank account. And by the way, that percentage is on top of the total credit card charge, including shipping and handling.

The third fee a merchant bank might charge you is a transaction fee. This fee is in addition to the discount fee and is the charge that your merchant bank assesses to process the credit card sale. Expect to pay between $0.25 and $0.70 per transaction.

And the fees don't stop there.

Your merchant bank might require you to pay a monthly statement fee on top of all the other fees. Statement fees range between $10 to $15 a month. You also might be charged a minimum processing fee of up to $25 a month. This fee is usually waived if your credit card sales meet your merchant bank's minimum monthly credit card sales.

A chargeback is what your bank does when they reverse a charge on your customer's credit card. Reasons for this include fraudulent or unauthorized use of the customer's credit card or simple dissatisfaction with your product if you've refused to take back the product and issue a credit to their account. You can reduce the threat of chargebacks by providing good customer service and offering a 100% customer satisfaction guarantee. There is no reason why you shouldn't offer such a guarantee unless the products you sell are so personalized that you could not resell them.

Free Info

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There also might be a holdback for chargebacks. Your bank might want to hold a sizable deposit against your sales to cover any chargebacks that you incur.

Do you have to pay all these fees?

That depends on your bank and the relationship you have with them. The credit card business is very competitive and now that eCommerce is the hottest thing in business, many banks are aggressively lowering and even eliminating fees to attract eBusinesses. There are hundreds of credit card programs available to eTailers today and if you do your research, you'll find merchant banks that will not charge statement fees, minimum monthly processing fees, or even setup fees. But you have to take the time and make the effort to look around.

Web Resource: Merchant Services Companies

Here are some companies that specialize in merchant accounts for online merchants and are First Data Merchant Services (FDMS) compatible.

  • 1st American Card Servicewww.1stamericancardservice.com

  • Card Service Internationalwww.cardservice.com

  • Chase Merchant Serviceswww.chasemerchantservices.com

  • Wells Fargo Merchant Serviceswww.wellsfargo.com

  • First Bankwww.fbol.com

  • Bank of Hawaiiwww.boh.com

  • Express Merchant Processing Solutionswww.empsebiz.com

  • First Interstate Bankwww.firstinterstatebank.com


Using PayPal

With the new integration of PayPal, merchants now can use PayPal with Checkout Manager. Merchants can open for business with just a PayPal account or use PayPal in addition to a merchant account. Before, merchants were required to have a merchant account (online or offline) in order to open for business. With PayPal, there is no monthly fee or setup fee, and transaction fees range from 1.9% to 2.9% depending on the number of transactions per month. Also with 78 million registered PayPal accounts around the world, you have a huge group of potential new customers. For more information about using PayPal with your Yahoo! store, go to smallbusiness.yahoo.com/merchant/paypal.php.

And don't be afraid to push these providers into a bidding war. With a little research and planning, getting a merchant account can be painless and inexpensive. It also can protect you from lessreputable providers who know they can make a quick buck off a web merchant who's new to the game of accepting credit cards.

Okay. You have your business accounts set up and you're ready for the next step. In the next chapter we'll discuss the tools of the trade needed to build your Yahoo! store.




Launching Your Yahoo! Business
Launching Your Yahoo! Business
ISBN: 0789735334
EAN: 2147483647
Year: N/A
Pages: 149

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