Taking credit card payments via the Internet

It all started when one of my clients wanted to pay me with a credit card. It is odd that I have been in business for 18 years and this is the first time that I have been paid in this way. It is doubly ironic in that I used to teach classes on eCommerce back in the early days of the Web and hadn’t ever gotten around to getting a merchant account, which is what you need to take credit card payments.

If you want to accept credit cards, you enter a brave new world where there is an entire collection of jargon to use your secret decoder ring. For example, “discount rate” is the fee that the card issuer (like American Express or Visa) charges you per transaction. Typically these are anywhere from one to four percent, depending on a series of circumstances. Then there is the “virtual terminal” which is a series of Web-based services that allow you to enter the credit card number in your browser and have the transaction completed online. These replace the typical credit card swipe machines that you see in every retail shop.

Since my client wanted to use their American Express card, my first stop was to try my business bank, Bank of America, and see what they could offer me. Online had limited information but I tried the 800 number and got nowhere fast. They suggested that I talk to Amex and see what they could do for me. Within about 30 minutes I was setup with an Amex merchant ID and could start accepting their card via a telephone response number. The issue was that the transactions would take some time to clear and actually end up in my bank. They could also sell me their virtual terminal software, called Payment Express, which would be an extra charge of $20 a month. Amex has many different options that can easily get confusing – my recommendation is if you want to go this way, first sign up online to access your account and then read the various screens that describe Payflow, Payment Express and their physical card payment terminals.

In the interests of research, I pressed on to see what else is available.

Paypal was my next stop. While you can process some credit card payments, once you get beyond a few hundred dollars you need to have a Paypal business account. This means $30 a month, plus transaction fees of 2.4 to 3.1% to use their virtual terminal software. Here is a description of that process.

Intuit was next. Their merchant services are $13 a month, and it took about a day to set me up. They also have their own virtual terminal software and their home page takes something to get used to. They also charge less per transaction, with fees ranging from 1.9 to 2.9%. They have a great series of online demos here on their Web site.

So which do I recommend? If I had to start over knowing what I know now, I would go first to Inuit. They are geared towards their online product, they have a simple sign up process, and if you already use Quickbooks they can integrate with that too if you end up with lots of transactions. (I have been a happy Quickbooks user for nearly two decades, starting with the DOS version, can you believe it?) I would steer clear of Paypal, I just think they charge too much for too little.

There are dozens of other payment processors online, and this isn’t meant to be a comprehensive review. And feel free to share your own experiences on my blog or via Twitter.

21 thoughts on “Taking credit card payments via the Internet

  1. I’ve had an Intuit merchant account for about a year. After the transaction fees, batch fees, and monthly fee, total fees have averaged 4% on about $2000 of monthly charges. I use the virtual terminal that’s built into QuickBooks since I cannot physically swipe my clients’ cards, and that adds to the fees. But I also enter the CVV for almost all charges, which helps lower the fees.

    Intuit’s fees have, for me at least, run higher than the average I was paying on my former Bank of America merchant account. (David, I’m surprised you had trouble setting up a merchant account with BA. I received a solicitation from BA soon after I set up my business checking account; I called the 800 number and was set up right away.)

    But I still switched from BA to Intuit because of the incredible convenience of being able to create a sales order in QuickBooks and run my clients’ cards right there!

    Apropos this discussion, the latest issue of Wired Magazine has a terrific article on “The Future of Money”–new ways to transfer money over the Internet without using traditional credit cards.

    • Just a note that regonline.com is an event registration site. So, it only works for people doing events and then you have to use their software. I didn’t get the impression that’s what you were collecting for. If that’s the case, then any event software, including Ennect’s, cvent, etc., will process your registrations online. Some use Paypal or Intuit, and some give you the option of using your own credit card accounts.

  2. Our clients sometimes ask us if they can pay via credit card, and when they do, we just use our PayPal account. We’ve had a business account with them for quite some time now, receive $2K-$4K-at-a-time payments, and have NEVER had to pay a $30 monthly fee. Don’t know why you would have to if we don’t have to. We don’t use a virtual terminal — we just ask clients to send money to our account email address the same as any other payment via PayPal. Sure, PP takes a fee, but it’s a lot cheaper to pay that than recurring monthly merchant account fees that we might need only five or six times per year. PayPal also downloads into Quickbooks.

  3. I guess misery loves company, so I felt exonerated to learn that you also had problems setting up a merchant account with B of A. I won’t bore you with the gory details here, but trying to close the B of A merchant account was even more problematic than opening it, taking over 3 months and several phone calls and letters to accomplish. I agree with Lee that using PayPal turned out to be the best option I could find and we don’t pay the $30 monthly fee either; just the processing fees.

