How to register with PayPal and verify your credit card

If you aren’t registered with PayPal yet (what’s holding you up?), use the convenient Selling link on the All Selling page, which you reach from your My eBay page. To get more information, just click the PayPal link to arrive at the PayPal overview page, and then click the Sign Up for a PayPal Account button to begin registration.

The convenience of PayPal integration into the eBay site shines when your item is purchased. Winners just click a Pay Now button that pops up on your auction page immediately after the listing closes. When you list auctions, you pre-set the shipping and handling charges that appear in the shipping box at the bottom of the page. When winners click the Pay Now button, they’re taken directly to a payment page set up with your information. The process is as easy as purchasing something through Buy It Now.

When a purchase is made and the payment is deposited in your PayPal account, the system holds the money until you choose how you want to withdraw it.

Because credit card and identity theft is so prevalent on the Internet and an expensive burden to e-commerce PayPal uses the extra security measure provided by Visa and MasterCard called CVV2. Most credit cards have three (or four) additional numbers listed on the back, immediately following the regular 16-digit number. Merchants use these numbers for security or verification but aren’t allowed to store them, so they’re presumably protected from hackers. However, in the unlikely event your credit card doesn’t have these numbers yet, PayPal still allows you to use your card by verifying it through a procedure known as random charge. PayPal charges a few cents or so to your card and asks you to disclose the pin number printed on your statement. Then PayPal knows that you control the card and didn’t steal it. Withdraw your funds from the PayPal account on a regular basis; you need that money to operate your business. Don’t let it become a temporary savings account unless you choose the PayPal interest-bearing account (check out www.PayPal.com for details). Also, any money you have in your account can be extricated for a chargeback and chargebacks can be applied as many as 60 days after the transaction. For more about chargebacks, see the “Forget the buyer: Seller beware!” sidebar.

Your very own merchant account

If your eBay business is bringing in more than $20,000 a month, a credit card merchant account may be for you. At that level of sales, discounts kick in and your credit card processing becomes a savings to your business rather than an expense. Before setting up a merchant account, however, I recommend that you look at the costs carefully. I get at least one e-mail each week begging me to set up a merchant account, and each one offers lower fees than the last. But charges buried in the small print make fees hard to calculate and even harder to compare.

Even those who advertise low fees often don’t deliver. Be sure to look at the entire picture before you sign a contract. The best place to begin looking for a merchant account may be your own bank, where they know you, your credit history, and your business reputation and have a stake in the success of your business. If your credit isn’t up to snuff, I recommend building good credit before pursuing a merchant account because your credit rating is your feedback to the offline world. If your bank doesn’t offer merchant accounts for Internet-based businesses, find a broker to evaluate your credit history and hook you up with a bank that fits your needs and business style (or join Costco as a last resort; see the following section). These brokers make their money from your application fee, from a finder’s fee from the bank that you finally choose, or both.

After you get a bank, you’ll be connected to a processor, or transaction clearinghouse. Your bank merely handles the banking; the clearinghouse is on the other end of your Internet connection when you’re processing transactions, checking whether the credit card you’re taking is valid and not stolen or maxed out. The next step is setting up your gateway, the software (ICVerify or PCAuthorize, for example) with which you transmit charges to the clearinghouse. Some gateways use HTML Web sites and take the transactions directly on Web-based forms (Cybercash or VeriFone, among others). Web-based gateways connect your Web forms to real-time credit card processing.

Remember that some merchant accounts will charge you some of these fees and others may have a bunch of little snipes at your wallet. In the following list:

- Setup fee: A one-time cost that you pay to either your bank or to your broker.

- Discount rate: A percentage of the transaction amount (a discount from your earnings), taken off the top along with the transaction fee before the money is deposited into your account.

- Transaction fee: A fee per transaction that’s paid to the bank or to your gateway for the network.

- Gateway or processing fee: Your fee for processing credit cards in real time that’s paid to the Internet gateway.

- Application fee: A one-time fee that goes to the broker or perhaps to the bank.

- Monthly minimum processing fee: If your bank’s cut of your purchases doesn’t add up to this amount, the bank takes it anyway. For example, if your bank charges a minimum monthly fee of $20 and you don’t hit $20 in fees because your sales aren’t high enough, the bank charges you the difference.

If you’re comfortable with all the information in the preceding list and in Be sure you aren’t missing any hidden costs.

PayPal’s Virtual Terminal

If you want your own merchant account and want all the benefits of PayPal, you can apply for their solution: Virtual Terminal. With Virtual Terminal you can accept credit card payments by phone, fax, or mail. All this for only an additional $20 a month over your regular PayPal fees. No extras and no equipment to buy or rent. What a deal! Just log into your PayPal business account online at www.PayPal.com/vt and fill in the Virtual Terminal form. You can also apply for the terminal through that link. You must have a Business account to use the Virtual Terminal feature.

Virtual Terminal fees are the same as PayPal merchant tiers and are based on the total amount of money you put through PayPal per month including regular PayPal payments. The buyer’s credit card charge will appear on their bill with the name of your business.

Costco member’s credit card processing

Here’s some true discount credit card processing: a one-stop merchant account and gateway! You can not only buy tuna fish in bulk with a Costco membership, but also obtain a reasonably priced way to handle a merchant account through the NOVA Network. Costco got together with Nova Information Systems, one of the nation’s largest processors of credit card transactions, to offer Costco Executive members a discounted Internet credit card processing service. Costco Executive membership brings the cost of a Costco membership up from $45 to $100, but you get the benefit of receiving 2 percent back for most purchases (not including tobacco, gas, food, and some other purchases).