Do You Need Credit To Accept Credit Cards Online? 13
eries asks: "I run a relatively small startup company, with little credit history. We're trying to add credit card processing to our site, but we cannot, because (As Charge.com said), "You have too little credit." We have no credit because we cannot get a credit card because we have no credit. What's a company like ours supposed to do? Most of the downloadable-software options are written for NT or Solaris, anything for Linux? " Now -why- do you need a credit history to -accept- credit cards? Is there some legal reason for this?
Credit card acceptance policies (Score:5)
You need a credit history to take credit cards because it's insanely easy for a card-taking merchant to commit fraud. It wouldn't be hard to put huge, unauthorized charges on a few hundred customers' credit cards, wait 48 hours for the money to be deposited in your business bank account, withdraw it, and skip town. By the time the customers got their statements and started squawking, you'd be long gone.
This is why the the merchant banks that process credit cards like to see some "hard" evidence of a significant business investment. Putting up a Web site takes nothing. Ditto home-based businesses, which a lot of merchant banks won't accept at face value. When I first started processing credit cards for my home-based limo business (in pre-Internet days), the merchant bank sent a guy out with a camera to take pictures of my limousines, and they checked the registrations to make sure they were really mine. Once they had determined that, yes, there was a big investment there, enough that I was unlikely to leave it behind and run off to Mexico if I got my hands on $10,000 or $20,000 in fast cash, I was good to go.
And now, the Internet. In the eyes of the merchant banks, all online businesses are flaky, from your little startup all the way up to established ones like ThinkGeek. The problem with businesses that operate online - and those that operate over the telephone - is that they have no real way to prove that the credit card number a customer has just typed into a form or read them over the telephone really belongs to the person at the other end. Many online (and phone) businesses will now ship merchandise only to the billing address shown in the credit card issuers' records as belonging to that card holder. Others are asking to have proof of identity faxed to them; CowboyNeal recently had an online merchant demand copies of his most recent credit card statements, which he felt (rightly) was going too far. But no matter what, there is currently no way to accept credit cards online or by phone that is as fraud-preventing as the good old fashioned physical imprint (or electronic card reader "swipe") combined with a driver's license or other photo ID on a sale made in person.
And now, the software problem. Yeah, all the credit card acceptance software you can get is a rip. It's all for proprietary OSes and it costs through the nose. I bought my old "sits on the desk" physical Tranz 330 Terminal 5 years ago for under $300, and they want more than that for the software alone these days. I'm still using the physical terminal, becaus my limo volume isn't high enough (fewer than 100 total credit card sales per month), and it doesn't take me long enough to manually punch in the numbers, to justify a change.
I have been told, by the tech guys at Novus/Discover, which has been my credit card processor for many years, that if someone called them who was seriously interested in developing an Open Source and/or Free software package that would work on Linux, they'd be happy to help or at least to furnish the software hooks needed to write for their system.
Now, here's how you can handle things as a startup: through friends. It's not cheap setting up a secuire server, getting the certificate for it, and getting a merchant account even if you meet all the specs. You may be better off finding a friend who already has an account and all this machinery in place, and letting them "sell" your product for you in return for a cut of your sales slightly higher than the credit card company's cut. That is, if they're paying 2.2% for credit card processing, and 2.8% for Amex charge card processing, you pay them 5% or 6%, even slightly higher. Note that I say they "sell" your product or service for you, because terms of most credit card merchant accounts prohibit "renting" that account out to other businesses.
Indeed, even though I already have a merchant account, I've considered doing something sort of like this if I ever decide it would be worthwhile to accept credit cards directly online - I have a friend who has a secure server, and for a small, fixed monthly fee he'd happily put up a credit card transmittal page for my business on his site which would then forward the customer's info to me via encrypted e-mail. I would still use my merchant account (and manual terminal), but would be spared the expense and trouble of doing the secure server thing.
There are a lot of alternatives out there if you have a little imagination and some friends who already have established businesses. I am a big believer in cooperating with others. Even in the limo business, which can be cutthroat, I have found that it's better and more relaxed to work closely with other small limo companies than to regard them as enemies to be vanquished a la Bill Gates.
BTW, I strongly recommend Novus/Discover as a fine credit card processor for small businesses. http://www.discoverbiz.com/ is their URL. I tried several others before them, but they have proved, over the years, to give the best service and the lowest rates.
Shopping note for new business owners: when a credit card processing company demands an "up front" application fee, say no. There's a whole industry out there that, in my opinion, does nothing but take advantage of new businesses owned by people who don't know any better. They get that fee, and if you get turned down they still profit from you. I found it *easier* to get an account with Novus/Discover than with any of the "front fee" crowd, and it cost *much less* to set up. If you can't get on with a major, do the friend thing for your first year, until you have enough of a sales and credit track record that one of them will deal with you. To get a (hopefully positive) credit rating going quickly, list your business with Dun and Bradstreet (biz credit rating agency) as soon as you can.
