• The Best Credit Card Processors

Payment Gateway

What is a payment gateway? A gateway for credit card processing is the electronic data handling that authorizes payments by credit cards/debit cards/loyalty cards and other forms of non-cash payments. Some will even handle checks or wire transfers. In this article, we’ll focus on payment gateway solutions for internet payment sales.

Although the focus is on credit card internet payment processing, it’s important to realize that all merchant payments flow through a secure gateway. It’s just that a keyboard and mouse are replacing the terminal customers would “swipe” in a physical store. The payment processing is the same after the data is collected. The gateway refers to the company you use to deal with the data or you can just think of these companies as payment gateway providers.

Best Payment Gateway

The best payment gateways for any particular business come from wise choices in two general areas. The first is the cost to process credit cards. The second is the gateway integration with your sales page or shopping cart.

Costs for Credit Card Merchant Processing

The main fees you will pay to accept credit cards as an internet merchant are the same as offline. These are generated by credit card merchant processing of any sort – no matter how the data actually moves around. Some of these are (see note after list):

  • Statement fee — $5 to $10 a month
  • Monthly minimum (and penalty) – varies depending on how much volume in sales you project. Higher minimums (more sales) may mean a discount on other fees.
  • Discount rate (Internet)—under 2.5%. This is the percentage of sales you will pay to accept credit cards. The rate is often negotiable and will depend on your sales volume, credit history and how you’ve handled a merchant account in the past.
  • Transaction fee (Internet) – 20 to 30 cents per transaction. Note that a transaction doesn’t necessarily mean a sale. If a card is run and rejected, that is still a transaction. Every communication through the payment gateway generates this fee.
  • Address verification fee – 5 to 10 cents. This may be rolled into the transaction fee. It is a legacy fee to verify a customer address when they are not present at the point of sale (all Internet transactions are of this type). The purpose is to prevent fraudulent use of the card.
  • Membership and other fees—other fees may include a one-time set up fee, a yearly membership fee, fees for chargebacks, account insurance and fees for moving money around (international currency conversion and same-day payment might have additional fees).

Note: These fees are representative of the current marketplace. Any and all can vary. Discount rates may be adjusted based on economic conditions and the best merchant account for you will balance these fees to match your type and amount of sales.

Best Credit Card Processing

The second main concern when selecting payment gateway services is gateway integration. Most businesses won’t be familiar with the guts of the programming – we rely on the internet payment gateway provider to marry their system with our websites.

At some point in the online “experience,” your customers will push the pay-now button, or finish-pay in a virtual shopping cart. At this point, the web payment gateway is activated to authorize the transaction. How well the ecommerce payment gateway delivers at this point will either make the experience a good one or a poor one.

Payment systems have to be as invisible as possible to customers, but still function well on the “back-end.” In other words, after customers enter their information they see nothing — and you see everything you need to. Ease of use matters – you don’t want to lose sales because someone drops out at the last minute.

The best scenario is a plug and play payment gateway service that just drops into your existing shopping cart software.

The Balancing Act

If you’ve followed along, you should appreciate that savvy entrepreneurs have to strike a balance between the costs they have to pay for credit card merchant processing with the services they need and expect. In some cases, it’s better to pay a little more to get better service. The rule of thumb is that the easier it is to sign up, the more it costs you – although this is changing as competition alters the market to favor a new breed of Internet commerce.

Merchant account processing is offered by a slew of companies. Some are direct processors, some are resellers. Ecpss payment gateway and authorize.net payment gateway are two of many. Paypal is probably the most popular. Some offer complete ecommerce solutions with shopping cart software thrown in. Payment guarantees, same day approval for merchant accounts processing and other incentives are common.

The best advice is to think about your needs and read everything before you sign. It is also worthwhile to seek outside information about any processor you are thinking of dealing with. Just as in all business relationships, reputation matters. Find out how disputes will be resolved and how you can contact your processor when there is a problem. Do they offer support for their software? How about response times for complaints/errors or other difficulties?

If you already take credit cards in an offline environment, you will recognize many of the issues for online commerce solutions. One of the main differences is the security element. There should be mechanisms in place to prevent fraudulent use of a credit card on your site.