In order to sell much of anything on your blog, you’re going to need to be able to accept credit cards. But, just HOW do you do that?
This episode of Coffee Break is a 101-level overview of exactly how to accept credit cards.
- What’s a merchant account and payment gateway?
- Do you NEED a merchant account?
- How much does a merchant account cost?
- Is a merchant account cheaper than Stripe?
- Should you use Paypal?
- How does a credit card transaction work?
If you need a “plan English” discussion on how to take credit cards on your site, give this episode a good focus right now. 🙂
Today we are going to talk about how to accept Credit Cards on your blog. This is definitely an important topic and one that I know; can be a little bit confusing.
But before we jump in I want to remind you that you can go over to coffeebreakblogging.com at any point. That is a shortcut into a particular page on my site at Blog Marketing Academy, and you can catch up on these episodes.
So the way these episodes work is that we are going in on a particular order. And it is a 7 Stage process; you can download an infographic which shows you all the seven stages over at Coffee Break Blogging, just look at the sidebar there. But you can also click on the button into the full archives and you can now go all the way back to Episode 1. It wasn’t even called Coffee Break Blogging back then; it was called The Blog Program. But the only reason I mentioned this again is because we have had an issue here, especially on iTunes which we are working on fixing right now; where we can only go back a certain number of episodes and the rest of them were not showing up in the feed. But at the same time, I know a lot of you would want to go back in the beginning and kind of go on chronological order because that is how this podcast works.
So, if you can still not get into this inside of iTunes as far as going all the way back in the beginning, specially going back to Episode 30, then go over to Coffee Break Blogging, click the button for the full archives and you can now go all the way back to the beginning right there on the website and play catch up with us, okay?
So with that being said, let us jump right in to our topic which is How To Accept Credit Cards On Your Blog.
Now, it should go without saying at this point that in order to sell anything on your site you have to be able to take credit cards. I want to make a mention about checks… Now there are some people, more old-school, who still like to write checks. They do not feel comfortable doing credit cards on the internet or what have you. As a merchant, as a seller, I would not even recommend bothering with checks. I used to do it back in the old days and it was way more trouble than it is worth. The internet runs on credit cards or debit cards; it doesn’t really matter what kind it is, but that is how the economy online works. You know that, most likely. But I just want to make that one clear; for anybody who might be listening who either dealt with people who weren’t comfortable with paying by credit card… I mean, my response to that is, in a very nice way… “Tough luck”. I mean, I am not going to take checks from anybody. It is just way more hassle than it is worth. That’s what I do.
So let’s jump in to the 3 Different Methods To Accept Credit Cards in your blog. And I kind of put this into 3 Generic Categories and we are going to talk about each one.
The first one is the Merchant Account along with a gateway. And I will now describe those terminologies here in just a little bit. But basically, this is the more traditional way where you go to your bank and you set up a way to take credit cards and blah-blah-blah. You go typically do a credit check and the whole thing. It is the most vault way to do it but it is a lot more traditional in the fact that this is the way it is being done for a long time. So we’ll talk about that in just a bit.
The second method; I didn’t exactly know what to call this, but for lack of a better word I am going to call it a Payment Processor. That is a generic term and some people might refer to a gateway as a payment processor. But what I am referring to here are ways of accepting credit cards online where you actually do not really have a merchant account. It is different in the way that it works. This is actually the way that I do it now and I will go over that more in just a little bit.
And the third way is just again a generic umbrella that I am calling it and that is just: Third Party. It is a third party processor of some kind and this is where we will put PayPal and that type of thing.
So I am going to explain these and if you are much more knowledgeable on this topic you might take issue with what I have called those 3 generic categories but I am going to explain them now and why I have done it that way. So let us go back, in details…
Merchant Account On A Gateway
This is the traditional method of setting up the ability for your business to take credit cards. You would go either online and you search for the word “merchant account” or what have you, you will find tons of providers for them; or you can also go to your bank and they will typically have a way of setting up a merchant account. Sometimes you will find stores like, I want to say I even saw Sam’s Club one time offering this to their business members, you know, a merchant account capability. It is all basically run through a bank. And what you are basically getting for your business with a merchant account is a line of credit. That is essentially what you are getting.
And for that reason, it also involves a credit check and some other things, and paperwork to get it set up. So if you are running a corporation, then what is going to happen is that they are going to get your Social Security number and all that stuff and they are going to check your credit as the owner of it. And your terms on that merchant account; in terms of how much you are going to pay, any money that they are going to withhold, blah-blah-blah is going to be dependent on your credit because they look at it as a potential risk. That is the way to look at it. It is a line of credit and they are looking at it from a risk perspective. So the merchant account is essentially, that. It is a line of credit. Money is going to go into that little merchant account and then it is going to get settled with your bank typically, every single day. Well, at least Monday to Friday.
Now how does your website interface with this merchant account that you set up? Well, that is where this thing called “gateway” come in the mind… Payment Gateway.