- Robin
Re:Talk to your bank (Score:1)
CCVS [redhat.com] was written by the guys at Hell's Kitchen Software which is now owned by RedHat. It's available for several OSen.
We use it at the dotcom where I work and it works pretty well. There are APIs for C, Java, Perl, PHP and Python and TCL. They guy who set ours up pretty much used their example code, grabbed the socket server code from the Perl Cookbook [oreilly.com], added a few queries to our Oracle database and was good to go.
From what I hear, the support is pretty good as he's needed to call them a couple of times. I'm now supporting the software and I certainly haven't had any problems
For more info... (Score:2)
Also see MerchantWorkz [merchantworkz.com].
http://www.goemerchant.com/ (Score:1)
Go E Merchant [goemerchant.com]. I was in the same boat as you until I found these guys.
Re:Cybercash (Score:1)
Non M$oft OSs (Score:2)
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Catch-22 (Score:2)
That being said, there are good companies to deal with and bad companies to deal with. In our years as a software merchant, we've had both. We are now with a very good one. A relative with a small home-based service business referred them to us, and we switched and have never regretted it. We use the old ZON terminals because we haven't had the motivation to integrate their software with our operations systems, but they do offer a (Windows-based) software solution.
Our rep is in Boulder, CO, but I think they are a nationwide outfit:
ACS Merchant Services
800-654-9256
Can't hurt to give them a try.
BTW: Many merchant account agreements give them the right to hold transactions for indefinite periods of time, or to chargeback (revoke) large amounts of money from you if they determine you did something fraudulent. These companies mean business.
Where's my secure digital cash?
Re:Talk to your bank (Score:1)
I don't know of any GPL'd ware, but Linux Journal has advertised the CCVS system for some time that is supposed to work on Linux. They might have been bought out by a larger firm lately, IIRC. Don't know how much it costs.
Re:Same boat... (Score:1)
I finally recieved the second application from Charge.com for their "Secondary Processor". Strangely the application was from the same bank. Only this time, "Real Time Processing" cost $995 up front or you could lease it for 48 months at $14.95/month. That lease is unbreakable BTW. Real honest, upstanding business practices.
Looks like bait and switch in it's purest form to me. And here I thought I had found someone whose intentions were at least honest.
So, I hope no one wasted time on Charge.com. They've wasted quite enough of mine. I've taken my merchant services business elsewhere (not going to comment on where just yet, as I don't know if they are any more honest than Charge.com).
Same boat... (Score:2)
Advanced Merchant Services/Signio has very similar rates and claim to like small internet startups and people with little or no credit. I will contact them if the Charge.com application doesn't pan out. They are at www.merchant-accounts.com [merchant-accounts.com]
When I started all of this I had no idea setting up merchant services was such a dirty business. I've come upon some of the nastiest business practices from merchant services folks. And a read through the contract of even the better ones (Charge and Signio being two of the best I've found) makes it clear that the merchant has ZERO rights. They claim the right to withold funds on a whim, make chargebacks with very little recourse, cancel at any time, change terms of the agreement at any time. Section 5.11 of the Charge.com contract even states that they have to right to refuse to accept payments beyond a certain approved amount or to withold those funds for an indefinite period. It's ludicrous.
If someone were to start an honest and fair payment services company that doesn't rely on the old-guard banks (where much of the crookedness comes from, I've found in my own research) they could make a killing. If you follow the ISP-ecommerce mailing list, you see nothing but complaints, charges of fraudulent behavior, and overall dissatisfied merchants.
At this point, merchant services is the only thing keeping us from going live on our website. And we've been waiting over a month now. (We started out talking to our banks, who made it clear that they wanted no truck with internet startup businesses.)
It's really a rather disgusting business.
Talk to your bank (Score:3)
I can't see why the credit status of your company was an issue for charge.com, unless they were concerned you wouldn't be able to pay them. If your bank is happy for you to accept credit card payments then thats all you need to become a merchant.
There are a number of different ways to start accepting online payments - good web hosting companies/ISPs offer e-commerce products, your bank might even have a product to do it. People like VeriSign etc have products to help.
Shop around for different products, estimate your volumes, look at fees (setup, monthly and per transaction) and find someone willing to work with you.
Web based credit card software is available for a range of platforms. The system I worked on had an OS/2 machine as the gateway to the credit card clearing house. There are *NIX and Windows software out there that do it, but it might be hard work finding open source ones - the financial world chokes about 'giving stuff away'!
Back to the point though, your available credit will guide your product selection, but shouldn't stop you from becoming a merchant.
It's clumsy but.. (Score:1)
Cybercash (Score:1)