Disadvantages of Having an Internet Merchant Account

Most internet based business owners can rattle off a list of benefits or advantages of having a merchant account- from an increase in sales to providing a valuable customer convenience, accepting credit cards as payment offers a variety of advantages to businesses.  internet based businesses in particular are almost dependent upon the ability to accept credit cards and other online payments.  Can you imagine trying to buy something from a website that doesn't accept credit cards at this point?  You may actually have doubts as to the reliability of the business, or simply take your business elsewhere so you can purchase with a credit card rather than mailing a check.  Even with all of the advantages that come with having an internet merchant account, as with anything else in life, however, having a merchant account has a set of disadvantages as well.

Fraud

Internet based businesses that accept credit cards online have a high potential for fraud.  It's important that your ecommerce enabled website has a security system in place to make sure your customer's credit card information (and other personal data) is not stolen during the transmission process.  There is also some risk that your database of customer information (if you keep one) might get hacked into, so be sure to take proper precautions to protect your customer's personal data.

Fees

Depending on what merchant account provider you decide to use, there will be a variety of fees associated with using the account to accept credit card payments.  Some providers charge an initial set up fee, some charge monthly and/or annual fees, and almost all will deduct a percentage from each transaction processed.  Smaller businesses with low credit card sales might actually lose money during card transactions while larger businesses are sometimes given lower processing rates in exchange for the high volume. 

Accepting checks, cash or money order payments do not require any fees (other than standard bank account fees you may pay).  You have to decide if paying fees for the ability to accept credit cards is worth having that capability.

Maintaining

As an internet based business owner with an ecommerce enabled website, it is likely up to you (or your web designer) to ensure that the site is always up and running in order to generate sales.  If the site isn't working properly, you're going to miss sales.  In order for your merchant account to work effectively, it requires a working website!

Contracts

Some merchant account providers will require a lengthy contract with specific requirements such as monthly minimums to maintain, or a limit to the number of transactions you can process each month.  If you go outside the terms of your contract, you are likely to be charged fees.

When considering which merchant account provider you want to use to accept credit cards as payments for your ecommerce website, it's important to evaluate the merchants on the potential disadvantages along with the advantages.