E-commerce credit card processing
just the basics...

E-commerce credit card processing seems to be one of the most confusing issues for businesses doing business on the web for the first time. At least part of the reason for this is the fact that e-commerce credit card processing is, in fact, quite confusing. There are at least five elements that have to work together. A basic process outline follows.

1. Your shopping cart or e-commerce solution gathers the necessary information about products being ordered, taxes, shipping charges, customer billing information and shipping information and prepares it for presentation to the payment gateway.
2. The payment gateway is an interface between your e-commerce solution and the transaction processor. It takes the information provided by the e-commerce solution and passes it to the transaction processor and waits for a reply. The reply generally falls into three groups. The transaction is approved, declined or the transaction failed due to an error or insufficient information.
3. The reply is passed back to your e-commerce solution. The solution then has to use the returned information to present a receipt page if the transaction was approved. It also has to handle a decline or error and provide the customer a with the appropriate response.
4. The transaction processor does the actual work of processing a transaction. It checks the users credit card account to insure that it is an active and valid account and, if the transaction is approved, updates the users credit card account and sends the approval back to the gateway which returns it to your e-commerce solution.
5. Your credit card processing merchant account is nothing more than a simple bank account that holds your credit card transaction amounts temporarily and then transfers the funds to your checking account.

Fortunately most of the complexity of e-commerce credit card processing is transparent to you and your customer. But when you are making a decision on which of the thousands of potential combinations to use it is easy to get bogged down in the terminology. This is especially true if you are new to the process and everyone you talk to has a different recommendation. Where do you start? Which component should you consider first?

This is the easy part… start with your e-commerce solution. Every packaged e-commerce solution should include at least several options for credit card processing. If you decide on a payment gateway that is not supported by your e-commerce solution you may end up shelling out a chunk to have a custom implementation created. If you choose an e-commerce credit card processing merchant account first it may require the use of a transaction processor not supported by the gateway(s) your e-commerce solution supports.

Your e-commerce solution will define the payment gateway options you will have. The gateway options define the transaction processors they will work with. The transaction processors will dictate which merchant accounts you can use. Any merchant account can work with your checking account.

This may seem backward. Most people assume that they need to work with their local bank to get a merchant account. That may have been true five years ago but today there are dozens of merchant account companies who specialize in working with Internet e-commerce sites. With a little research most people find that these companies generally offer better discount rates, lower up-front fees, lower gateway fees and lower transaction fees.

Yes, accepting credit card payments over the Internet is a confusing process. However, it gets much simpler when you start in the right place. A phone call to Web Transitions can help simplify a confusing process.

Here are some of the fees you can expect to pay for maintaining a merchant account and payment gateway.

• Credit Card Discount Rate: The percentage of the sale that the merchant account takes from each sale. This is generally between 2.2% and 3.5% but can vary depending upon the kind of internet sales you do and the average sale amount.
• Merchant account Up-front fees: Most merchant account companies charge either an application fee, set-up fee or charge for the software you will use to process charges manually. These fees can range from under $100.00 to well over a thousand dollars. Set-up fees are also generally required by gateway companies.
• Merchant account monthly fees: Most merchant accounts charge a minimum monthly fee for maintaining the account whether or not the account is actually used.
• Gateway fees: This is generally a monthly fee charged for using a gateway service. Prices range from $15.00 upwards to $100.00 per month.
  Transaction fees: These are fees charged by the gateway company for each transaction sent through their system. They generally range between 10 and 35 cents per transaction.