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Purchase or Lease?

If you choose to lease you will pay more in the end than if you had purchased the processing solution on day 1. Lets say you find a merchant account provider who'll charge you $200 to purchase a Real-Time Internet credit card processing solution. Or they'll lease you the same solution for $20 per month for the next 48 months. This leasing agreement will cost you $980 in total - $760 more than you'd pay if you'd purchased the solution and used it over the same time period. Also, be aware the above calculations don't include the state sales tax on the lease, or the amount that's charged for the damage/loss waiver. With these two additional costs, you can end up paying as much as $20 more, along with the lease amount you're charged for the solution. Another thing you should note is that the 48 month lease is not cancelable, so even if you go out of business you may still have to pay out that lease until the 4 years (48 months) is completed.

Not all leases are for a 48 month period - some providers offer 12, 24 and 36 month leases. However, the shorter the lease period, the higher the monthly lease cost will be. Your credit rating will also have an effect on the amount you pay for a monthly lease. Those with bad or no credit will almost always pay more than those with good to excellent credit. Check with the Merchant Account Provider for details.

Needless to say, purchasing a processing solution is by far the best way to go - and it’s 100% tax deductible, too.

General Questions To Ask

In addition to identifying these fees, there are several things that you should ask a company before you take the plunge and purchase their solution:

• Can you provide me with the email addresses or URLs of at least 5 customers who I can contact for references?

• Are you willing to put everything in writing, including all fees?

• What is the name and location of the processing bank?

• Are you registered with Visa and MasterCard?

• Do you provide 24/7 support over the phone? (If so - and they should - test it out)

• Is a reserve account required? (If the answer is yes, look elsewhere)

• When will my funds be available? (Aim for 3 days or less)

• Are you a member of your local Chamber of Commerce and/or with the Better Business Bureau (BBB)? (If they are, check to see if there are any previous complaints or disputes on their record)

• Are the banks with whom you partner to issue merchant accounts FDIC-Insured?

• Are you a member of the Electronic Transactions Association (ETA)? The ETA is a trade organization that supports fair and ethical business practices for Independent Service Organizations (ISOs) -– a fancy name for Merchant Account Providers.

Questions For Internet Real-Time Processing

• Do the Secure Payment Gateway and Merchant Account already work with the shopping cart or solution you want to use? Integration can be expensive or, in some cases, impossible.

• Does your Web Hosting company support the Gateway/Processor you prefer? They may be able to accommodate you, but usually this takes time and patience - and can be impossible.

• Does the Gateway/Processor support electronic checks? If not, you will have to pay yet another company to do this for you. Aim to find a provider who offers support for checks, credit cards and a Gateway all under one roof.

• Does the provider publish all their fees on their site? The ones that don’t may withhold this information so that they can mark up the price they charge you!

• Is the company too big for their (and your) own good? In many cases, a smaller company is better able to provide direct support, help eith integration, and consistent service.

• Does the Merchant Processor or Gateway only provide Internet services? We've all heard of “dot com failures”, and Internet Processors are no exception. CyberCash, perhaps the best know Gateway, recently filed for Bankruptcy! Make sure that your Processor/Gateway also has real world merchants as clients to ensure long term stability for your business.

• Does the Gateway provide a Virtual Terminal and Online Reporting? Make sure they do, because you'll need these facilities.

Make sure you read all the terms and conditions carefully, and keep your eyes on all the costs involved - not just the discount and transaction rates. Again, we recommend that you consider the purchase of a processing solution rather than leasing one - you'll be glad you did in the long run.

Next week, Part 3 will explore third party processors, fraud, encryption, and an overview of shopping cart software. See you then!