Accepting Credit Cards for your Online Optical Store. All You Need To Know
We briefly discussed all payment methods that you can accept with LiveOptical web store here. We talked about PayPal in details here. Now time to give you the full list of benefits and pitfalls about credit card. You have a lot of experience accepting credit card at you walk-in optical boutique, but don’t get too encouraged. Accepting credit cards online is totally different, more complex process, that eventually you would need to master if you are serious about running a successful online optical. Here is what you need to know.
Setting Up a Merchant Account
To accept a credit card you need to sign up with a Payment Gateway – a technology service that will provide you an online account, similar to PayPal where you can see all the transactions and reports. You also need a Merchant Account with a bank that will process your transactions. Payment Gateway will take all the credit card information that your customer enter on your online store and pass it on to the Merchant Bank. Merchant Bank will pass the info to the customer’s bank and get the transaction approved or declined. Similar to POS device, online transaction processing will only take a few seconds. Your current POS Merchant bank could process your online payments also. It will depend on whether they have an agreement with the chosen Payment gateway. We at LiveOptical work with several Payment gateways and will recommend a suitable option depending on your province or state.
Fees
There is usually a onetime sign up fee of $100-$500 that can be negotiated in many cases. There is a monthly fee of average $30 per currency. There is also per transaction fee $0.10-$0.30 and a transaction percentage anywhere from 2.5-3.5% depending on your monthly sales volume. It may take up to a month to open an account. Payment gateways not only ask you to fill a lengthy application about your business, but also will verify the content of your website ensuring you have proper contact information, privacy policy and other terms and conditions. Some gateways are quite demanding, and some are very linear. After a few e-mails back and forward your will get your account set up.
The fees with credit card processing are very different from PayPal, but similar to POS. The transaction fee of $0.30 cents is charged on every transaction – approval, decline, refund, void etc. Unlike your walk-in customers, online shoppers often don’t give up after one decline. They will try a few times, so even a declined transaction can cost you up to a dollar. If you need to refund a customer because the item was returned, unlike PayPal, credit card transaction percentage of 3.5% will not be returned to you.
Good news is that a decline transaction is statistically only 1:10 to approved transaction. Most of people are using their credit cards in a good faith. And declines most often happen because customer made a mistake with one digit and will get approval on a second attempt. Other good news that returns with eyeglasses are rare. We talked in detail about how to avoid returns by setting good business practices in place.
Risks
Bad news is that winning a chargeback with online transaction is much harder than with POS. With POS you usually just show your copy of receipt. But with online credit card chargeback you need to show the copy of transaction report (from payment gateway), proof that item was sent to a matching billing address (copy of postal waybill) and proof that customer has received your item (signature). All this proof is not a guarantee, decisions are made by people and it’s totally up to their individual judgment. Watch out for a detailed article about how to win a chargeback. We hope you will never have one. Chargeback is rare because payment gateways do a lot of checks on a transaction even after bank’s approval. They may decline a fraudulent transaction for you or e-mail you a warning. Example CVV code didn’t match or IP address of a cardholder didn’t match their billing address. The credit card issuing bank can still approve the transaction, but the payment gateway will decline it for you in such case to protect you. There are bad credit card directories of users that were blocked by other merchants for dishonest practice. Credit card can still be good, but there will be a decline because your fellow merchant flagged that customer as a bad one. We recommend participating in these directories and contribute information about your bad customers. Please read our acticle on minimizing the credit card fraud.
Online Credit Card Transaction Process
You also need to understand the credit card transaction process. We have a separate training article about this. In detail a credit card transaction consists of two statuses Pre-Authorized or Pending and Approved. When people enter their credit card on your online optical store checkout, the bank will Pre-Authorise the transaction for a merchant to capture the transaction at a later time. This gives you, a merchant, a choice to take the actual money or not. Bank will also reserve the money from the card holder so they don’t go over their limit when it’s time for you to take money. Your customer see their eyeglasses purchase under “Pending” section on their online banking. If you didn’t take the money, the transaction will expire. Various gateways have different rules on how much time you have to realize the transaction. Usually it is at least a month, which is enough to process any eyeglasses order. This process is set in place to give merchants control over the sales that they want to do. Sometimes the eyeglasses would be on backorder or unavailable and you need to cancel the sale. Sometimes you will feel funny about a customer and decide not to do the sale. As long as you don’t take the money (via clicking on a separate button) you will not be charged 3.5%.
Another good news is that credit card payments are regulated by national laws. So the process is fair and predictable. As long as you are running an honest business, banks will be on your side. There will be real people provided to deal with any problems, unlike PayPal.
Conclusion
You need to take credit cards on your online optical store because this is the most preferred payment method for customers. You need to foresee an extra cost associated with the credit card transactions and include it in the price of either shipping and handling or eyeglasses themselves. Beware of all the risks associated with taking credit card payments as winning a chargeback with online payment is much harder and longer than with POS chargebacks.