First of all, one thing should be made clear - third-party payment processing rates are substantially higher than a direct merchant account's. So the question is, if that is the case, why would anyone want to subscribe for a third-party solution? Usually the answer is very simple - because a merchant account is not an option. This is the case when any one of the following is true:
- Your credit is exceptionally bad. A bankruptcy less than 7 years prior to the application is a good example.
- You don't have a registered business. A direct merchant account cannot be opened under a personal name.
- You have been blacklisted by the Associations (Visa and MasterCard). If you have been included in the Terminated Merchants list, you will never be able to open a merchant account service again.
- Your business operates in a very high-risk area. Some businesses tend to generate higher levels of chargebacks (disputed transactions) and process credit cards at higher rates. There are several groups that are so high risk that US banks will not underwrite their payment processing accounts. Prime examples are adult-oriented websites, online gambling establishments, third-party collection agencies, etc.
- You process low credit card volumes. Card payment processing services come with certain fixed costs which are due whether you use the account or not. You will be paying a monthly statement fee (or an equivalent) and an eCommerce gateway fee and maybe other fees as well. These fees are not usually associated with third-party processing services where you simply pay as you go. So if you will only process one or two small volume transactions per day, you will need to do the math and see if a dedicated card processing account is the way to go or you should outsource the service.
There are of course a few other factors to consider but these are the main ones. If you process sufficiently large volumes and meet the other criteria, your best option is your own business merchant account. It gives you complete control over your card payment processing and a more professional image.