Finding the Best Merchant Account for Ecommerce: 4 Steps to Take

As an ecommerce business, you know the credit card processing rates can be a lot more expensive than your brick and mortar counterparts because your customers’ cards are not present during online transactions.

Since you have a more expensive cost associated with your online store, it’s more important than ever to make sure that you’re partnering with payment processors that charge reasonable fees.

In this post, we’ll shed light on the steps you can take to figure out the right merchant account for your ecommerce business. We’ll also talk about fees that you can cut when you choose the right payment partner, and what you can do right now to get the ball rolling on more savings.

Let’s get started.

What is an ecommerce merchant account?

First things first. What exactly is an ecommerce merchant account and why do you need one? Simply put, a merchant account enables you to accept credit and debit cards online. The role of the merchant account is to authorize these card payments so the funds can be transferred to your account.

Your merchant account plays a critical role when it comes to getting paid, and it’s a valuable service that you should invest in.

And that brings us to our next point…

1. Pay attention to the provider’s fee structure

How much should you spend on your merchant account? The short answer is not more than necessary.

Ecommerce businesses are facing a tough environment. The landscape is more competitive than ever thanks to the low barrier to entry and the rising costs of customer acquisition.
You need every bit of revenue that you can reinvest in your company, which is why it’s critical that you select a merchant account provider that lets you do just that.

Before settling with a payment partner, make sure to ask about the fee model and other additional costs.

As we mentioned in our previous posts merchant service providers typically use four models when determining your rates. You read our detailed explanation in our previous post on the topic, but here’s a quick overview of what those models are:

Interchange plus pricing  

The provider charges a markup on top of the interchange fees paid out to card networks like Visa and MasterCard. These costs translate to the provider taking a cut out of each transaction.

Membership pricing

Rather than taking a percentage out of your transactions, the merchant service provider simply charges a flat monthly membership fee. You, the merchant, then get access to the wholesale credit card fees (i.e., the interchange rates). Merchants that see moderate to high credit card processing volumes typically benefit the most from this pricing model.

Tiered pricing

With this model, the provider puts your credit card transactions in one of three tiers: qualified, mid-qualified, and non-qualified. Transactions that fall in the qualified tier have the lowest rates while those in the non-qualified have the highest fees.

Sounds simple enough, but behind the scenes, the tiered pricing setup usually means higher costs for merchants. This is because the 3 pricing tiers are arbitrarily set by the merchant service provider.

It’s not uncommon for a merchant account provider to deem most of your transactions as “non-qualified” simply because they can. Even worse is that many processors using this model typically advertise their low “qualified” rates to lure in merchants, only to hit them with many “non-qualified” rates when they sign up.

Tiered pricing is the least favored model among the rest because it’s costly and misleading. Stay away from it.

Flat rate

With this model, the processor charges one simple rate for all your transactions. So instead of using tiers or separating the interchange from their markup, the merchant services provider simply uses a flat rate. It’s the easiest to understand, though it may not be the best option if you process a lot of card payments.

As you can see, not all pricing models are created equal. Before signing up with a provider, strive to understand how they price their services. You can do this by calculating your effective rate, and comparing the costs between different companies.

If this is your first time shopping around for a processor, take a close look at your contract or proposal so you can determine your fees at Payment Depot we can provide a free and non-biased analysis of your statement or proposal. Get in touch to learn more.

2. Ask about PCI compliance and fees

PCI DDS compliance (PCI compliance for short) is table stakes in the world of credit card processing.

Short for Payment Card Industry Data Security Standard, PCI DDS is a set of standards established by the world’s largest credit card brands — Visa, MC, Amex, Discover, and JCB International. These standards are meant to protect both the consumer and merchant from fraud and other security issues.

Needless to say, any merchant accepting credit card payments must adhere to PCI standards. To stay compliant, you need to complete a self-assessment questionnaire to evaluate your practices. And if you determine that your business falls short complying with certain standards, you’ll need to make the necessary changes and file the paperwork with the right parties.

PCI compliance is an essential component of payment processing, and it’s something you should discuss with your merchant account provider.

Ask about how they can help you stay compliant, and if they charge fees for doing so. Certain providers charge annual or even monthly fees. Cayan, formerly Merchant Warehouse, for example, charges $99 per year for PCI compliance, while North American Bancard charges $79 per year.

For obvious reasons, you’ll want to opt for a provider that doesn’t charge you extra for PCI compliance. At Payment Depot, for example, PCI fees are already included with your membership, so you don’t have to worry about shelling out more costs.

3. Make sure the provider integrates with your existing technologies

Having a merchant account that seamlessly integrates with your existing ecommerce technology (such as your shopping cart) can streamline your business processes, save time, and prevent human error.

If you already have an existing solution, have a chat with the merchant account providers that you’re considering and ask whether they integrate with your ecommerce platform.

Be sure to discuss how the integration works and if you can get assistance with the setup process. Doing so will help ensure that your ecommerce platform “talks” to your payment technology, which in turn will lead to smoother payment processes and more accurate reporting.

4. Don’t forget about customer support

The world of credit card processing can be quite confusing, so it helps to have a payment partner that has your back at all times. When you’re evaluating merchant service providers, make it a point to discuss their customer support offerings.

Do they offer 24/7 customer service? Will you get your own account rep? Ask these questions and do your own research by reading up on reviews from current and previous clients.

The higher levels of support you can get from your vendor, the better off you’ll be.

The best ecommerce merchant account can literally put thousands of dollars back to your business

Now let’s look at a real-world case of how much money you can save with the right merchant account.

The image below is from a comparison we did for a real ecommerce Payment Depot member. Before he switched, he was paying an extra $1,200 a month to his processor because he wasn’t paying wholesale.

onlinebiz (1)

Looking at the statement, we see that the other processor not only charged a markup on top of the wholesale cost, but the processor also had higher costs on transactions, chargebacks, PCI, and hidden fees. Their rates and miscellaneous costs make this processor not even close to the best merchant account for ecommerce.

Payment Depot not only gives members the wholesale rates, but we also give everything else away just for the cost of a membership. Our processing club gets the best prices for all of our merchants, no matter the type of business.

Whether you’re starting a new ecommerce store or you’ve been operating for years, Payment Depot provides the best merchant account for ecommerce merchants.

Get in touch to learn more or feel free to ask our payment experts for a free analysis of your statement or proposal.