  4. Here at TidBITS Publishing, we use a PayPal account for some credit card processing in a business account – maybe up to $1,500 per month, but usually far less. We don’t pay a $30 fee. For the bulk of our sales – downloadable PDFs, we use eSellerate. eSellerate has been reliable and responsive. We get a monthly check, and they handle all interactions with credit-card companies, sales tax, VAT, and security. eSellerate used to be their own company, but a few years ago they were purchased by Digital River. Lots of smaller Mac companies use eSellerate as the back-end to their carts.

    For a short while we tried setting ourselves up with merchant accounts directly, but it was too much work and complexity for a very small business to handle well.

  5. Pingback: Taking credit card payments via the Internet « David Strom's Web … Money just to Me

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  7. Caution using PAYPAL. Be very careful it is very east to have them freeze your account and keep your money and still make even chargebacks to your credit card, bank for six months after they freeze your account.

  8. I went through the whole process of trying to find a merchant account about a month ago. I’ll tell you right now, that if you really try and research these companies, you better have a lot of time on your hands. It’s not just about fees and such, I even went as far as checking up on their online reputation and what not, with site’s like the BBB. I will tell you this, I was able to find some third-party type sites that help cut that time down, and I’m going to post them below, but feel free to remove the links if they fall outside of your policy David. I assure you that none of these are affiliate link, as none of these sites even offer affiliate programs.

    http://www.merchantmaverick.com/ – This is a site that does nothing but review merchant accounts. Mainly based on reputation, not fees. This guy has a TON of info on his site, even if you don’t follow the rating structure, at least read the “How I Review” to figure out how to research companies on your own.

    http://www.transfs.com/ – I found an article in TechCrunch that was talking about these guys. Basically, it’s like a quoting service for merchant accounts. They can explain it better on their site, but I have to warn you, I didn’t use their services so I have no idea how good they are. If anyone else has, definitely let us know.

    That’s pretty much it. All the other resources seemed worthless and cheesy to me. Hope this helps. 🙂


    • Thanks everyone for your comments. Yes, I am trying out Google Checkout, and yes I am aware of Amazon’s Payment services and I will have more to report on both shortly. I don’t know what I was doing wrong with Paypal but I am glad that it happened because it motivated me to take a closer look at these other services. — David

      • Great analysis and comments..
        For non-recurring, one-off, every-once in a while credit card processing I highly recommend Google Checkout
        – easy to use “send an invoice” option
        – no monthly fees
        – reasonable transaction fees

        Unfortunately you missed the early days of Google Checkout with no-fees, it was a good time!

  9. I wouldn’t do it for one client, in fact I recently refused to take a credit card. He mailed a check.

    Almost every bank has an option for paying online, most of them are free, including postage. For big payment recipients, like utility companies, the payment is electronic, but for smaller payees the bank just prints a check and mails it. The user just needs to setup the payee (name, mailing address, maybe an account number to reference on the check) once, then it’s trivial to pay.

    You get the full face value, although you do have to wait for the client to actually make the payment and the time for the check to get to you, but giving up 3+% of $500 invoices isn’t appealing. For smaller amounts, particularly for one-time transactions, I’ll send a PayPal invoice.

    Also, it’s possible for a client to dispute a credit-card transaction months after it’s occurred, in my experience there isn’t much you can do about it.

    BTW, I think the issue with PayPal indefinitely freezing merchant accounts with no good reason or appeal is a thing of the distant past. I have a lot of clients taking PayPal, small businesses that can’t justify the overhead of a full-up shopping cart and the ongoing expense of a merchant account, and none of them have had any problems, nor have I heard of any actual incidents for years.


  10. Pingback: Great Merchant Account research « Grow Your Business

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  12. Initially I had the idea that I just need to find the best deal from the credit card processing companies. Later I realized how dangerous that was. Most of these second tier solutions are not safe at all, neither for the merchant nor for the customer. After reading so many bad experiences I’m sure that going with PayPal is the best thing an inexperienced merchant can do.

  13. Pingback: A simpler way to process credit cards « David Strom’s Web Informant

  14. Great goods from you, man. I’ve understand your stuff previous to and you’re just extremely great.
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  15. Thanks for sharing your insights on accepting credit card payments. It’s valuable to hear about your experiences with different providers. Your recommendation for Intuit, citing its simplicity, integration with Quickbooks, and competitive transaction fees, is particularly helpful for those navigating the world of credit card processing.

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