You've got an adult paysite or service and you want to receive payments from customers over the web. What do you do? Do you call VISA? Do you visit your bank? What about your credit? Will it pass muster? Who processes for adult Internet ventures? Do you need a third party processor? Can I get a Merchant Account?

These are questions you ask yourself when you decide to sell adult services and products on the World Wide Web.

We've written a lot of articles on Cozy Frog about third-party billers, presently known as IPSPs. As well, we've reported on the subject of e-payment providers like PayPal. We will undoubtedly cover these topics again in the future.

Right now, it's time to tell you about Merchant Accounts.

What is a Merchant Account?

"Third-party billers charge roughly 15% of your credit card transactions. True Merchant Account fees run along the lines of less than 5% of your cc sales."

A Merchant Account is a relationship between you and a bank. You agree to pay a fee and your bank agrees to handle the processing of checks and credits cards through your business. Your bank (called an Acquiring Bank) will have an existing relationship with a Credit Card Association like VISA or MasterCard. The Credit Card Association has an existing relationship with an Issuing Bank. Your customer pays you with a credit card. You turn that sale over to your Acquiring bank. The Acquiring bank sends it to the Credit Card Association. The Credit Card Association sends it to the Issuing Bank. The Issuing Bank either accepts or declines the transaction. Sounds simple enough and it is if you have impeccable credit and are operating a non-adult business in the brick-and-mortar world.

The first thing that your Acquiring bank does -when you apply for a Merchant Account- is to check your credit rating in order to see if you're financially responsible/solvent enough to be trusted with a line of credit from an Issuing Bank. If your credit record/rating is good then you are an exceptional person. This first stage in the process is where most of us are disqualified.

If you pass the first hurdle, then you have to find an Acquiring Bank that will open an account for an adult business. This used to be a much more difficult process before the net came along. You can still visit a bank in person to apply for a Merchant Account but you don't have to. You can apply for a Merchant Account online. In fact, there are services that specialize in setting up such accounts for adult Internet merchants.

Three of the most used are:

Epoch Systems
http://www.epochsystems.com

Jettis
http://jettis.com

NetBilling
http://netbilling.com

These companies have relationships with Issuing Banks who have relationships with the adult web's primary Credit Card Association, VISA. Our industry is thankful that there are still some Issuing Banks willing to open a line of credit for our type of business. Recently, a major Issuing Bank (Card Services International) announced they would put an end to all processing for adult web transactions.

You will be required to fill out an application for a Merchant Account. If you're in adult, you'll apply for a High-Risk Merchant Account. We're given High-Risk status supposedly because it's easier to commit fraud on the web. As a High-Risk Merchant you pay higher discount rates and transaction fees than you would as a brick-and-mortar Merchant. As a High-Risk Merchant, you also have a lower chargeback limit than in a physical shop.

The plus is that your fees (per transaction/month) are less than they would be with an IPSP. You get to keep more of your cc money when you have your own Merchant Account. Third-party billers charge roughly 15% of your credit card transactions. True Merchant Account fees run along the lines of less than 5% of your cc sales.

The negative is that when you have a true Merchant Account, you're on your own. You are responsible for fraud control and customer service. You also have to eat the hefty fees applied if you exceed chargeback limits.

As an adult webmaster, you would be a High-Risk Merchant. If a certain percentage of your credit card customers receive refunds via the chargeback process, you have to pay a penalty. In addition, your Acquiring Bank will often freeze some of your assets if you surpass chargeback percentages. These penalties can be very expensive and if you have too many chargebacks, your Merchant Account provider can drop you without notice. They might also add you to the Member Alert to Control High-Risk (Merchants) File, or MATCH List. In days past, this list was called the Terminated Merchants File or TMF. Member Banks share these listings with each other and if you're on it, you're fairly screwed.

So there it is. The truth about Merchant Accounts. The truth is they are obtainable. If you pass the criteria, have the funds and are willing to assume the responsibility, you can get one even if you're a dirty old cybersmut monger!