Effective Strategies for Your Business Utilizing Third Party Payment Processing

saleMerchant accounts have proven to be very beneficial for large businesses needing to process their online transactions efficiently. But for many small business owners, the high monthly fees associated with merchant accounts are not feasible, especially in a business’s early stages where sales volumes can differ greatly from month to month. This is where third-party processors come in.

How Third Party Processors Work

Third party payment processors represent the ‘middle man’ in online transactions. These companies do have their own merchant accounts, but under their company name. These processors, although they may have a slightly higher rate than a merchant account may, offer businesses no minimums and low monthly fees. In addition, third party processors offer other incentives, such as free online shopping carts and recurring billing. If your business earns less than $2500 per month in online credit card sales, you may actually be able to save money by signing up with a third party processor.

What to Look For In a Third Party Processor

As with any purchase of any product or service, of interest will be the company’s track record. The same is true for third party processors. Getting quotes from as many processors as possible will make it easy for you to compare their rates and other incentives. Creating a list of what you need can also help you to find the company that will work best with your business.

In the event that you predict your business will require a merchant account in the future, signing up with a third-party processor which also offers true merchant account service can help you avoid having to sign up with a new company in the future. Two companies which offer true merchant services in addition to third party payment processing are Paypal and 2CheckOut.

Is A Third-Party Payment Processor Right For Your Business?

When trying to determine whether third-party payment processing is right for your business, ask yourself about your products. If you offer a small number of products or plan to continue offering a limited number of products, then a third-party solution could be ideal, as it eliminates the need to deal with extra transaction fees and other expenses, along with the number of programming issues that can arise with virtual shopping cart systems.

The less you sell, the more trouble a merchant account can be. This is mainly due to the costs to maintain a merchant account, which can take a significant bite out of your profits if your sales volume tends to be low. Not only that, but most merchant accounts will have a monthly minimum that must be met. If it isn’t, charges may be applied, draining your profits further.

The Disadvantages of Third-Party Payment Processors

Every potential solution for your business will have caveats, including the decision to use a third-party processor. You may end up paying higher transaction fees with a third party company – often up to 15% of the transaction amount. And you may have to jump through hoops in order to remain with the company. Your business may also experience misrepresentation due to your use of third-party processors, as these are perceived to be used only for the payment of items obtained at auction. Therefore, using third-party companies for business purposes is deemed to be unprofessional.

For those wishing to build some sort of credit rating for their business, a third-party processor will not affect your numbers whatsoever.

Deciding on which solutions to use for your business will not be easy, because there is no one solution that works for every type of business venture. Weighing your options will be much easier when you keep the above considerations in mind as you search for the best payment processor for your business.


Guest author Maria Kane enjoys writing on a variety of topics, particularly related to technology.  You can check out her work helping consumers locate internet providers in Columbus.


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