Taking Credit Card Payments

Ever wonder why you need to setup a Payment Gateway for your online store? Why is it necessary and what does it do? If you want to accept credit card payments from your online store you will need to setup what is called a Payment Gateway and a Merchant Account.

What is a Payment Gateway?

The Payment Gateway is an online entity that will contact your customer’s bank on your behalf to make sure the bank account linked to the credit card number has sufficient funds to cover the purchase. Once your Payment Gateway receives a positive response it will then post the transaction into your Merchant Account which is connected to your Bank Account.

How Does it Work?

Here is a simple diagram on how a Payment Gateway integrates into the eCommerce environment:

This is how a transaction gets processed.

If you are using a Mail Order management system, such as M.O.M (Mail Order Manager from Dydacomp) or Stone Edge Manager, you can also take orders over the phone. In this case, your mail order manager system in your office is connected to your Gateway which will then process the transaction in the same way.

Here is a simple diagram to illustrate this scenario:

Taking an order over the phone

What is a Merchant Account?

A Merchant Account is a special bank account designed specifically for online and eCommerce businesses. You can easily sign up for a Merchant Account through your preferred financial institution. I would start by visiting your current bank and asking them about this service. Most of the time banks have a department in charge of this kind of accounts.

How Much Should I Pay for a Payment Gateway?

Payment Gateways charge you a percentage for each transaction. Usually somewhere between 2.3 to 2.9%. Make sure you negotiate with them their numbers are not set in stone and even if you can negotiate a 0.1% less, it will add up over time.

How Much Should I pay for a Merchant Account?

Just like the Gateway, your Merchant Account will charge a percentage for each transaction and rates are very similar to the Gateway (2.3% to 2.9%).

IMPORTANT!

Talk to your bank before you setup a Gateway. Many times your bank will have a special discount with specific Gateways which can greatly reduce, or even eliminate, one of the transaction fees. So instead of paying 2.3% + 2.4% you only pay a 3.0% to your Merchant Account. I would take 3.0% over 4.7% anytime!

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