Option 2: Monthly Settlments — AD2AD’s Default Method
If you don’t have — or don’t want — a merchant account, AD2AD’s can collect payments on your behalf and to settle accounts with a monthly check. In fact, this is AD2AD’s default method until you set merchant account parameters.
With option 2, in effect, AD2AD sells ads as your agent, collects credit card payments, then turns around and buys the ads from you at cost. AD2AD then sends you a monthly check for those ads, less gateway fees and our service charges.
Payments typically settle 30 days after the end of the month. (Payments can be delayed for a few days if we need to deal with chargebacks and credit card disputes. These happen more frequently when we process payments, as the customer’s charge card statement says “Newspaper Ad through AD2AD” rather “Small Town Press-Herald” or whatever, and customers often wonder if this is a fraud. Typically you will have fewer chargebacks/disputes with your own merchant account, as customers will recognize your name on their credit card statement.)
Choosing Between the Options
Aside from the way you choose to get paid — monthly settlement check or direct deposit of funds, you and your customers will not see any difference in the way the system operates — these are differences in how the system manages accounts.
Why wouldn’t you want a merchant account? Mostly because of the costs involved. Merchant account fees vary widely. Merchant accounts offered by banks are often have high fixed monthly costs.
But despite those costs, a merchant account may still be preferable to AD2AD settlements, because of the immediacy, certainty, and availability of funds, and because of the likely reduction in chargebacks and costly and time-consuming disputes. The decision is not cut and dried.
With option 2, monthly settlements, AD2AD absorbs many of the fixed monthly fees charged by merchant accounts. For a small publication, the monthly merchant account fees could eat up a 20%-50% percent of your profits. So:
- If you monthly classifieds revenue is small — a few hundred dollars — you may make significantly more money with AD2AD monthly settlements. But you won’t get immediate settlements, and you’ll likely see more chargebacks.
- If your revenue is large — thousands of dollars per month — the fees charged by merchant accounts will not be so significant. In any case — the money is in your account immediately — no waiting and no worries. Also, there will be likely be fewer chargebacks and disputes, which can be costly.
- If you fall between these extremes — you will have to use your best judgement.
- But don’t worry. You can change methods any time.
Calculating the Costs of a Merchant Account
For an example comparison, here are the costs of an Authorize.net merchant account. There are lots of other merchant account providers out there, some with higher fees, some with lower, but Authorize.net’s merchant account fees are pretty typical. When looking at the fees of merchant account providers, READ THE FINE PRINT VERY CAREFULLY. Very, very, very carefully.
(These fees come from the Authorize.net website: http://www.authorize.net/signupnow/)
