The growth of eCommerce websites over the past decade has made the process of setting up credit card accounts fairly simple, with the most common methods of accepting payment through use of your own merchant account.
In brief, an internet merchant account, which can be obtained through a bank, allows you to process credit or debit cards. In effect, the bank considers it a line of credit; as such, you must apply for the account, much as you would any other type of loan. Essentially, a merchant account is an online bank account that holds your money temporarily until it’s moved into your actual bank account. After a sale has been completed, money is transferred into the merchant account and “sits” there for a few days before automatically transferred into your bank account. So, in other words, a merchant account is sort of a holding tank. The easiest route to obtaining a merchant account is through your own bank, particularly if you have been a customer for some time.
Merchant accounts can also facilitate donations; many non-profits, such as religious organizations and schools have merchant accounts specifically for the purpose of accepting contributions.
Not to be confused with a merchant account, a payment gateway is the service that processes credit card transactions, such as PayPal, Authorize.Net, Cybersource and Verisign. How a payment gateway works is fairly straightforward. When a customer purchases something from your site, they enter their credit card number during checkout. Your e-commerce site sends those numbers to your payment gateway where the transaction is authorized and the payment processed. If the charge is approved, the payment gateway transfers the money from the customers’ account into your merchant account.
It’s important to note that the typical fee schedule for a smaller volume merchant account – say fewer than 1,000 transactions monthly – may include monthly processing fees that can range from $10 to $100, in addition to fees of between 2 and 5 percent per transaction. Take the time to shop around for the lowest fee percentage and pay attention to the merchant account’s track record for customer loyalty.