In the offline world, when you pay by credit card, you simply swipe your credit card through a point-of-sale device and either show your identification, sign the receipt or enter your pin number (if you are using a debit card, for instance), and the purchase is paid for. If you want to accept credit cards online, the process is a bit more complicated. Online merchants don’t have the luxury of swiping a physical credit card or asking you for your signature or identification, so they have other measures in place to make sure they get paid.

Payment Gateways and Merchant Accounts Defined

If you plan to accept credit cards online for products and services, you will need to set up a payment gateway and a merchant account.

A payment gateway allows online stores and auction sellers to accept credit card payments over the Internet and acts as the equivalent of the point-of-sale device in an offline store. Whenever a purchaser enters a credit card number, the payment gateway protects any sensitive information entered to ensure that information passes securely between the customer and the merchant. It also checks to ensure the customer has enough money on their credit card to pay for the product or services. It then places a hold on the funds so the cardholder can’t spend that money before it is transferred to the business’ merchant account. Two of the most popular payment gateways are Authorize.net, Paypal, and Google Checkout.

Your merchant account will usually charge you various fees such as an authorization fee for each time a credit card payment is sent to the card-issuing bank to be authorized, a monthly statement fee, and possibly a monthly minimum fee if your store’s purchases don’t exceed that amount each month. While some merchant accounts have their own payment gateways, most use a third party gateway. For instance, I use Authorize.net as my payment gateway and Practice Pay Solutions as my merchant account.

Start Accepting Credit Card Payments

If you want to accept credit card payments on your website, you have a number of options.

1. Paypal - One of the quickest and easiest ways to start taking money online is to set up a PayPal account. Paypal is a secure payment processor that allows anyone with an email address pay by credit card or direct transfer from their bank account. You can set up an account and connect it to your business banking account in a matter of minutes. And they provide a suite of tools you can use to create a basic shopping cart or “buy now” options for your website. Paypal is great if you only offer a few products or services and don’t need a lot of options.
2. Google Checkout - Google Checkout is Google’s response to Paypal. The service functions similarly to Paypal and allows you to place “buy now” buttons on your website.
3. Shopping Cart - There are numerous shopping cart systems you can use to sell products and services online. Your shopping cart is software that assists customers in making online purchases by simulating an offline “shopping cart” where customers can place items they wish to buy before they “checkout” and make their purchase. At checkout, your customer places their order and enters their credit card number securely through your payment gateway. When the payment gateway approves the charge, it transfers the money into your merchant account, which transfers the money into your bank account. I’ve used 1ShoppingCart in the past and currently use Infusionsoft’s shopping cart system.

If you sell digital products such as PDF files, MP3s, or online videos, you can use services such as ClickBank, PayDotCom, or E-Junkie to act as a shopping cart and to deliver your products to customers. Each will allow you to accept payments through Paypal or your merchant account.

Regardless of the size of your company, there is a payment solution that is right for you. Paypal and Google Checkout are great for smaller companies who want to start taking sales online. If you plan to do a lot of business online, you will probably want to look into getting shopping cart software, a payment gateway and a merchant account.

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