How to Accept Credit Cards:
CREDIT CARD PROS
AND WOES

Buyers who order online usually pay using major credit cards: it’s the most popular, quickest method, and provides some measure of protection to the buyer if they order something and don’t receive it – but it requires you, the seller, to set up a credit card account, pay monthly and per-item processing fees, and ultimately to assume the risk if the buyer is dissatisfied and places a claim to the credit card company for a refund.

Despite the trouble involved, it’s a fact that 90% of buyers wish to use credit cards because processing is almost instantaneous and they can receive their cd quickly – and they’ll either order elsewhere or not buy at all, if all that’s available is mailing a check the slow way (or even, in many cases, using an online payment service alternative such as PayPal.)

Here are some common pros and cons to accepting credit cards for online sales:

PROS:

1. Increases customer reliability. When customers can select an item and immediately pay for it, the entire processes is speeded up and customers are less likely to change their minds.
2. Increases customer confidence. Customers know their credit card companies will back them up if a transaction goes awry, such as an item never received or received damaged. So they are more likely to trust the seller who accepts cards than one who requires cash or mail-in payment only.
3. Speeds up the process. Customers who pay by card need only provide their credit card information and a shipping address; eliminating the need for envelope, postage, and slow postal turn-around time.
4. Convenient. Customers who shop online often choose to do so for either convenience or because your item isn’t available locally. A big part of convenience is easy payment methods. The easier you make the process, and the less steps involved, the more likely your customer will follow through – and be happy!

Why would a customer who is initially interested in your music not follow through? Typical reasons are frustration with automated ordering systems which don’t work correctly, and inconvenient payment methods!

CONS

1. Fraud. Yes, you the seller are liable if a transaction turns out to be fraudulent due to a stolen credit card which processes through the card system before being reported.

The most common type of fraud occurs when a customer is illegally using someone else`s credit card before the credit card is reported missing. Once the credit card is reported missing, the credit card company blocks usage of the card, but if the user commits the fraud before the card is reported stolen then the credit card companies hold the processing merchant responsible.

In addition, if an order never arrives and you cannot prove through proper accounting that you shipped it – and where you shipped it to - you, again, are liable to the customer.

You can always refuse a credit card order if the transaction raises an alarm.

Common signs for worry:

By taking their credit card, you guarantee your customer’s satisfaction. How?

2. When customers pay by credit card, they are guaranteed satisfaction by the credit card company regardless of your return and refund policies. The credit card companies reserve the right to confiscate funds from your checking account if they deem that their customers have not received what they ordered in good condition.

This rule is part of the agreement that every credit card processor in the world must sign with the credit card company.

It’s not all gloom and doom: a merchant / credit card processor is given the opportunity to appeal unfair chargebacks (refund requests from the customer).

In order to dispute a chargeback, credit card companies usually demand some proof (Proof of Delivery) that the customer received the goods: this proof requires documentation such as a registered mail or postal insurance receipt – or a tracking receipt and number. In the case of a customer complaining that the goods were not of satisfactory condition, proof that the customer refused or did not return the goods is required.

All this is fairly ‘invisible’ to the card holder but it falls upon sellers to assume the risks and process the card correctly to reduce the risks of a ‘chargeback’ (a situation in which a credit card charge is contested and refused due to fraud or customer objection).

So let’s examine how you can take payments!

First, you must locate and sign on with a credit card processing company and understand their many different fees (usually there’s a monthly fee, plus a per-order charge to process each transaction).

There are a wide range of credit card processing companies out there from your local bank’s supplier to companies which specialize in online sales transactions.

Make note of all the various charges and then contact your bank for card processing info, and at least 2 other online services. You can type in ‘Internet credit card services’ in Yahoo or Google and dozens of names will appear.

Second, your customer needs a secure method of transmitting his card number to you for processing (email is not a secure method, and if you use your web site it must be set up for security with a ‘secure socket layer’ protocol (SSL). You (or your Internet service provider) will need to use a Web server that supports SSL.

You will also need a digital certificate that identifies you as a legitimate business - these are available for a fee from companies such as VeriSign.

Third, you'll need a special bank account in order to accept credit card orders. Most banks offer merchant accounts: start with your own, but consider their fees and compare with others to figure out which one offers the best price, typically calculated as a percentage of each credit card order you submit.

Also, be aware: most banks charge higher fees for what they consider 'risky' accounts, such as those with large numbers of charge backs or fraudulent charges. And online sales are typically charged a higher rate than retail merchants because you’re unable to physically look at the card and check customer identification – thus it’s considered a higher-risk transaction than an in-store sale.

You’ve done all your research, you’ve found a bank, and you’re going to doing your own credit card processing – what’s next?

The final step is deciding how you wish to process the cards.

Too much trouble, but you still want to offer your customers credit card processing? See our article on ‘Selling Through Third Parties’: by processing the transactions through their systems, third party sellers can save you time and trouble – yet offer you an opportunity to sell your items online and fill orders quickly!