Your Get-Started Guide to Online Credit Card Processing

Providing your ecommerce customers with as many convenient payment options as possible is vital to your success as an online store. And while offering options like Apple Pay and Google Pay will almost certainly help you convert more, credit card processing is critical—without this option, you’ll end up with some very confused (and possibly skeptical) customers.

While you may already understand why you should use online credit card processing, you might not be sure how to set it up. How much will it cost? Should you use a merchant account, or something like PayPal? What’s involved in the application process? After reading this guide, you’ll be able to answer those questions and more.

What is online credit card processing?

Online credit card processing is the method used to accept customer payments through debit/credit cards like Visa, MasterCard, Discover, or American Express. Just as you swipe your card when making a payment at your local gas station, online shoppers must also “swipe” when purchasing through an ecommerce site. The main difference is that there isn’t a physical terminal to facilitate the transaction, which is where online processing comes into play.

In a larger sense, online credit card processing (often referred to as having a merchant account) is the process in which payment transactions take place over the internet. This chain of events requires a payment gateway and payment processor to help move and share information across the web to ensure that you, the business owner, quickly and correctly receive customer payments. While the transaction itself takes only a few seconds, there is a lot of behind-the-scenes work that comes into play, which we’ll discuss later.

Should I use an online merchant account or a third-party service like PayPal?

If you’re like most people, the search to accept online payments starts with the following question: should I use PayPal or get a merchant account? While several businesses opt to use PayPal or Google Wallet because of its convenience and quick setup, there are some key drawbacks to using services like this by themselves.

However, it’s ultimately not a question of either/or: both are vital ways to provide your customers with the convenience and flexibility they need. You do, however, need to make sure that accepting credit cards through your merchant account is always an option. Here’s why:

  • Enhanced customer convenience: Using a merchant account to accept credit cards makes the checkout process much easier. If you only accept PayPal, it’s likely that customers will have to leave your site and log into their PayPal account or create one to finish the transaction. Many of your customers won’t be willing to take this extra step.
  • Reduce abandoned carts: To put a finer point on the item above, when customers aren’t willing to take an extra step, they’ll abandon their cart and find a site that meets their needs. Using your own merchant account to accept payments will help boost and retain the sales you’ve worked so hard to earn in the first place.
  • Receive payments faster: Using a merchant account allows you to receive payments in as little as two days, and funds are directly deposited into the bank account of your choice. With third-party services, it can take up to three or four days to receive your funds, which causes headaches when you’re trying to settle up at the end of the month.
  • Get personalized support: With a merchant account, you’ll often receive better and more personalized customer support. With third-party services, phone support is typically only available to their highest-tiered customers.
  • Sustain business growth: As your business grows, you’ll quickly see that third-party services are no longer cost-effective due to their high transaction fees. Even more, as your customer base expands, so too will the need for you to expand your payment options to satisfy an increasingly diverse set of shoppers.

More than anything, only using a third-party service like PayPal to accept payment greatly hinders customers’ perception of your business and brand. If you’re not accepting credit cards directly through your site, it dampens the credibility of your entire ecommerce operation, leaving shoppers to wonder if your site is truly legitimate.

How does the actual process of accepting online payments work?

Once a customer submits their credit card information, their data is securely moved across the internet to ensure that sufficient funds are available, and then the funds are moved from the customer’s bank account to yours. Step by step, the process looks like this:

  1. The customer enters and submits their credit card information during checkout.
  2. That information is encrypted (turned into characters and symbols) and securely carried through your integrated gateway to your credit card processing company.
  3. Your credit card processor submits this transaction data to the appropriate credit card network, such as Visa or MasterCard.
  4. The credit card network forwards that information to your customer’s bank, which checks to see if your customer has adequate funds to pay for the order. If the funds are there, the transaction is approved; they aren’t, it’s declined.
  5. Your customer’s bank sends the approved/declined status back to the credit card processor, which then reports that information back to your credit card processing company and to you, the merchant.
  6. Once you receive the “Authorized” (approved) message, you fulfill the order.
  7. Your customer’s bank sends the funds to the credit card network (Visa, MasterCard, etc.), which then passes the money to your bank. From there, the bank deposits your funds directly into the account you’ve specified on your initial application

What fees are associated with online credit card processing?

Naturally, one of the most important factors for anyone looking for an ecommerce credit card processor is cost, and there’s definitely some variety between providers.

Standard online credit card processing fees

No matter who you choose, all providers charge the same standard fees each month:

  • Discount rate: A percentage of each sale that is retained by your credit card processor. The industry average for your discount rate ranges from 2.00%-3.00%.
  • Gateway fee: Your gateway is provided by your credit card processor and encrypts credit card information to protect the data from being breached. Expect to pay around $20/month for a normal gateway fee.
  • Transaction fees: These small fees are attributed to each transaction you process, and are separated into two categories:
  • Transaction fee per transaction: This fee occurs with each payment that’s processed, costing you $0.25-$0.35 each.
  • Gateway fee per transaction: Specific to your gateway—expect to pay $0.06-$0.15 cents per transaction.
  • Statement fee: Just like your personal credit card bill, your processor needs to list out all of the transactions for you to review each month. This results in a statement fee (also known as a monthly service or processing fee), which typically runs around $10-$15 per month.

