Virtual Merchant

Who doesn’t sell online these days?  Maybe frozen yogurt shops, but the rest of us sell at least a portion of our goods online.

Virtual Merchants will often pay higher CC rates because they pose higher risk to Banks and Processors. The simple truth is that online transactions are more prone to Fraud. If customers dispute transactions and submit Chargebacks, how will you prove it was or wasn’t them? You don’t have signatures or video footage of customers buying from you. When the risk for Merchant Service Providers goes up, so does your merchant rate.

Right?   Yes…. But

Your Virtual Merchant account doesn’t have to be more expensive, a lot depends on the fine print.
Some quick facts:

  • If a portion of your sales is done online and the rest are face to face, you should create 2 merchant accounts: one for each type of transactions
  • Online/Virtual sales are called Card Present ‘CP’,  and Face to Face/Retail sales are called Card Not Present ‘CNP’
  • Risk is different for Virtual Merchant vs Retail sales, and it’s true that the price reflects the risk.  Except when you don’t pay attention to the Mid-Qualified and Non-Qualified categories.


When more than 20% of your sales are Virtual, you will have to automatically split the merchant accounts into Card Present and Card Not Present.  If less than 20% are online, it’s your decision, but here’s why you should still choose to split the accounts:

Assume you process $1,000,000, and 18% of your sales are virtual (Card Not Present).  Your account provider gives you the following merchant processing rates:

You stay with these because you don’t want a separate account.  Let’s call this Case A.

In this scenario all your Virtual/CNP sales fall into the Non-Qualified bucket.  So your cost will look like this:

18% of your online sales are $180,000 and 82% are retail sales – $820,000

Total processing cost in Case A: $13,940+$6,660 = $20,600

BUT, if you demand that the Merchant Service Provider split your account into 2 and negotiate a 2.1% discount rate on your Virtual/Online sales.  Your Retail transactions will stay at 1.7%, and Virtual transactions will process at 2.1% (instead of the 3.7%):

CASE B – Two Merchant Accounts:

Total processing cost in Case B: $13,940+$3,780 = $17,720.  This constitutes $2,880 in savings.  It’s a topic of a separate post: but for an equivalent of $2,880 in savings you have to sell about $20,000.

This is a big deal!

The fine print can get complicated if you have any questions, don’t hesitate to contact us.  We are always happy to help

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