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Online Credit Card Processing

Accepting credit card payments online is now such an accepted part of our everyday lives that it's easy to forget that it's actually quite a complicated process.

Accepting credit card payments involves several parties, and a number of steps, but once you understand exactly what happens, it all becomes easier to grasp.

Setting Up a Merchant Bank Account

If you want to your business to accept online credit card payments, you will first need to set up a means by which they can be processed.

Credit Cards

Most sellers opt for a merchant account, which includes the ability to manage credit card payments, and allows customer data to be securely sent and received.

A merchant account also helps you to minimize the risk of fraudulent transactions, by checking card details against existing records.

You can even make use of risk tools to manage your response to AVS results based on your own criteria, allowing you to personalize your acceptance criteria.

There is generally a set up fee, and additional payments may include a monthly fee, a transaction fee and a discount rate (i.e. a charge based on a percentage of the transaction amount).

Some merchant accounts charge a flat monthly fee instead of additional fees. You will also need to make sure your shopping cart is compatible with your merchant account processing software; most merchant accounts can handle all the most popular systems.

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Payment Gateways

To accept credit card payments online you'll need a system that operates with a payment gateway.

Payment gateways authorize card payments for online retailers. It's the online equivalent of a typical POS system that you'd find in a bricks and mortar store.

Sensitive information (such as the customer's credit card number) in encrypted to ensure it is passed securely from the customer to the business they're purchasing from, and then safely on to the payment processor to complete the transaction.

Typical Online Payment Process

When a customer purchases something online from a retailer with a payment gateway enabled the following steps take place.
  • The customer submits their order.
  • The customer’s web browser encrypts the information being sent to make sure the transaction is secure.
  • The online retailer forwards the transaction information onto their payment gateway.
  • The transaction information is forwarded to the payment processor used by the retailer’s bank.
  • The information is forwarded to the relevant card association (American Express, VISA, MasterCard.
  • Fraud and credit checks are done.
  • The information travels back down the channel to the retailer who fulfills the order.

After these steps have been completed the payment settlement process begins. Typically the whole process (from authorization to settlement and funding) takes three days to be completed.

Choosing an Online Credit Card Processing Supplier

There are a number of online credit card processing companies to choose from.

Below is a list of companies who offer credit card processing in the US, with information about the rates and fees they charge.

Know The Facts

To the customer, making an online credit card purchase appears to happen in the blink of an eye, but as an online merchant, it helps to understand the many steps involved.

After all, taking payment by card is a serious matter, considering the often vast sums of money involved.