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An quick guide in Payment Processing Services and Terms
By: alex marias, Sun Jun 18th, 2006
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
About the author:
Alexandru Marias is an IT student mentaining websites like
http://www.amicutilities.com , http://www.downloadsplaza.com ,
http://www.fungamesplaza.com , http://www.web-site-templates.org
and http://www.zero-spam.org
