The Basics ~ what you need

Anyone wanting to take credit cards as payment needs a merchant account. This is your agreement with a payment processor to authorize the transactions, put them through for settlement, and directly deposit the monies into your checking account. For this service, Visa/MasterCard and processors charge a discount rate, which is normally assessed as a percentage of the sale + a transaction fee.

If you are selling directly online through a shopping cart, you will also need a payment gateway. This is the secure portal that hooks into the back end of your shopping cart and transmits the credit card information to the card issuer for authorization and settlement. It is similar to a terminal/Point of Sale device in a retail storefront environment.

Most gateways can also be used as virtual terminals, which provide the merchant the ability to key in their customer’s credit card information in a mail order or telephone order (MOTO) situation.

What is involved?

Many merchant service providers bundle the payment processing services with the gateway. Applying for your merchant account is one of the things you can begin ahead of time, even before your website is live or your inventory is ready.

Visa and MasterCard are associations of banks that brand their credit cards. Discover and American Express are independent companies that handle all their own issuing and payment processing. Many merchants can accept all four major credit cards under one merchant account.

Getting a merchant account and gateway/virtual terminal involves an application and underwriting. Most applications ask for your company’s Tax Identification Number. If you don’t have one, the social security number of an owner often suffices.

Payment processors underwrite your business because they are forwarding funds from your sales before the customer has paid their credit card bill. In most cases during the application process, the payment processor asks for documents showing proof of business, pricing examples, trade reference, and a return policy. This provides the information the processor needs to manage your risk and theirs, and find a win-win solution to your credit card processing needs. Sometimes, the processor will make a compliance call to the merchant to verify information.

Once approved, you will be notified of your new Merchant

Account ID number and the integration process for your gateway.

In most cases, it involves simply placing your gateway codes into your shopping cart so that the two systems can communicate.