Payment Gateways:A Primer

One of the first things to consider before adding a store to your website is how payments will be handled.  You may already have a merchant account, especially if you have a bricks-and-mortar presence, and it would easier for you to use that account, right?

Not necessarily.

Merchant Accounts ≠ Payment Gateway

A merchant account is a bank account that enables the account holder to accept credit cards for payment.  From what I understand, a merchant account “package” usually comes with some sort of manual credit card processer – that swipey thing.

Wikipedia defines a payment gateway as “an e-commerce application service provider service that authorizes credit card payments for e-businesses”.

Most merchant accounts, especially those through local banks, do not offer a payment gateway automatically.  Instead you will need to sign up for a payment gateway that will work with your merchant account.  This costs extra, both in monthly fees and in transaction fees.

In other words, you are paying twice just to process credit cards: once for your in-person purchases via a merchant account and once for your online purchase using a payment gateway.

Combining the Two

There are companies that combine the two. is one of the biggest payment gateways in the U.S. and offers a free interface so that you can hook a Point of Sale (POS) card reader to a computer and process in-person credit card transactions.  The card readers are under $100 and doesn’t seem to charge extra for this. (Correct me if I’m wrong).

Talk to Your Bank First

If you already have a merchant account and are happy with it, talk to your bank or provider and see what they offer for a payment gateway.  Be sure to ask about monthly fees and processing charges.  One of the first clients I built an ecommerce site for (and this has been many years ago) stopped selling online because she was charged an extra 3% on top of her regular merchant account processing fee.  She just couldn’t make money from her site.

If you choose to keep your current merchant account, but it doesn’t offer a payment gateway or the fees are too much, I always suggest using PayPal for online purchases.  Buyers do not need a PayPal account, there usually isn’t a monthly fee, and the processing charges aren’t bad.


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