Accepting credit cards on your site is a great way to increase sales and provide better service to your customers. This is not only true for online merchants but for nearly every type of business. By accepting credit cards you will get your invoices paid faster and save time writing deposit slips and taking checks to the bank.

But how do you get started and what do you need to know to avoid making mistakes? Getting setup to accept credit cards is easier than you think, but you should first understand what the pieces are and how they work.

Business Checking Account

If you are running a business you probably already have a checking account. Banks differentiate between personal and business accounts so make sure you have a business checking account.

To get a business checking account simply contact your favorite local bank. Just like choosing a personal account watch out for hidden fees and charges.

Merchant Account

A merchant account is an agreement between a merchant and a bank that allows payments to be routed from the credit card brands included in the agreement (Visa, MasterCard, Amex, etc.) to the merchant’s business checking account.

There are many different options for merchant accounts and it's best to check around to get the best rates but also lookout for unscrupulous brokers. Start with your bank but get some other options; often your bank doesn’t offer the best deals.

Payment Gateway

A payment gateway is most easily understood as a “virtual terminal.” In other words, instead of physically swiping a card like you would at a restaurant or convenience store, the credit card information is entered into a website and is sent electronically to be verified by the payment gateway.

Your payment gateway must be compatible with your web form or shopping cart, so start by getting a list of compatible gateways. Once you have a list check with your merchant account broker or bank and see if they offer a gateway. Since you can also get a gateway through other sources, once again check the rates and fees and choose the best fit for your business.

Web Form or Shopping Cart

To accept payments on your website you need a web form (for invoice payments) or a shopping cart (for traditional e-commerce). The web form or shopping cart accepts the credit card information from the customer, submits it to the gateway, and then if accepted completes the transaction.

Setting up a shopping cart or creating a custom web form requires specialized knowledge. Your web developer will often recommend or implement this part of accepting credit cards.

SSL Certificate

The SSL certificate provides the “security” that shoppers look for when making a purchase online. The little padlock that can be found in the bottom corner of your browser on secure shopping pages indicates that traffic between your browser and the server are encrypted making the transmission of data more secure. There are other aspects to appropriate security but SSL is an obvious requirement.

SSL Certificates are available from Geo-Trust, Verisign, Thawte and others. Typically your web host will request and install the SSL certificate. Certificates cost between $75-$500 and must be renewed yearly.

Putting it all together

Now that you understand all the pieces, we can talk about how they work together.

Payment Initiation

The payment process is initiated when a customer enters a credit card into a web form or shopping cart. The website takes the credit card and submits electronically to the payment gateway where a response will be generated. The response will include either an acceptance or rejection of the payment. If the payment is rejected the customer will be notified and can either reenter the information or try another card.

Payment Completion

If the payment is accepted successfully the website completes the transaction and notifies the customer. The payment gateway at the same time communicates with the customer's credit card account and posts the transaction, reducing the customer’s available balance (for debit accounts) or available credit (for credit accounts).

Settlement

At the end of the settlement period (normally at the end of the day) completed transactions are settled to the merchant. The settlement process credits the merchant’s business checking account with the total of all transactions for the period.

Discount Fee Settlement

Shortly following the successful settlement a merchant will also see additional transactions to the checking account. These show up as “discount fees” and will reflect the % each credit card issuer charges for accepting their cards. For instance if you processed $100 in online charges you will probably see $2-4 in discount fees debited from your account.