Online payment
credit cards and dedicated online accounts

Selling by mail order online

This page is about using credit cards and dedicated online accounts like PayPal. There is a wider range of retail options in the DIY checklist page.

You can sell CDs through a third party (Online music distributors or local independent shops) but it will cost up to 50%—less for downloads. If you sell CDs on your own site or at gigs you don’t pay that retail markup. You could accept cheques by post but here’s how to accept payments online.

Most online music sales are still CD mail order (downloads account for about 25%). Online mail order works like traditional telephone and postal systems; the only difference is the browser. There’s a lot of hype about new ways of paying (micro-payments, digital cash and so on) but debit and credit cards are the standard today, just like ordinary mail order.

Online payment services

Credit card payment gateways

Web payment is rather expensive to set up and run, and not very flexible. Cash used to be the most expensive kind of retail money (it costs about 6% to handle) but online card payments can cost the same or even more. They should be cheaper and hopefully prices will come down.

The benefits of credit cards are:

• most buyers have a credit card or access to one (Mum and Dad!);
• it’s a mature system with a good global network;
• payments can be taken in most major currencies without much fuss;
• they’re cheap to operate (not usually the 4% plus we see online).

Small online retailers normally use a virtual swipe system to accept credit cards. This ensures they don’t handle card data or transactions directly. These card systems are called secure payment gateways and there are many suppliers. Unless you’re selling in volume you won’t want a separate business account or a merchant account. Business account charges are high and some gateways make things worse by requiring a merchant account (on top of high fees). This forces you to pay higher bank charges.

Here are some popular credit card gateways for small businesses. WorldPay and NetBanx don’t advertise their charges, but as a rough guide:

• CCNow charges a set-up fee of $9.95 and 4.99% plus 50¢ per transaction
• Protx charges £240 a year for small business (up to 1,000 transactions/month)

Online payment solutions such as iTransact and DataCash are aimed at bigger businesses.

Dedicated seller accounts

Dedicated seller accounts are an alternative to credit card gateways—the most common in the UK are eBay PayPal and NoChex. These allow you to accept credit card payments.

Some questions for payment services

Terms and conditions for online payment services have become a lot simpler but they do change frequently. Here are some angles you might want to check.

• Is a merchant account provided as part of the package?
• Is there a set-up fee?
• Is there a monthly, annual or transaction volume fee?
• Are there any threshold volumes that affect pricing?
• Does the package include debit card payment?
• Are there different transaction fees for debit cards?
• Is there a charge for withdrawals?
• Is there a minimum withdrawal amount?
• Is there a charge for withdrawals outside the USA?
• Is there a minimum transaction amount?
• Is there a minimum transaction fee?
• Are there charges for handling multiple currencies?
• Are there charges for Verified by Visa?
• Are there charges for Mastercard security?
• Do buyers require any kind of account?
• Does the package cover payments world-wide?
• Is there an email payment option with the package?

The supplier sites are very good these days and I recommend you browse the 6 above as an introduction to online payment services.