Credit and debit cards Visa and Mastercard

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Taking Payments

The obvious difference between eCommerce and a brick-and-mortar store is that you cannot come face to face with your customers. There’s just no way in the world that they can hand you cash for what they’re buying, so you must have some way of accepting non-cash payments. There are three ways you can get paid: credit and debit cards, checks, and e-cash.

Credit and debit cards

The single most common way of purchasing products on the World Wide Web is with credit cards, although debit cards (the kind used to access ATMs) are gaining significant popularity as well and may soon exceed credit card use. No matter what kind of Web space provision you decide on, the odds are pretty good that the Web hosting service provides credit card acceptance. It’s only the purely tech providers who are missing out on the opportunity to grab a few extra bucks by adding basic eCommerce services to their roster. However, if your Web hosting service doesn’t provide credit card acceptance, all you have to do is go to the source. Table 19-4 lists the URLs for the major credit card companies.

American Express

Discover Card

MasterCard International

VISA International

When you talk to these merchant acquirers, there are a few details you need to nail down. In a nutshell, they all come under the heading of ‘‘how much is this going to cost me?’’ The answer to that question, however, isn’t as simple as you might think. Here are the points you need to cover:

- Application fee Is there a charge for submitting the application form? If so, do you get your money back if the application is denied?

- Setup fee Does it cost you anything for the account to be initiated once you are accepted? What does that fee include?

- Statement fee What is the monthly charge for sending you a statement of your earnings and fees?

- Discount rate This is one of the most important points. The discount is the percentage of your sales that the credit card company will take for its cut. The lower the discount rate is, the better. However, most Internet companies cannot get the kind of low discount rate that conventional companies can. This rate is usually based on your transaction volume.

- Per-transaction fee Is there an additional flat fee that is charged for each transaction? If you sell high-ticket items like customized Ferraris, then the additional amount (maybe 30 to 50 cents) will mean nothing. But you understand why most stores don’t like taking credit cards for low-priced items. Generally, the more transactions you process per month, the lower the fee. The fee structure has to be negotiated, though, so shop around before choosing anyone, and ask any friends who own stores or sites that process credit cards to make sure you’re not being scammed.

- Monthly minimum fee If your sales don’t take off as anticipated, you may have to pay the credit card company anyway. It’s their way of making sure that, no matter what happens to your business, they always have a little something coming in. PayPal now offers a secure API for processing using xmlHTTPRequest. Further information on this interface can obtained at http://www.paypal.com/IntegrationCenter/ic nvp.html.

Watching out for chargebacks

Sooner or later, you’re going to run into some situation in which your happiness over your credit card sale turns into anything from surprise to dismay as the sale goes sour. Your profit drops as you face a chargeback the credit card company taking the money back from you. There are many possible reasons for a credit card sale to fail; it can even happen if the whole approval process runs smoothly. A cranky customer who didn’t read your return policy (or who did, but doesn’t want to admit it) writes to MasterCard that you defrauded them and suddenly you have to defend your right to get paid. Another typed in the wrong credit card number and it was charged anyway. Stay in business for a while, and you can write your own list of problems easily enough.

Credit card fraud, however, is the one bugaboo that hits most companies the hardest. It’s a multizillion dollar industry, and it’s not going to go away. Your merchant account provider will doubtless be fully on your side in helping you to prevent it, but be sure to ask for specifics before you sign anything. The most important item to have on your side is an address verification system (AVS). This is a service that compares the address your buyer gave on the order form with the address that the credit card company sends the bills to. If they’re not the same, then the chances increase that the credit card is being used by someone other than its owner.

Of course, there are lots of cases where somebody legitimately wants to order something to be sent to a different address. The florist business, for example, would wither overnight if it insisted on delivering roses to your house instead of to your valentine’s house. Nonetheless, if you are in a more common line of business, you should consider conflicting addresses to be a red flag. If you are willing to accept shipments to an address other than the billing address, then at least have separate address sections on your order form one for the shipping address and one for the credit card billing address. That way, you can still run the AVS on the billing address. If it matches, then you may feel a bit easier about shipping to the other address. Ensure that you follow up on chargebacks quickly. It’s sometimes cheaper to give the money back than to challenge the chargeback. Many providers will charge you ‘‘extra’’ if you lose the chargeback claim, and the law is usually on the consumer’s side. The extra charges can be $20 or more, so pay attention!

Checks

You can accept checks for your online business in two different ways. The first, of course, is the old-fashioned way: someone simply prints out an order form, fills it in, and mails it along with a paper check. The second possibility is for you to print the check and deposit it just as if it had been sent in the mail. Yes, it’s legal as long as you have the buyer’s permission, that is. If you’re not familiar with this approach, take a look at the bottom of the next TV ad that’s trying to sell you some fabulous gadget you just can’t live without. Somewhere in the payment details, it’ll doubtlessly say that you can pay with a check over the telephone. All you have to do is call them up and give them the information on the bottom of your check. This identifies two important things your bank and the number of your checking account. Armed with that information, a check called a paper draft can be created. Checker is one company that offers software you can use to create paper drafts. Instant Check by EasyDesk Software and Smart Checker are other sources for paper draft software.

This may sound scary to you what’s to keep them from whipping up as many checks as they want to and emptying your bank account? That’s a good question, and you should carefully consider to whom you give that information. But everyone who ever wrote a check for anything already gave that information to everyone they ever gave or sent a check to. Remember, it’s right there for anyone to read. You may want to point this out to your customers if they seem antsy about using the technique. What’s the real value of this capability? Simple people who don’t have credit cards can place an online order just as easily as if they had a wallet full of them.

Overall, though, you may likely not want to do business with people who won’t use a credit card. Yes, you can save yourself the credit card processing fee. But that fee pales in comparison to bouncing the check and having to deal with banks and possibly attorneys to get paid. If you do decide to accept checks, it’s best to have a policy that the check must clear before the item ships, and that you are allowed to charge the customer a fee if their check bounces. Each state varies when it comes to fees, but know the law and consider carefully your willingness to accept checks.