So the payment gateway acts as a middleman, so to speak, between your website and your merchant account. The payment gateway is what does all the ground works. It is what actually checks the credit card, check the expiration dates; if you have address verification turned on it will check that to see if the address on file with that credit card matches up with what they entered, blah-blah-blah. You have probably heard of this gateway because it is extremely popular; this is what a lot of people use. And that is called Authorize.net. And if you go to authorize.net you will find what they are. They are essentially a payment gateway. So what will happen is that authorize.net will be set up; if you have an account with authorize.net it will be set up specifically to talk with your merchant account.
Now, many times, you do not actually need to individually sign up for authorize.net. Many merchant account providers will provide the gateway. And in some cases they will actually hook you up with authorize.net. I know when I originally got my merchant account they basically set me up with authorize.net themselves so the hook up was already done, no big deal. So you probably very often will find that is the case.
Let us talk fees here because there definitely are fees associated with this. You are going to pay a percentage of transaction, in averages; in the high 2’s to 3% of the transaction. So if you charged somebody $100, you are going to pay $3 to the merchant account provider. Now there is also a flat rate on top of that. Now that flat rate varies as well. The whole thing about these fees with the merchant account is that the whole thing is generally negotiable. Many times they will start out kind of high especially depending on your credit. If they do not like your credit score they will offer terms to you that are going to be higher than the average. It will be higher than the 3% of the transaction; higher than 2.9% and you might not like that. So, you can negotiate with them.
Another thing that people sometimes do specially as they start processing more volume through a merchant account is that they will call up their merchant account provider and be like, “Look, I’m running an X amount of volume every month” you can point out what your refund rates are and say that it is really low risk and say “I want my fees to go down.” And you can negotiate. And in fact you could actually shop around. I have talked to some people who would actually shop around at different merchant account providers and be like, “Hey, can you offer me less than these other people?” And you literally switch business. You can do that. But that fee, that percentage of transaction is definitely negotiable and in some cases can be higher than what you will find in other places and this is simply because, again, they are looking at what their computers are telling them – is the risk factor of doing business with you. Okay?
Now on top of these things; this percentage of transaction and the flat fee, there are also typically different account fees that go along with it just to keep your account active. And so, I’ll give you an example: Right now, I have a merchant account that I have had for years… It is with a company called PowerPay. I am currently not running any volume through it because I am doing it in a different way and I am still paying that company. Off the top of my head I think I am paying them between $50 and $60 a month to literally have an inactive merchant account. I’m probably going to turn it off. I have had various opinions on whether I should just get rid of the darn thing and some people are saying I might want to keep it as a fall back and it is actually the only reason I’m still paying for it. But it goes to show that these account fees were just built-in to it. And so for that reason, a lot of times, a merchant account along with a gateway is going to cost more than some of these other options that we are talking about.
Now, not only that… Sometimes these merchant accounts would want to withhold a certain portion of your revenue for risk purposes. So, basically, they again are judging the risk of your business, what you intend to sell, your credit score; stuff like that and their computers tell them how much risk you are going to be. And then sometimes, in order to minimize the risk, they would want to withhold a certain portion of your revenue, put it in a little account. It is not like it is their money but they kind of hold it and it is for risk purposes. So that if your customers come in and they do charge backs which is where they dispute the transaction or stuff like that, there is money there to cover those things by your merchant account provider.
Typically when you are just starting out and you do not have much of a track record, they are going to want a certain percentage of your revenue in order to build that buffer. And they might have a higher percentage of transaction that they are going to want to keep. And then as you build up a little bit of history with them, you can get those numbers down.
Now the last thing I want to mention again with regard to fees is that the gateway is going to typically charge fees as well. And I was paying $10/month for authorize.net on top of that. Now, it could be that your merchant account provider will have that all bundled in and you won’t have to deal with that but it is just something to keep in mind. And so as you can see, there are a fair amount of fees involved with a merchant account. Now if you are running a lot of volume, it can definitely payoff. If you are not running a lot of volume like if you are running just a few thousand dollars a month in transactions or even less; then having a merchant account with a gateway can actually be kind of expensive. And there are other ways to go and I’m going to tell you about those right now.
Another way to go is what I was calling the…
Now, I might not be referring to this as the right thing but basically it is a way to accept credit cards directly, very similarly to how a merchant account works except that you do not actually have a merchant account. Now the big one that you might have heard of; and these are the guys whom I use personally now, is Stripe. Now there are other ones out there but Stripe is very, very popular and basically it is like having a merchant account. You accept credit cards on your blog. Now the big thing with Stripe is that it does not provide a payment gateway like authorize.net. Authorize.net will actually give you payment forms and all that, if you want. With Stripe, you will need to integrate it with some form of software on your site to actually talk with Stripe. Now that is not hard to do because a lot of the software that we talk about is designed right off the bat to talk with Stripe.
