How to Accept Credit Card Payments Online

Want to accept credit card payments online? You’ll need an Internet merchant account and a payment gateway account.

Internet Merchant Account

A merchant account is a type of bank account that captures and holds funds from credit card sales, then transfers the funds to your bank account on a daily or weekly basis. An Internet merchant account is a merchant account that allows your business to accept credit card payments over the Internet.

Most businesses already have a merchant account. But to accept payments online you’ll need to contact your credit card company to set up the Internet merchant account.

Payment Gateway Account

When processing a credit card transaction, the information is sent to a payment gateway to see if the cardholder has sufficient funds.

This is the online equivalent of the POS (point of sale) machine in a retail store which sends the cardholder data to Visa or MasterCard to check if the customer has sufficient funds. If they have enough cash, the transaction is authorized and the funds are transferred from the cardholder into the merchant account.

Payment gateways vary in cost depending on the features you need. Higher security, such as fraud protection, can run extra.

The PayPal Option

PayPal allows you to accept credit cards without having a merchant account. Setting up an account is quick, easy, and free.

Because you are using PayPal’s merchant account, they charge a higher transaction fee. If you’re doing a large volume of online transactions, a merchant account will be more cost effective.

Unlike a merchant account, funds are not transferred directly into your bank account. The money remains in your PayPal account until you transfer it out. Once you do, it usually takes 3 to 5 business days for the funds to show up in your bank account.

PayPal is a great option if you’re just starting out or have a low-volume online business. Its drawback is lack of customer service. In some cases, PayPal may place your funds on “pending” status for up to 21 days—or even freeze your account if they notice suspicious activity. All this can have a negative impact on your business if you can’t resolve the issue quickly.

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