If you want to compete in the e-commerce arena you need to accept credit cards on-line, and if you want to accept credit cards on-line you need to have a merchant account. Unfortunately, there are few areas of web building more difficult to get a grip on than merchant accounts. The other components we've dealt with on this site mainly involve a straight forward product with a straight forward price. There are two reasons why this doesn't apply with merchant accounts: 1) These accounts are very lucrative, resulting in tons of advertising on the subject, much of which is intentionally misleading; and 2) There are more ways of putting hidden fees into merchant accounts than into just about anything else on-line.

There are two basic fee components involved in merchant accounts, a percent of each transaction and a set transaction price. For instance, for accepting an order of $100, you may have to pay 2.5% of the transaction as well as an additional transaction cost of $0.35, making your total cost $2.85. If you took an order for $200, the total cost to you would be $5.35. Merchant account rates are almost always higher for internet transactions than they are for in-person transactions or telephone transactions. Thus the same order may have cost you a dollar less if the purchaser had handed you a credit card rather than entering it online. The fees used in the example, 2.5% and $0.35, are about average merchant rates for internet transactions. If you're paying more than this, you find a better deal.

Here's where things get complicated, there are a number of other fees that are associated with merchant accounts. Not all merchant accounts charge you all of the following fees, but every merchant account will charge you at least some of these fees. They are:

• An initial setup cost;
• Initial or ongoing hardware costs;
• Initial or ongoing software costs;
• A monthly service charge;
• A monthly statement charge;
• A monthly minimum.

Since there are so many different charges, it is exceedingly difficult to set up an easy way of comparing the different accounts around. Many of them advertise low or non-existent rates in one area in order to entice customers and then wallop them in another area. Even putting dishonest business practices aside, merchant accounts are difficult because your business has particular needs individual to it. Those planning on doing a great deal of e-commerce shouldn't be as concerned about set up costs or monthly fees as they are about individual transaction costs. Companies which sell high cost items should look for the best percentage transaction rate and be less discerning regarding the set transaction costs, whereas those that sell low cost items should look for the exact opposite.

We encourage you to look around and explore your options before settling on a merchant company. Below we compare and rate several merchant companies that we've had positive experiences with, and this should be enough to get you started. However, with merchant accounts the field is seemingly endless, so there's no need to end your search until you find a company you're happy with. Good Luck!

Account Provider	Retail Fees	Internet Fees	Our Rating
Cardservice International	1.71% + $0.20	2.35% + $0.25	*****
PayPal	1.9% - 2.9% + $0.30 USD	No extra	****

• Cardservice International
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