Your Get-Started Guide to Online Credit Card Processing

Looking to accept payments through your online store?

Good for you—doing so is a surefire way to take your business up a notch. Not only does directly accepting payments boost your credibility, it also boosts the chances of turning casual shoppers into paying customers.

And while you may already understand why you should use online credit card processing, you might be unsure of the following: How much will it cost? Should you use a merchant account or try something like PayPal? What’s involved in the application process?

That’s what this guide is all about—giving you the valuable details needed to confidently choose the best online merchant account. So get ready to roll, because we’ll be covering a lot of information that will help shape how you accept payments online. Whether you read the entire guide or are just looking to reference specific sections, feel free to print this out, bookmark it, and/or share with your social networks.

After reading this guide, you’ll be able to answer the following questions:

  • What is online credit card processing and why is it important?
  • Why should I use an online merchant account instead of something like PayPal?
  • How does the process of accepting online payments work, anyway?
  • What type of fees will I encounter, and how much do they cost?
  • What can I expect the application process to look like?
  • What should I be looking for when selecting an ecommerce credit card processor?

Let’s get started, shall we?

What is online credit card processing and why is it important?

In its simplest form, online credit card processing is the method in which you accept customer payments, via debit/credit cards (such as Visa, MasterCard, Discover, and American Express), directly through your online store. 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. Of course, 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 a 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’s a lot of behind-the-scenes work that comes into play, which we’ll discuss later.

Beyond knowing what payment processing is, you should also understand why it’s so important to your online business. For a brief overview of its impact, consider the following benefits:

  • We’re all in business to make money: Naturally, a critical component of the overall sales process is to collect payment from your customers. Without this money, you’re unable to pay the bills and keep your business running. This means that online payment processing is an absolute necessity for growing your online store.
  • Operate 24 hours a day: One of the biggest benefits of accepting online payments is that you can literally make sales around the clock. Unlike a retail store where you need someone to process payments and assist customers, your ecommerce site allows you to sell day and night, reaching shoppers in time zones across the globe.
  • Boost customer convenience: Allowing shoppers to pay with a variety of credit cards makes their shopping experience more seamless and convenient. Beyond that, your customers will be able to pay in real-time, which allows them to finalize their transaction without delay.
  • Build credibility: Accepting payment directly on your site makes your business more credible to online shoppers. Just think: all of the big retailers like Amazon and Target accept credit cards, so if you extend the same option, it naturally makes your business more legitimate.
  • Enhanced security: Almost all ecommerce credit card processors include security protections to protect your business from fraudulent orders and security threats. This is also a big benefit because it helps protect your customers’ sensitive information from potential cyber criminals.
  • Increase sales: All of the points detailed above contribute to the overall goal of increasing sales through your online store. From real-time transactions to customer convenience and credibility, online credit card processing builds a foundation that makes shoppers more comfortable and willing to purchase from your ecommerce site.

Now that you have a better understanding of the basics of online credit card processing and why it’s so important to the success of your ecommerce business, let’s answer the common question about why you should choose a merchant account over other options, such as PayPal.

Why should I use an online merchant account instead of something like PayPal?

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

To help guide your decision, take a look at the following advantages of using an online merchant account:

  • Enhance customer convenience: Using a merchant account to accept credit cards makes the checkout process much easier and more seamless. If you only accept PayPal, it’s likely that customers will have to leave your site and either create or log into their PayPal account to finish the transaction. Adding this extra step to the mix can be an extra pain that your customers won’t appreciate.
  • Reduce abandoned carts: Piggybacking off the idea above, if your customers are anything like me, they might not remember their PayPal login, or even worse, may not want to pay via PayPal. If that’s the case, shoppers are much more likely to give up on making a purchase and head to a competitor’s site. This means that using your own merchant account will help boost and retain sales that you’ve worked so hard to earn in the first place.
  • Receive payments faster: Using a merchant account allows you to receive payment in as little as two days, with funds being directly deposited into the bank account of your choice. With PayPal, however, it often takes up to three or four days to receive your funds, which can cause headaches if you have bills that you need to pay quickly.
  • Get personalized support: With a merchant account, you’ll often receive better and more personalized customer support, often 24x7. With PayPal, phone support is only available to their highest-tiered customers, which can be particularly problematic when you need assistance in getting your account set up.
  • Sustain business growth: As your business grows, you’ll quickly see that PayPal is no longer cost-effective due to its higher-than-average 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 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. In other words, accepting credit cards helps make your online business seem bigger than it really is—and in a world that’s filled with competing sites, perception is everything.

