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Accepting Credit Cards continued ...

Third-Party Processors
But there are third-party online payment services not affiliated with specific auction sites that allow buyers and sellers to accept and use credit cards for their transactions on more than one venue. PayPal is the largest such service, with more than 2.7 million customers--that's five times the amount of any other online payment service. PayPal offers two types of accounts, one of which is a free and more basic service, and one of which is a more robust and fee-based account aimed at high-volume sellers and merchants. Additional non-site-specific third-party online payment services include ProPay and BidPay.

Other possibilities include companies such as CCNow and Verza. Both eliminate the need for applying for a merchant account at a bank, something that most folks in the online financial services industry liken to obtaining a home mortgage. These companies let you accept credit cards in any venue you want--be it a classified marketplace, newsgroup, or auction site. Typically, they also offer value-added services to justify a more premium price. One caveat, though: Companies like CCNow, which actually take ownership of the seller's property during the transaction, tend not to pay sellers immediately.

Merchant Accounts
Sellers also have the option of opening a merchant account. In brief, a merchant account is a bank account that allows a retail or online business to accept credit cards from its customers. Because traditional brick-and-mortar banks have been slow to adopt e-commerce-based services, we've seen a big increase in the number of online merchant account companies--called Independent Sales Organizations (ISO) and Merchant Service Providers (MSP)--which have partnered with traditional merchant banks and online credit card authorization providers.

The main benefits of merchant accounts are twofold: One, they offer more premium services and control over your account, and two, you usually can get your money faster. There's no middleman, which is what services such as Billpoint and PayPal essentially are. On the downside, however, they require more attention and management; plus, they're more complicated and involve a variety of fees and charges, which can cause some confusion. For more information on merchant accounts, consult our tip "Considering a Merchant Account."

Processors By Default
Though they are not known for processing credit cards for buyers and sellers, online escrow services, such as i-Escrow, TradeSafe, and Internet Clearing Corporation, do it as a matter of course while operating their businesses. Since they are paid directly by the buyer during an escrow transaction, they accept payment a variety of ways, including credit cards. In effect, this allows sellers to accept credit cards and expedite their sales. It also lets buyers pay by credit card. They, of course, also provide online escrow, which tends to include shipment tracking. When you look at online escrow in this light, the 5 to 6 percent commission is easier to swallow. On the downside, escrow adds a delay to fulfillment.

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