Merchant Account Types
Merchant Account Providers
News & Advice
Merchant Account Tools
What's a payment gateway and how does it work?
By Steve Thompson
Do you conduct business online? If so, a payment gateway account might be beneficial for accepting credit cards. Anyone who conducts business online should be aware of the payment gateway, and how this processing tool can benefit both the business and the customer. A payment gateway is simply an authorization service for Internet credit card transactions and is used to facilitate communication between the business, the card issuer and the business's bank.
Of course, a business can choose to process credit card transactions manually, but there are several benefits to using a payment gateway.
Of course, it costs money to use a payment gateway, which is probably the reason why many businesses shy away from them. A percentage of each sale will be subtracted from your profit for the payment gateway's services, which might be a major negative if you don't handle a large volume of credit card transactions.
Nevertheless, a payment gateway is currently one of the easiest ways a business can accept credit cards online.
What does it cost?
You might also be charged for other fees, such as charge-backs, customer complaints, withdrawals, reversals and setup. Make sure all the fees are disclosed before you sign a contract for a payment gateway account.
What should you ask?
You should also find out if the payment gateway service requires you to establish a retail merchant account in addition to the gateway. This will require you to hire a third-party service and may increase the amount of money you pay for each transaction.
Who should use a payment gateway?
However, it's important to consider your volume of credit card transactions. If you only receive two or three per month, the benefits of a payment gateway might not justify the cost. Additionally, a payment gateway can be enormously helpful for any business that operates internationally.
Article by Steve Thompson
Published: May 18, 2009