AW Daily - Tips & Tactics - Accepting Credit Cards

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Using credit cards for online auction transactions has become much more easier and much more commonplace for both buyers and sellers. Although Billpoint, eBay's online payment service, estimates that 80 percent of the site's transactions still use conventional payment methods via snail mail (credit card, money order, and so on), credit card-based online auction transactions offer several benefits, most notably expediency--they significantly cut down the length of the transaction process. First we look at some of the other payment methods available, and then we provide an overview of what online auction users should know if they decide to use and/or accept credit cards for their transactions.

The Traditional Approaches
As a buyer, avoid paying with cash, though some sellers recommend it. You have no recourse with cash payments, such as stopping payment on a check or requesting a credit card chargeback from your credit card issuer.

Paying for auction items by personal check remains one of the easiest and most common, albeit slightly slow, ways to pay for merchandise. Forms of certified payment, such as cashier's checks, money orders, and C.O.D.s (collect on delivery), must be obtained from a bank or post office, and come with a modest fee. These forms of payment should be reserved for items of justifiable value.

As a seller, it's wise to offer a variety of payment options, including checks, so that the buyer can choose what's best for him or her and for the particular transaction. No one wants to pay $5 for a cashier's check to buy a $4 book. A good rule of thumb: Require certified payment on items more expensive than $30.

The Cutting Edge
Accepting payment or buying merchandise via credit card has some obvious advantages. For one, the seller can ship the product immediately to the buyer if his or her credit card is valid and the charge is not denied. This is good for both the buyer and the seller. The seller doesn't have to wait for certified payment or a personal check to clear, and the buyer gets his or her merchandise sent immediately. Payment by credit card also reduces the seller's transaction management: no back and forth with the bank, less opening mail and matching checks with buyer emails, and so on.

Online auction sites themselves are offering users the capability to pay by and accept credit cards. All the major auction venues have rolled out online payment services that integrate credit cards: eBay has the aforementioned Billpoint, Amazon.com Auctions offers its Amazon.com Payments, and Yahoo Auctions users have the option of using Yahoo PayDirect. The fees can vary somewhat but they usually are in the same general range. (In contrast to Billpoint and Amazon.com Auctions, Yahoo PayDirect is a free service, although fees might apply in the future.) In essence, the service functions as a third-party processor in the transaction process, and funds are transferred either to or from your account with the service. Buyers are not charged to use the service, but sellers pay a small percentage of the transaction plus a minimal per-transaction fee.

The main benefit of using an online payment service that's integrated with a particular auction site is just that--it's integrated. On the other hand, that benefit also can be viewed as a drawback. Sellers or buyers are limited to auctions on a specific venue. Multiple venue users might find this to be frustrating.

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