Accepting Credit Cards Online

Accepting credit cards online is a great way to boost the success of any online business. Once your business begins to accept credit cards over the Internet, you’ll enjoy greater sales, increased revenues, and better cash flow, among other benefits. This article describes the main benefits of accepting credit cards online, and then presents an overview of the process and all the terminology and background information you’ll need to get started.

The Benefits of Accepting Credit Cards Online

Most business owners choose to begin accepting credit cards as a convenience to their customers, but they are often pleasantly surprised by all the other benefits that accrue to the business. Most notably, accepting credit cards online causes sales to increase. In a traditional bricks-and-mortar store, credit card users make impulse purchases more often than do customers who are paying with cash, because it doesn’t feel like “real money.” Online, this effect is multiplied by the fact that online shoppers can make their purchases within seconds of finding what they want to buy. In contrast, if your site doesn’t accept credit cards, the potential customer who is browsing your website has too much time to rethink the purchase during the time that he or she is calling customer service or filling out the order form and writing a check.

With greater sales, your business’s revenue increases. Even more importantly, your cash flow improves. When customers pay with a check, you may have to wait up to one week for the funds to be made available in your bank account. Credit card payments, however, are processed much quicker, giving you access to the cash you need to run your business.
Another benefit of accepting credit cards online is that you’ll have to deal with fewer bounced checks. The credit card’s available balance is verified at the moment of the purchase, so there’s no chance that you’ll make the sale and then subsequently find out that the customer didn’t have funds to cover the transaction.

What You’ll Need to Accept Credit Cards Online

If you’ve never accepted credit cards online before, initially it can be intimidating, but in essence you will need only four things: an online shopping cart, a payment gateway service, a credit card processor, and an internet merchant account. Let’s consider each of these in greater detail.

An online shopping cart is the platform though which customers make their product selection(s) and input their credit card information. It comprises the catalog of products that you sell, the “cart” to which customers add their desired purchases, and the checkout/payment page where customers provide their credit card information. The online shopping cart is the user-friendly side of things that customers see on the website. It needs to appear professional and secure, so that your customers feel confident entering their financial data on your website. The online shopping card automatically submits customers’ credit card information to a payment gateway service.

The payment gateway service collects that information and securely transfers it to the credit card processor (i.e., the acquiring bank) to request the transaction’s approval. The customer is unaware of the payment gateway service, as it is primarily a tool that allows your online shopping cart to communicate with financial institutions and credit card companies. When selecting a payment gateway service, be sure that it is compatible with your online shopping cart and pay attention to the fees and the level of security offered.

The credit card processor accepts the data from the payment gateway service and then contacts the bank that issued the credit card to verify that the requested funds are available. Once the transaction is approved, the credit card processor sends the results back to the payment gateway service, which sends the results to the online shopping cart system for the customers’ review. (Although the process described above seems long and complicated, it is fully automated and can be completed in just a few seconds.) The credit card processor also deposits the funds into your bank account.

The Internet merchant account, provided by the credit card processor, gives you the authorization to collect funds from your customers’ credit card accounts. All funds will either be deposited into a bank account of your choice or one that you will have to open at a bank designated by the credit card processor.

Unfortunately, if you are only accepting credit cards online (not in a traditional bricks-and-mortar store), many banks view your business as being more high-risk and therefore charge exorbitant fees for the Internet merchant account. The increased revenue of credit cards payments may or may not offset these high fees. Consequently, many online retailers opt to use the services of a company that specializes in e-commerce, as described below, rather than try to obtain an Internet merchant account on their own through their local bank.

All-in-One E-commerce Packages

If you aren’t experienced in the world of ecommerce, getting an online shopping cart, payment gateway service, credit card processor, and Internet merchant account can be confusing, overwhelming, time-consuming, and expensive. Fortunately, as online sales have grown in popularity, many full-service merchant account providers have arisen in the marketplace. They provide all-in-one ecommerce packages, allowing your business to quickly and easily obtain an online shopping cart, payment gateway, and even arrangements for processing credit card payments through a bank. In the long run, many of these companies’ fees are expensive, but the peace of mind is usually worth the price, at least during the first few years that you’re accepting credit cards online. Of course, there are affordable full-service merchant account providers so an investigation is warranted.

When shopping around for one of these all-in-one solutions, take the time to do your research. If a company doesn’t respond to your inquiries promptly, eliminate it from consideration. Ask about the application process and all the fees (application fees, setup fees, discount fees, transaction fees, monthly fees, etc.). Know what the total start-up cost will be, as well as your ongoing maintenance costs. Finally, be sure you know exactly what services you’ll receive and whether there are any limits on the volume or amount of your monthly transactions. Once you have all this information, you will be ready to select an ecommerce package and begin enjoying the many benefits of accepting credit card payments online.

Andy Lax has worked in the credit card processing industry for over five years and is now an Account Manager at IntelliCollect, a merchant account provider that enables business owners to accept credit cards and electronic checks.