Capitalism in Action
April 29, 1999
Now we get to the part that I love writing about - Scams! If
you search on "credit card merchant accounts" or something
similar, you'll come up with about five or six trillion Web sites.
Simple logic and the natural skepticism of a wise Web surfer
both suggest that not all of these outfits are legitimate.
A few are reputable and well-run businesses, a few are outright
attempts at theft, and the rest occupy some position on the
continuum between those two extremes. This continuum includes
the shady, the sleazy, the small-timers, the
honest-but-incompetent and a host of other characters that
you would prefer not to get involved with.
The lowest stratum of this capitalist jungle is a simple scam,
a variation of the old "pigeon drop." A "company" promises to
get you a merchant account quickly and cheaply, set up every
other aspect of your credit card system for you, and probably
anything else you want them to promise. You pay a couple of
hundred dollars up front as an application fee. A couple of
weeks later, Oh! Golly Gee! Too bad! The bank wouldn't approve
your account. Sorry! Your two hundred is gone.
Slightly more scrupulous companies play on your ignorance about
how credit cards work, and make it sound more complicated than
it really is. They pitch you expensive software, and collect
various exorbitant fees. They may be able to get you a perfectly
legitimate merchant account, but what they are really doing is
selling their software, which may or may not be what you need.
Because people perceive (wrongly) getting set up for credit cards
as a very complicated scene, there are hundreds of "all-in-one
solutions" offered. Some are pretty good deals, and some are
just big rip-offs.
There are also companies that use credit cards as a come-on, but
are really selling something that has nothing to do with credit
cards, like "virtual checks" or "virtual cash." Whatever the
future promise of these things may be, at the moment they have
no practical application for most online merchants. Credit cards
are what people use, and they're all most of you need to worry
about.
How do you sort out the wheat from the chaff? First of all,
educate yourself, and don't be taken in by marketing hype.
Visit a bunch of sites until you start to get a feel for which
companies are established, reputable firms and which are
spare-bedroom operations that recently jumped on the e-commerce
bandwagon. There's nothing wrong with using a reseller instead
of dealing directly with a bank, but do shop around for a good
deal, and make sure you're dealing with a well-known, proven
company.
As I've said so many times before, don't even consider doing
business with any company that doesn't publish full contact
details on their Web site. A street address, phone number and
email address should be proudly displayed. Of course, some
companies want to call you and give you a sales pitch, so they
provide only an online form for you to fill out "for more
information." This may (in some peoples' books) be acceptable
for certain types of businesses, but it would seem a strange
way for a company selling Internet-related services to do
business.
If a company is a going concern that's been around a while,
their Web site should contain plenty of information about
what their products are and how they work. A site that consists
of a dozen pages, each with nothing more than a bulleted list
of marketing slogans, is a sign of a fly-by-night outfit.
For Further Reading
Credit Card Management
Faulkner & Gray
publish various trade magazines and newsletters
about credit cards. Their site has some useful information,
including contact info for hundreds of companies in the industry,
and a killer links page.
The Master Card
and
Visa
sites both offer a little information about choosing a merchant
bank.
Electronic Commerce Resources
A
collection of tutorials, product reviews, and other
information about Web commerce.
Electronic Commerce Book Reviews
There are lots of
books on Web commerce,
although I've yet to see one that clearly explains how credit
cards work.
Additional Resources:
Payment Processing Options
Accepting Credit Cards: Getting a Merchant Account
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