Years ago, I had a merchant account, but eventually dropped it in favor of using only 3rd party payment processors.
Merchant accounts tend to be expensive and time-consuming to set up and administer, so you may want to consider using a 3rd party payment processor if you:
- Don't qualify for a merchant account;
- Don't want the hassle of getting and handling your own merchant account;
- Sell just a few products online;
- Live outside the United States;
- Prefer the ease of having a third party handle payment processing.
Many third party payment processors have extra options such as built-in affiliate programs, which will give you a marketing boost through additional exposure and sales.
Another advantage is that you are only charged for transactions you make – unlike merchant accounts which tend to require a big deposit to set up and then charge monthly fees as well.
The only disadvantage that I've found with third party payment processors is that transaction fees on each order are just a little higher than with a typical merchant account – however, the time you will save will more than make up for the added cost.
When working with 3rd party payment processors, you'll want to consider using a ‘front-end' software utility such as DLGuard that allows you to protect your downloads from theft, and also build up a customer mailing list through your own autoresponder service.
Here is a list of my most recommended third party payment processors, including their setup, transaction and refund fees.
I use Clickbank's services to sell my Super Affiliate Handbook and Affiliate Blogger PRO memberships. The Clickbank ordering system is fast, and only asks customers for their name, card, and email address. ClickBank has over 100,000 affiliates who know how to find customers for your digital products. Leveraging these affiliates can be the secret to multiplying your product sales by a factor of ten or more.
- Reach millions of customers worldwide.
- Affiliate network with 100,000+ affiliates
- Real-time reporting.
- GREAT customer service.
- On-time payments
- direct deposit into both domestic and international bank accounts – no charge.
- Sell subscriptions, memberships, and digital products that leverage regularly scheduled customer payments with recurring billing.
- Offer installment payments.
- Spanish language products accepted. Currency convertion.
- Set your commission rates from 1% to 75%
- Account activation for publishers (merchants) is $49.95
- Signup for affiliates is FREE
Don't have a PayPal account yet? You WILL need one as an affiliate, because many merchants pay ONLY with PayPal.
As a merchant, I use PayPal to process purchases through my Watchcraft dropshipping site, WindingWay.com. Paypal offers your clients payment options which include credit cards, bank accounts, buyer credit or account balances, without sharing financial information.
PayPal, founded in 1998, is located in San Jose, California, and was acquired by eBay in 2002 becoming eBay's official payment processing agent. Paypal reports more than 153 million accounts worldwide. Available in 190 markets and 17 currencies around the world, PayPal enables global ecommerce by making payments possible across different locations, currencies, and languages.
|Open an account||Free|
|Withdraw Funds||Free for bank accounts in the U.S|
|Receive payments funded by PayPal Balance, PayPal Instant Transfer or PayPal eCheck||1.9% to 2.9% + $0.30 USD|
|Receive payments funded by Credit Card, Debit Card or Buyer Credit||1.9% to 2.9% + $0.30 USD|
|Multiple currency transactions||Exchange rate includes a 2.5% fee**
Fees for cross border payments
When deciding whether you should use a third-party processor, you'll need to compare the benefits of doing so with having your own merchant account.
Time and money investments are factors to consider. If you need to learn how to integrate software, set up secure processing, you might want to consider outsourcing the job through a service like Freelancer.
Third-party payment processors offer an inexpensive option for new businesses to get off and running.
Comments, questions or suggestions? Please leave a comment below!