At this point, you should have a good understanding of what online credit card processing is, and the pros and cons of pursuing this option in light of using PayPal. Now it’s time for us to take a glimpse into the behind-the-scenes action of online payment processing; that way, you know exactly what happens and what tools you need to facilitate that process.

How does the actual process of accepting online payments work, anyway?

The average credit card transaction takes just a few seconds to complete online, which is particularly impressive considering all the action that takes place behind the scenes. Between the buyer entering his/her credit card information and the elaborate communication process between various financial institutions, there’s a lot going on. And while it may seem like a lot of information to take in, having a decent understanding of this process is particularly helpful as you begin to accept online payments of your own.

In a nutshell, once a customer submits their credit card information, that 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.

Check out the full process, step by step:

  1. Your customer enters and submits his/her credit card information when placing an order through your online store
  2. That information is encrypted (turned into a bunch of characters and symbols) and securely carried through your integrated gateway to your credit card processing company
  3. Your credit card processor then submits this transaction data to the credit card network, such as Visa or MasterCard
  4. The credit card network then forwards that information to your customer’s bank, which checks to see if your customer has adequate funds to pay for the order. If yes, the transaction is approved. If not, it’s declined
  5. Your customer’s bank then sends the approved/declined status back to the credit card processor, which then reports that information back to your credit card processing company, and then sends that information back to you, the merchant
  6. Once you receive the “Authorized” (approved) message, you fulfill the order to your customer
  7. Your customer’s bank then sends the funds to the credit card network (Visa, MasterCard, etc.), who then passes the money to your bank. From there, the bank deposits your funds directly into the account that you’ve indicated on your initial application

To sum it up, the process is designed for credit card information to flow in one direction and back the other, with the first step being a customer entering their credit card on your website, the middle steps including fund verification and collection, and the last step resulting in funds being deposited into your account.

Now that you know the basics, let’s dive into what you really want to know: how much online credit card processing costs.

What fees are associated with online credit card processing, and how much should they cost?

The old saying “there’s no such thing as a free lunch” definitely applies to online merchant accounts. The good news, however, is that credit card processing will end up paying for several of your lunches, so the investment pays off in the end. 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.

When you’re comparing options, there are two general categories of fees you should be aware of:

Standard online credit card processing fees

No matter your provider, you’ll see these charges 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: As mentioned above, your gateway is provided by your credit card processor and encrypts credit card information to protect this data from being breached. To account for this service, 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: A tongue twister, yes, but 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 document 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

Depending on your provider, you may see or experience these fees in different ways:

  • 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 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: Yes, the government requires a little piece of the pie here, too. This minimal fee helps ensure that your merchant provider is meeting all guidelines provided by the Internal Revenue Service, and, on average, costs around $2/month.
  • American Express: If you plan to accept American Express (AMEX) on your ecommerce site, note that AMEX charges a higher transaction rate than other cards like Visa and MasterCard.

I know you’re probably thinking that credit card processing has a lot fees. But keep in mind that accepting online payments is a complex process. And 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.

On that note, remember that price shouldn’t be the determining factor. So if you find a merchant account provider that offers rates far below the industry standard, make sure there aren’t any hidden fees involved. In other words, you often get what you pay for. At the end of the day, you need to find a provider that’s both affordable and sustainable enough to power your business growth.

