Online Merchant Services: How Online Stores and E-Commerce Websites Process Credit Cards

Dayton Uttinger  | 

Selling your products online can be a great way to reach customers that you might never have before, as well as earn some extra revenue. However, opening an digital marketplace can be more difficult than it appears. Here are some of the basics you’ll need to know before you can start selling your merchandise online.

Accepting Credit Cards Online

There are two ways that you can go about selling your products online, both with their own pros and cons.

E-Commerce Websites

E-Commerce websites are hosted on your own business website. Let’s say that you’re the owner of Suzie’s Shop of Stuff; you could sell your products directly from the website for Suzie’s Shop of Stuff. This way, you don’t have to rely on another platform to sell your merchandise, and you won’t have to compete with other sellers on the same page.

On the other hand, you will have to pay for online merchant services. These entities process your customers’ credit cards, and they will charge you for the transaction fees. These will be billed monthly, although you can negotiate other payment arrangements if necessary.

Online Marketplaces

However, you can avoid all that hassle by using established online marketplaces, like Etsy, Ebay, or Amazon. Your can list your merchandise easily on online marketplaces, but there is less customization options. Additionally, your product will likely be shown next to your competitors’.

Listing on an online marketplace doesn’t get you out of paying fees, either. These online marketplaces already have their own merchant services established, but they will charge you all the same. Instead of paying for online merchant services, you’ll pay listing fees, transaction fees, and processing fees. These are small individually, but over time it can make up a significant amount of your would-be profit.

E-Commerce Credit Card Processing

When your customers buy your product online, there are several entities that come into play.

  • Credit card processors provide your with merchant account services. They give you the tools to process your customers’ credit card information.
  • Credit card associations run the credit card network. These make up the Big Four (Visa, MasterCard, Discover, and American Express). They basically provide the framework for credit cards to function.
  • Credit card issuers are the banks that issue credit cards to consumers. They put the framework into practice, and are in control of credit card approval, interest rates, and paying for the initial transaction.

Shopping Cart

The shopping cart is an integral part of your digital marketplace. It’s the term given to all software that allows customers to choose what products they’d like to purchase and “store” them together, much like you would an actual shopping cart.

Payment Gateway

A payment gateway allows customers to pay for their desired products and for that payment information to be process so that you get actual money in return. If you want to start your own e-commerce site, then it’s important to make sure that your shopping cart and your payment gateway are compatible.

Hosted Payment Pages

Having people’s credit card information run through your site could be a security concern. To solve this problem and add convenience, many businesses use hosted payment pages. These are externally hosted pages created by gateway agencies, like PayPal, allow customers to enter their personal information into that site instead of yours. This releases you from a lot of security concerns, customers feel more comfortable, and it’s more convenient than entering your credit card number every time.


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Dayton is a chronic Wikipedia addict, which is detrimental to her social life but stellar for her writing. She resides in Boise, ID, surrounded by her own frantic outlines, highlighted encyclopedias, and potatoes. The latter was not by choice.

This post was updated November 16, 2018. It was originally published November 17, 2018.