Micro-payments Merchant Account - is there such a thing?

[dave2007]

I would like to open an online web store (with shopping cart etc.) that would sell very low priced items: $0.50 - $0.99

The problem is that the merchant account services I know so far, charge a flat $0.30-$0.50 fee per transaction, in addition to some percentage, which could be anywhere between $1.9% - 5%.

In my micro-payments business model, I can afford an even higher percentage fee. But with $0.30 per transaction on a $0.50 item, I am left with very little...

If I were confident that my business would sell millions such items a month, I would have been happy with this scheme (and perhaps could even negotiate a better deal with the merchant account service). But in the first year, I do not expect to sell more than 1000-3000 such items per month. So, I am looking for a reasonable merchant account for this business. Is there such a thing?

Or all merchant account providers assume that every one with presence on the web must be at least as big as Apple's iTunes?

I am curious to know what iTunes' merchant account provider charges Apple per transaction.

Thanks,
Dave

[stymiee]

Low ticket items like that are a nightmare for credit card payments For most merchants it just isn't feasible to accept credit card payments as, like you've discovered, the rates will kill your margins.

Apple almost certainly has a sweetheart deal with a major processing bank. The bank probably makes pennies on each sale but due to the sheer volume of transactions being processed it is worth their while to establish the account. Those pennies still becomes thousands of dollars each month and makes their portfolio look all the more impressive.

From what I understand Paypal offers a micropayments service. I don't know much about it so you'll need to do a little bit of research to see if it will work for you.

An alternative solution is to not actually accept payments for that small amount. What you do is charge your customers in blocks of $5 ($5, $10, $20, etc) and then subtract their $0.50 - $0.99 from that. That way you run only one transaction and it isn't for such a small amount and it encourages future transaction from that customer as well. Just a suggestion.