Okay, that’s enough of a math lesson. Let’s talk about what you need to know regarding the actual application process. The good news? It’s a lot easier than you think.

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

Applying for an online merchant account may seem intimidating at first, especially if it’s your first time submitting an application of this kind. Fortunately, there’s no need to worry, as the process is quick and painless. Because of the increasing number of businesses moving online and the increased competition among payment processing companies, the application process has been streamlined to help you get set up faster.

The main thing to know is that there isn’t a true industry standard when it comes to applying for a merchant account, as each company has a slightly different procedure for receiving and processing applications. Most reputable companies, however, require only the basic information, and more importantly, 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. That way, they know if it fits in with their guidelines and policies for processing payments for certain products.
  • 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. Or, if you’re using a personal account, you’ll need to share your Social Security Number (this is a financial account, after all).
  • Bank letter or voided check: Either provide a letter from the bank housing your account or a voided check from that bank to confirm the routing and account numbers with your merchant provider. This step is important as it ensures that the funds you earn are indeed deposited into the right place.
  • Decision on accepting AMEX: As mentioned before, accepting American Express on your site comes with a slightly different process and higher processing fees, so it’s helpful for your provider to know that 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: Worried about your potential credit history? Don’t be. Your provider is there to help ensure that you can accept payments regardless of any past credit mishaps. The most important thing is that you provide 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, and just like that, you’re ready to start accepting and receiving credit card payments directly from your ecommerce site.

That wasn’t too bad, was it? Now that you’re set to breeze through your application, let’s use our final moments to talk about key things to look for when selecting and comparing potential online credit card processors.

What should I look for when choosing 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, even thousands, 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 that, no matter what you’re selling, there are some key guidelines to help you narrow things down and select the right provider.

Keep this pointers in mind to guide your search:

  • 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 ecommerce software. If possible, try to find a provider that offers a gateway with a full integration. Why? Because using a gateway with a limited integration creates a lot of extra steps on your end to receive payment. Even more, a fully integrated gateway is more secure, which helps significantly decrease fraudulent orders and corresponding chargeback fees. When looking at a particular merchant provider, be sure to find out what gateways integrate with your ecommerce software, and to what level that integration exists.
  • 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 working with two separate companies to answer questions, help you with setup, and troubleshoot any difficulties you may encounter? Having both functions housed in one place can save you major headaches down the road, as there’s no back and forth between different providers.
  • 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 previously listed in this guide. If they’re way over, ask your provider why. And if the prices are way under, don’t forget that in the world of merchant accounts, price is a sign of quality.
  • Customer support: As is the case with most business relationships, you’ll eventually have questions or run into a potential issue. That’s why selecting a provider with a high degree of customer support is particularly important, especially as you’re getting started. That means you should keep an eye out for what levels of support are available with your merchant provider, namely if it costs anything extra and if you’re able to talk with a real 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 to help save you some money upfront.
  • Your gut: At the end of the day, you know what’s best for you and your business. Thus, when you’re on the cusp of making your decision, don’t forget to trust your best instinct and go with a provider that you can trust. Cost and convenience is one thing, for sure—peace of mind is another.

As you start your journey into the realm of online credit card processing, keep these pointers in mind—not only will they save you time and money, they’ll also help you sleep better at night!


Choosing a credit card processor for your ecommerce site is a foundational element of your short-term and long-term success. After all, accepting payments is what keeps the lights on, so don’t take the process of getting paid lightly.

In other words, instead of picking the first provider you find in a Google search, talk to your ecommerce provider and do the diligent research to find the right online card processor for your needs. Don’t forget to ask the key questions: How much does it cost? What kind of support do I get? How does this decision affect my daily operations?

While this process may seem like a lot of work, I promise you that it’s not nearly as complicated as it seems. The idea here is to ensure that you have the information needed to make an empowered decision that serves you and your online business from day one and beyond.

We wish you the very best when it comes to finding and selecting the perfect provider for your online credit card processing. If you liked this guide, please share it with your social networks—I hope you found it helpful!