Accepting Credit Card Orders
When you start selling shareware seriously, you will probably strongly consider gaining the ability to take orders yourself. Before you can do this, however, you need to obtain credit card merchant status. In other words, you need to gain the ability to accept credit cards for payment. Unfortunately, this can be rather tricky to do. Credit cards are a topic of much confusion and frustration among shareware merchants. It's not a hopeless battle, but it is one which will cause you some frustration.
The main problem is, in short, fraud. There is a lot of credit card fraud. That makes banks and other credit card companies very shy about giving merchant status to small businesses. They're especially shy about giving merchant status to software companies, and extremely reluctant to give it to businesses operated out of the home. Before they will give a merchant account to you, you will need to expend quite a bit of effort getting them to take you seriously. You will probably need to have been in business for at least one or two years, and will need to have very good credit. Even then, it can be a long, challenging process.
Should you decide to attempt this journey, there are two sorts of places you can go to try to get merchant status: banks, and not-banks.
Going to a bank: Banks give out a lot of merchant accounts. Practically every bank can give merchant status to businesses having accounts there. Unfortunately, banks are also notoriously shy about giving them to home-based and Internet-based businesses, mainly preferring to deal exclusively with businesses with storefronts.
To apply for merchant status at your bank, go in, speak with them, get the appropriate forms, and find out what information they will need from you. Fill out the forms as carefully as possible, assemble the required information, and, in addition, scrape together every bit of information you can use to convince the bank that you have a legitimate business. Make copies of your business plan and every magazine article you can find mentioning your programs. Get a CD-ROM or two which include your program, and take disks with your programs on them as well. Include a printout of your web page (no joke - when I got my merchant account, I HAD to have this).
When you go in to speak with the bank employee and submit your application, present all of this information, while explaining as clearly as possible what shareware is and how it works. Do everything you can to explain why your business is stable, honest, and legitimate. If possible, speak to the bank manager and explain the situation. Remember that you will look like a bad risk to them. Be as calm, reasonable, and professional as possible. Giving you a credit card account will probably break a few of the bank's guidelines. You will need to make sure to speak with someone who can OK the relaxing of the guidelines in your case.
Prepare to be rejected. Or, if not, prepare to be unhappy with the conditions they place on your account (such as, in my case, the need for a $10000 deposit). Try not to get angry. If you aren't happy with the terms you get, go to another bank. And another. If your business is stable and your credit is all right, you should eventually be able to get merchant status. Fortunately, if banks refuse to help you, there is still plenty of hope. Banks are not the only people in the credit card business.
Not going to banks: There are plenty of companies in the business of giving merchant status to small businesses. These companies are not banks, and often give merchant status to those that banks wouldn't even consider.
To find these companies, look in the yellow pages under, for example, "Credit Cards & Plans". You should find a number of different services listed. Each of them will be in the business of giving small businesses (often home-based) merchant accounts, making up with the higher risk by charging somewhat higher rates than banks do.
Call around to these different services, ask for the rates they charge, and have them send you the appropriate information and forms. If possible, speak to owners of other businesses and get recommendations/warnings. In general, approach this process as if you were applying at a bank. Assemble as much documentation as you can to show that your business is stable and legitimate.
Of course, there is a chance that all of these services will reject you. In this case, you will have no choice but to use a third party order taking service (described in the section "How to take cash"). If your business has a few years behind it, though, you should eventually be able to succeed.
How a merchant account works:
Merchant accounts do vary in the details, but, in general, some things are the same from service to service. When you have your merchant account set up, the bank/service will usually provide you with either a machine (which is hooked up to a phone line, sometimes called a terminal) or a computer program (to be installed on a PC or Macintosh with a modem - very convenient option, if you can get it).
When someone tries to place a credit card order with you over the phone, they will give you their card number, expiration date, and, usually, the billing address for the credit card (not always necessary, although many services charge you less if you get this information). You input this information in the machine or specially provided computer program, which then contacts the credit card company to see if the charge will be allowed. If it is, the program or machine will store the information about the order. At the end of the business day, you will give the machine/program a Settle command. It settles out the sales for the day, which causes the money you charged to be deposited in your bank account, usually within 24 hours.
In return for this service, the credit card company will take a percentage of the sale, usually from %2.6 to %5. This percentage will be taken away either when the money is deposited or at the end of the month (so be sure to leave some money in the bank account).
Once the charge is made, however, the money may not be yours permanently. Customers can contest the charges, and the credit card may then give them a charge-back (which means they take the money out of your bank account and give it back to them). You can contest the charge-back, but you probably won't have much luck. Fortunately, this will probably only happen to a minority of your orders, usually because of credit card fraud.
American Express and Discover:
Your merchant account will automtically give you the ability to accept VISA and MasterCard. This enables you to handle the vast majority of potential customers. If possible, ask your service to enable you to accept American Express as well. Quite a few people only keep an American Express card.
If it's easy to accept Discover as well, go ahead and do it. Accepting Discover isn't worth a good deal of effort, however. Practically all of your customers who try to pay with Discover will also have another sort of card.
Unfortunately, setting up a credit card account is often a difficult process. Even after you are accepted, you need to get the equipment set up and running properly, and get your account with the company configured properly. If you are using software to process credit card orders, this software needs to be configured correctly as well, and you won't always be provided with good information by technical support.
Start the process as soon as possible, and be sure to leave a few months extra time to get set up properly. Be prepared to make quite a few phone calls monitoring the progress on your application and account. While getting a credit card account set up is not always this difficult, it is best to be prepared.
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