There are two main ways to collect credit card payments online. You can get a merchant account yourself, or you can do a third party merchant account. There are many different merchant service providers available. We have chosen three who we feel are the best in price and service.

What's the difference between a third party merchant account and your own?

Own Merchant Account

Having your own merchant account means you get to bill credit cards yourself. This is a lot of responsibility! You would be storing your client's credit card numbers in your very own database, and would have the power to bill them any time you want for any amount. Because you have so much power this type of an account isn’t easy to get. You have to have a business checking account and pass credit checks. We recommend e-onlinedata as far as getting your own merchant account goes. We currently use them, and our partnership with them allows you to get an even better deal. Not only does E-onlinedata have the best rates, but they have the highest credit approval percentage out there. Believe it or not, Hostgator was denied from a few other merchant companies out there when we first launched. After asking around, one after another referred us to E-onlinedata, and within days we were up and running with them.

Third party merchant account

Paypal and 2checkout are what you can call third party merchant accounts. They store the credit card numbers charge your clients. With a third party merchant account, you basically go into your account, click "create item," decide how much to sell that item for, and if its  going to be a recurring charge or not. Once you decide all that, they give you a link to provide to your customers. Your customers will then go to that link and pay.

Fees

E-onlinedata has a monthly minimum of $25.00 in transaction fees, so if you sell $0 worth of goods you have to pay an extra $25 for not reaching their minimum. If you sell $1,100 in goods you will reach the minimum in fees and not have to pay anything extra.

Benefits and Disadvantages

Paypal

Paypal is the cheapest way to collect payments and millions already have a paypal account. Paypal has a VERY strong member base. Even if you did have your own merchant account it would be silly not to also take payments using Paypal considering they are so large. Over 20% of our sales are done through people who refuse to use anything but Paypal. The biggest problem with taking Paypal is that they require everyone who pays you to become a member. Many people will not want to become a member, and don't have the patience to go through the whole process in order to become verified. Paypal has a close to zero fraud rate with us. A big benefit with Paypal is that you can have a debit card sent out, and have instant access to your funds! Paypal will run the shopping cart for you so it's hassle free, and no coding knowledge is needed. There are no monthly fees with Paypal, as you are only charged when you sell. Paypal allows you to deposit your funds into your bank, spend them using a debit card, or request a check.

2checkout

2checkout has very high transaction fees. The benefit is that it's a clean pay. People aren't required to become a member; all they need is a credit card and they can pay you. There is a $49 setup fee to get started. We do not recommend using only Paypal, so having Paypal AND 2checkout is an excellent combo. They run the shopping cart for you so it's hassle free, and no coding knowledge is needed. 2checkout does not have any monthly fees, so you are only charged when you sell.  2checkout will pay you in the form of bi monthly checks.

E-onlinedata

Advantages to E-onlinedata includes lower rates, more control, and the power to bill your clients for what they owe. The downside... monthly minimum, monthly fees, credit checks, and a business banking account. You will also need to purchase a private SSL which runs about $75 a year. This also requires a lot of programming skills. E-onlinedata does not provide a shopping cart, so you will have to use your own and know how to build it and integrate it. One of the biggest disadvantages is fraud. About 10% of all our new orders are fraud. We know how to catch the fraud and pretty much stop them as soon as they order, but it did take much learning on our part. If you do happen to let a stolen credit card be used, you will end up with a $25 chargeback fee and a 10% reserve on your cash. Also, if you get too many chargeback’s, Visa / MasterCard will give you the boot. E-onlinedata will pay you daily directly into your bank account. Having your own merchant account is not a game! We DO NOT recommend new companies starting with this. Paypal and 2checkout end up being much lower in cost.  Once a very high volume in sales is reached, you would dump 2checkout and switch to Paypal / E-onlinedata combo if you had someone skilled enough to run it for you.