An quick guide in Payment Processing Services and Terms

[autoralex]

Most successfully businesses use one or more 3rd party payment processing services to process their credit card orders on Internet, since this doesn't require to obtain a direct merchant account or to setup expensive ssl certificates. The 3rd party payment processing services handles payment by credit card (and usually can handle checks and other forms of payment as well), and sends the seller a monthly (typically) check or wire transfer, minus various processing fees, which vary from service to service.

These 3rd party payment processing solutions give the seller a link to a secure webpage where they can redirect their customers to, for completing the order. While the method has many benefits, it also has disadvantages.

Below I would like to make an introduction of the basic terms and concepts used by the standard payment processing services, to help sellers
Understand better what they need to compare when choosing an payment processing service.

Payment Cycle
- the time interval during which orders are taken for one payment. Can be monthly, bimonthly, weekly, etc. After each payment cycle ends, the payment should be sent to the seller.

Payment Hodling Time
- unfortunattely every payment processing service deliberately holds the payment for an amount of time that varies between a few days up to several months. They do not send the payment immediately after the payment cycle has ended, but instead they hold the payment for the specified payment holding time. They say this is to protect them against fraud, chargebacks, and it also helps them with increasing their profit ( by holding the money in bank for an interest ). For example, for a monthly payment cycle and a payment holding time of 15 days, the money resulting from orders during October will be sent to you on or after 15th November. This is not a big issue if the payment holding time is not long, but some services have a payment holding time of 2 months or more, and you will receive your payment for October sales in January the next year.

Payment Processing Day
- is the date of the month ( for montly payment cycles ) when the payment cycle should end, and the payment calculated. Usually this is the last day of the month, but some services let you specifically set it.

Signup Fee
- the fee for signup. Some charge non-refundable fees, other application fees, other do not charge a fee at all.

Transaction Fee
- the per transaction fee, usually a percentage with a minimum fixed value.

Chargeback Fee
- when a chargeback occurs ( it happens in case of fraudulent orders or when the customer is not satisfied with the product ) not only that the payment processing service takes back the amount of the order, but it also charges you with a chargeback fee.

Some payment processing services have additional fees, such as product download fee ( for virtual goods ), monthly fee, statement fee, refund fee, wire transfer fee, contract canceling fee. You need to ask them about all these fees, because most services do NOT clearly specify it on the website nor in easy to find documentation; and you might have unpleasant surprises later if you do not. Especially with the payment holding time, it's disappointing to expect to receive the first payment just to find out that it will be sent to you months later.

It is a good practice to read the TOS ( terms of services ) and the contract before signing up, as many payment processing services state they reserve the right to terminate or suspend their services to any customer, for any and no reason at all, without notice, and they also state that the last payment will be held 6 months, for chargeback protection.

You can learn more on http://www.ordersoft.net


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[Sperbonzo]

I would be happy to help anyone with advice in this area. I have been involved in online transactions since 95, and have dealt with all aspects of credit card processing, online ACH and alternative payments, etc....

I have worked for, and helped develop the business of third party processors, direct merchant account situations, aggregators, payment gateway systems, and alternative payments.

I work pretty much all the time, but if anyone has a questions I will be glad to help when I can. Please feel free to contact me and I will get back to you with answers as soon as I have a chance. :-)

Michael Sperber
Astral Group Inc
Michael.Sperber@gmail.com
ICQ 177961090
Tel +1 954 650 5789
Skype msperber
www.astralgrouponline.com
complete e-commerce solutions

[yadhavraj]

Thanks for posting the forum is so nice




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