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Basics of Online Payments

online credit card processing

Accepting Online Payments from Customers

As an e-commerce merchant, you know that accepting online payments from customers is necessary in order to succeed. However, if you are a first time, startup merchant, then you may not be familiar with the ins and outs of e-commerce processing.

Since we provide merchant services to startup merchants, we also provide them with information to help them understand the world of online payments.

Terms to Know When Accepting Online Payments from Customers

There are many terms associated with accepting online payments from customers—so many we could write a dictionary! We do not want to overwhelm you, so here are some of the most important terms e-commerce merchants should know.

E-Commerce Merchant Account

Similar to a traditional merchant account, an e-commerce merchant account assists you in accepting online payments from customers. Online payments are different from in-store payments as the card and cardholder are not present for the merchant to verify ownership.

Acquiring Bank

An acquiring bank is the type of bank that provides the e-commerce merchant account. Keep in mind that some acquiring banks also provide business bank accounts and consumer bank accounts, such as Bank of America and Wells Fargo.

Payment Gateway

Business owners cannot use an e-commerce merchant account alone when accepting online payments from customers. They must also use a payment gateway, which connects the e-commerce website to the acquiring bank as well as the cardholders' issuing bank. Payment gateways are typically Web applications that do not require downloading or leasing of equipment.

Discount Rate

Acquiring banks charge merchants a discount fee when accepting online payments from customers. This is a percentage of the overall purchase, typically between 3.5% and 8% depending on your high risk level. High risk merchant accounts have higher discount rates and low risk merchant accounts have lower discount rates. Some consider this fee the sales commission the bank earns on your sales in return for providing you with a merchant account.

Fixed Transaction Fee

Similar to a discount rate, merchants pay a fixed price on each transaction. Your acquiring bank also determines this fee. Most fixed transaction fees are between $0.20 and $1.00 when accepting online payments from customers.


When accepting online payments from customers, the cardholder enters his or her payment information and waits for a response. If the card is valid, then the customer will receive an authorization for your website to complete the transaction. Once authorized, you will ship the goods and the approved funds will transfer from the credit card issuing bank to your acquiring bank. However, some acquiring banks allow pre-authorizations, which enable you to screen your transactions for fraudulent transactions and cancel the order before it turns into a chargeback.


When you apply for merchant services, your acquiring bank will determine your payout schedule. This is when you receive your approved funds in a wire transfer from your e-commerce merchant account to your business bank account. Payouts can occur daily or weekly based on factors such as sales volume and processing history.

Low and High Risk Merchant Accounts

Low risk merchant accounts and high risk merchant accounts are types of accounts based on your risk level. Low risk industries include online retail, pet supplies, insurance brokerages, and financial services. High risk industries include licensed pharmacies, forex trading, escort services, membership-based services, and the adult industry—videos, photos, phone sex, toys, and novelties.

Domestic, International, and Offshore Merchant Accounts

International and offshore merchant accounts are similar in the respect to being in a non-residential country. Domestic merchant accounts are those you establish in your residential country. For instance, business owners living in the United States would open a domestic merchant account in the US. International and offshore merchant accounts have many beneficial features, including tax benefits, higher processing capabilities, and more currency and card acceptance options.

Direct and Third Party Merchant Accounts

Sometimes a business owner does not have the ability to establish a merchant account in his or her own name. Perhaps they have poor credit card processing history or perhaps they have no processing history at all. In instances such as these, a third party merchant account would be ideal. This is when the merchant account provider assumes responsibility for your transactions and assists you in accepting online payments from customers through their own merchant account. A direct merchant account is one that you have opened directly with the acquiring bank in your own name.

MOTO Merchant Accounts

Accepting online payments from customers comes in various forms. Some customers enter their own payment information into your website while others prefer to call or send in mail orders. A MOTO merchant account—short for mail order and telephone order—enables merchants to accept telephone and mail payments and enter them into the payment gateway through a virtual terminal.

Get Started with Your Merchant Account

Establishing a merchant account* and executing a merchant processing agreement are the first steps to get you started with credit card processing. Before you open a merchant account, it's important to know which account is right for you, and how the right payment processing solutions can help you manage and grow your business.

  •  Transaction Fees as low as 2.2%
  •   Offshore & Domestic Solutions
  •  Every Industry Accepted

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