So if you are selling with MemberMouse or WishList Member or many of the different shopping carts that are available that you can put on your blog; most of these things have the ability to talk with Stripe. You just enter a little code, essentially and it can process credit cards for Stripe. So it is really easy. In terms of fees; Stripe is very upfront about their fees so it is not all these variable crap like you get with merchant account. It is 2.9%% of the transaction and a 25 cent flat rate. So if you were to run a $100 transaction through Stripe, you are going to pay them $2.90 plus the 25 cents which means, I guess $2.15. That is what you pay Stripe and you keep the rest of it.
Now the way these things work is that it goes into your account on Stripe and then just like a merchant account on a Monday to Friday basis it is going to settle with your bank. So you will actually hook up Stripe to your bank account and every single day it will settle. So whatever transactions that you collect on say, on Monday it is going to get settled on your account on Tuesday. And then typically within one or two days of that it is available in your bank account. Nice and easy. And then with Stripe, one of the reasons I like it is that there is no other fees involved. It is actually pretty simple on that regard. No weird account fees or any of that.
So if you are doing lower volume and even up to what you probably consider to be significant volume, Stripe is actually a great way to go. And I am a big fan of using Stripe over a merchant account these days. I think the internet is just matured. I do not think the whole merchant account set up has existed for a long time like even before the internet and now that things were maturing on the internet itself there is always different payment systems that are becoming available. And Stripe is great. It has got a lot of advantages over a merchant account.
Again, I think that the only time that a merchant account would probably save you money over Stripe is that if you are running a lot of volume; like you are going to do some big launch and you are going to run many thousands of dollars to it or even a few hundred thousand dollars or something like that well then a merchant account probably makes a lot more sense than Stripe. But if you are running just a normal business where the revenue is fairly consistent and it is not huge but, hell… You can run tens of thousands of dollars a month through Stripe it is going to do it just fine. So for most everybody listening to this, I think Stripe is going to be a good way to go.
Now the last category is what I refer to as…
Maybe not the best, but basically these are going to be the people like PayPal, like GumRoad, e-Junkie… It is these all in one type of things where they process the credit card for you. It goes in to a little account like in the case of PayPal. PayPal does not actually get deposited to your bank. It sits in your PayPal account and if you want it in your bank you got to manually do a transfer. Nothing wrong with that; it is just the other way to go. And PayPal kind of operates like a bank in and of itself. GumRoad, it can deposit in different ways, and there’s different ways that you can do; there’s e-Junkie and you know, these guys; that’s a way to sell things on your blog, those companies will do the middleman stuff. And then they handle the money in their own unique ways. It is a way to go.
I want to mention PayPal here because I know a lot of bloggers will default to PayPal. They are like, they get PayPal, they understand PayPal and they will start using PayPal to sell things. And it is a way to go. Just realize, in order to grow your business well, I think you have got to move beyond PayPal. I think that in order to really operate a business in the context of what like to teach people to do, you need to be able to act like a real business and that is to accept credit cards on your website. It is not difficult to do and that is where Stripe comes in. You can use PayPal for that if you have the business side of it but you are going to pay them $30 a month or something like that to have that capability and then you still got the transaction fees and all that. But it is a way to go and then these other companies all work in their own unique way.
In order to use a shopping cart system of some kind; and we are going to talk about that here on the next episode, whether it be WishList Member or MemberMouse or WooCommerce or whatever you might be using to sell these stuff on your blog, but then in terms of payment, I am a big fan of Stripe. And that is just stripe.com. I think you should go check them out. Do not get scared of the way that it works; like when they describe how it works in the features you are going to see programming codes on there and all kinds of stuff. You are not going to have to code things manually because most of the software that we would probably use on our sites to sell stuff; most of them have built-in integration with Stripe. So it is really easy, in most cases you are not going to have to worry about anything customized or any programming or anything like that to work with Stripe. It is pretty simple. And the process of signing up with Stripe; it has been a while since I have done it, but it is pretty easy. You set it up, I think I entered my bank account information and it verifies some stuff that way and it was fairly A to B. I don’t think it took me very long at all; certainly a hell lot easier than getting a merchant account.
Alright, so hopefully that was some helpful information on accepting credit cards on your blog; definitely something you got to need to do so that you can collect money.
And speaking of money… If you want to know how to actually get people to buy stuff and how to actually set up your businesses in such a way where all these stuff about accepting credit cards is relevant, I want to invite you; if you have not been on it before, my Big Blog Monetization Webinar where you can learn the entire business model that I teach. I literally walk you through it onscreen and draw it out and the whole thing if you want to know the entire business model on how to monetize your blog and make serious money doing this. And we are not talking about banner ads and that stuff because I don’t like that kind of stuff. I am talking about creating a real business out of your blog. I want you to join me. Pick up a date and time which is convenient to you and I will see you there.
Thank you so much for getting into this episode of Coffee Break Blogging and I will see you next time!