Ancillary online credit card processing fees

The following fees can vary depending on the provider:

  • Application fee: This is a processing fee to have your application submitted, regardless of approval or denial. Some companies don’t require this fee, and others have different rates, so ask about this ahead of time.
  • Setup fee: This charge is initiated for your provider to sync your merchant account with your online store. Like the application fee, you may or may not have to pay this, but the rate can range upwards of $100.
  • Customer support: Some companies charge a monthly or “per contact” fee to get support for your account or troubleshoot technical issues. Frankly, this fee is unnecessary, so think twice about going with a company that requires this extra cost.
  • PCI fee: PCI stands for the Payment Card Industry, which has created a list of guidelines to better secure credit card data from cybercriminals. Many companies charge an annual PCI fee to help cover their compliance/certification, while others simply include it as part of the monthly costs. In addition, it’s important to ask what’s required on your end to maintain compliance with those regulations. Depending on your processor, you may or may not be required to handle some compliance measures on your own.
  • IRS compliance fee: This minimal fee helps ensure that your merchant provider is meeting all guidelines provided by the Internal Revenue Service, and costs around $2/month on average.
  • American Express: If you plan to accept American Express (AMEX) on your ecommerce site, note that AMEX charges a higher transaction rate than cards like Visa and MasterCard.

While that may seem like a lot of fees, accepting online payments is a complex process. Because credit card theft is more prevalent online than in physical stores, transaction rates and other fees are a bit higher to ensure security for you and your business.

What should I look for in an online merchant account?

If you’ve conducted even one Google search for “online credit card processing,” you’ve likely noticed that there are hundreds of options available. With this many choices, it’s hard to sift through the clutter and figure out exactly what you should be looking for.

The good news is, there are key guidelines that can help you narrow down your search and select the right provider. These include:

  • Level of gateway integration: From a day-to-day perspective, one of the most important considerations is the level of integration between your payment gateway and your ecommerce software. Using a gateway with a limited integration creates a lot of extra steps on your end to receive payment, so try to find a provider that offers a gateway with a full integration. A fully integrated gateway is also more secure, which significantly decreases fraudulent orders and corresponding chargeback fees.
  • Relationship between merchant provider and ecommerce software: Beyond the gateway integration, consider how closely your merchant provider works with your ecommerce software. In other words, will you be turning to two separate companies to answer questions, get help with setup, and troubleshoot any difficulties you may encounter? The more closely your provider and software work together, the more likely you are to find everything you need in one place.
  • Cost: Of course, the price you pay each month for credit card processing will be an important factor in your decision. To help you stay on the right track, reference the various fees and industry standards listed in this guide. If your provider’s fees are over the average, ask your provider why. And if they’re under, get skeptical. It’s likely the cost differences will be made up in hidden fees or lack of quality.
  • Customer support: As is the case with most business relationships, you’ll eventually have questions or run into issues. Keep an eye out for the levels of support available with your merchant provider, paying extra attention to whether you’ll be able to speak with an actual person.
  • Additional fees: With the amount of providers competing for your business, there really isn’t a need for you to pay unnecessary fees, such as an application or gateway setup fee. These extra costs can run upwards of $100-$200, so if you can, find a provider that either waives or doesn’t charge these.
  • Your gut: At the end of the day, you know what’s best for you and your business. When you’re on the cusp of making your decision, don’t forget to check in with your gut and choose a provider you can trust.

What can I expect when applying for an online merchant account?

The process of applying for a merchant account is fairly painless. While each company has a different procedure for receiving and processing applications, most require only basic information and can turn around your application in a matter of days, not weeks.

In general, most providers will require this information at some point during the application process. Please note that you won’t need all of these items to get started, so don’t let any of this hold you back from filling out the initial application and contacting someone from your desired provider:

  • Products listed on your site: Your merchant provider will need to have an idea of what you’re selling so they can determine whether it fits their guidelines and policies for processing payments on certain items.
  • Tax ID or Social Security Number: If you’re using a business bank account, be prepared to share the associated Tax ID number, also known as an EIN. If you’re using a personal account, you’ll need to share your Social Security Number.
  • Bank letter or voided check: You’ll either provide a letter or a voided check from your bank to confirm the routing and account numbers with your merchant provider.
  • Decision on accepting AMEX: Accepting American Express on your site comes with slightly higher processing fees, so it’s helpful to let your provider know you plan to accept AMEX beforehand.

Once you have this information complete and any necessary contracts signed, your merchant provider will forward that information to another entity, known as an underwriter, to review the accuracy of your materials, along with any pertinent credit history.

Note: If you’re worried about your credit history, be transparent and learn your options. Your provider is there to help ensure that you can accept payments regardless of any past credit mishaps. The most important thing is to offer as much information to your provider as possible so they can help facilitate the process.

After you’re approved for your merchant account, the pertinent information will then be available to finish the setup process on your site. Many merchant providers take care of this for you, so ask ahead of time. From there, you’ll want to run a few test transactions to ensure that everything works properly. After that, you’ll be ready to start accepting and receiving credit card payments directly from your ecommerce site.


Don’t take the process of getting paid lightly; choosing the right credit card processor is vital to your short-term and long-term success. Fortunately, this guide offers all the information you’ll need to make an empowered decision that helps your business thrive. We wish you the very best in selecting the perfect provider for your online business.