Accepting Credit Cards Online - the Basics

By SylverTek [ Reprint Info ]

The first thing to understand about online credit-card transactions is that there are two different methods in which the accounting and transactions can occur.

The first is a merchant account. A merchant account is an industry term for an arrangement between a merchant and a bank for the purpose of processing credit cards transactions.

. To get a merchant account you must submit an application providing all your business information; your business may be accepted or rejected depending on factors such as the nature of your business, your credit rating, amount per transaction, transaction totals per month, and transaction history with any other merchant account. S see our Merchant Account Requirements article for more information.

Fees charged for this service may include a signup fee, a monthly statement fee, a per transaction fee, a per transaction percentage, a gateway processing fee, and more. A chargeback fee will be incurred if a customer reverses a transaction; in addition, a reserve is often held against future chargebacks.

When setting up a Merchant Account there are actually at least two entities involved: the bank with which you have established your Merchant Account and a separate company that provides the Processing Gateway. Many merchant accounts are with a type of agent bank (ISO, or Independent Service Organization) for another parent bank.

The second method of credit-card transactions involves a card processing company. In this situation, your business only deals with one entity, the card processing company, which provides for the both the account and the gateway. Essentially, you are using their merchant account. Typically getting such an account is easy and does not entail scrutiny of your credit history and your business, and is easy to integrate as well. You pay for those services, though, in the form of higher fees and higher transaction percentages.

PayPal and GoogleCheckout are a special kind of card processing company. They handle both the account and the gateway, and provide easy integration, but due to their size they are able to offer rates lower than most processing companies, comparable to some merchant accounts. However they require that each customer have an account with them. This can add an extra inconvenience for new customers and maybe even scare them away from making a purchase if they have navigated through your shopping cart but are forced to go sign up for PayPal before they can check out; on the other hand, for existing customers it can be extraordinarily convenient, they just enter their log in and the purchase can be deducted from their existing PayPal account.