Ecommerce has opened up all sorts of possibilities, but credit cards remain one of the world’s most popular payment methods for making online purchases.
So, if you’re just starting out as an ecommerce business, setting up the functionality you need to accept credit cards online should be one of the first things you do.
Accepting credit card payments is one of the easiest ways to increase sales, grow your revenue, and provide an optimized customer experience.
This article will take you through how card payments work, what you need to do to start accepting them online, and how much it will cost you to accept card payments.
When a customer makes a purchase on your website, all they’ll see after they’ve submitted their card details is a notice informing them that the payment has been accepted, usually within seconds.
But behind the scenes, an intricate network of processes and providers is operating to verify their identity, validate the payment request, and ensure the correct amount is moved from their bank to yours.
The key parties involved are:
The customer who initiates the payment
Here’s how credit card payment processing works:
To accept credit card payments online, you’ll need to do the following:
Firstly, you’ll need a website to act as your digital storefront. This is where the customer will discover your products and services and initiate their credit card payment. You could use a website builder or ecommerce platform to create this yourself, or use a website designer if you’re looking for something more bespoke.
You’ll also need a merchant account, which is a type of payment holding pen that acts as an intermediary between the issuing and acquiring banks. When a customer makes a purchase, their funds are transferred from their account to your merchant account and held there until the transaction has been approved. Once approved, the funds can be moved to your business bank account.
However, you won’t need to open a separate merchant account if you choose a payment provider that also offers merchant account services. More on this below.
Next, you need to choose a payment gateway and a payment processor. To accept payments online, you’ll need both.
When choosing the right gateway and processor for your needs, you should consider:
The best option by far is to choose an end-to-end payments solution that combines processing, acquiring, and payment gateway capabilities. An all-in-one platform is cost-effective, streamlined, and easy to optimize.
Credit cards might be just one payment method, but there are many ways to accept them, including:
Learn more: Credit card authorization explained
The fees associated with credit card processing typically range from 1.5% to 3.5% of the transaction amount.
These fees are not fixed and can vary based on several factors, including the type of card used, your merchant category code (MCC), and the volume of transactions processed.
The three main credit card fees are:
You may also qualify for lower interchange fees if you are able to meet level 2 or level 3 data processing requirements.
Learn more: What is a credit card account updater?
Yes, you do need a merchant account to accept credit card payments. However, many payment service providers (PSPs) also offer merchant account services.
That means, if you choose a PSP, you don’t have to set up a separate merchant account in order to accept payments - it’s all bundled in together. PSPs aggregate funds from multiple merchants into one account and then transfer the amount you’re owed into your business bank account. This can be a much easier and more cost-effective option for smaller merchants who are just starting out.
However, larger merchants or those with a high volume of sales might find it more cost-effective to work directly with a merchant account provider. Additionally, some high-risk businesses with high fraud or chargeback rates might need to open a specialized high-risk merchant account.
Checkout.com acts as a merchant account, payment gateway, payment processor, and acquirer all in one.
As a new business, rather than navigating the complexity of working with multiple payment providers, choosing a PSP like Checkout.com is the easiest and most cost-effective way for you to start accepting credit card payments.
As we manage the whole process, it’s easy to streamline your operations, and we give you access to a wealth of data from across the payment lifecycle that can inform strategy and optimization.
Find out how to accept credit card payments with Checkout.com.