E-Commerce Credit Card Processing: The Ultimate Guide to Accepting Payments

E-commerce credit card processing services, including digital wallets like Apple Pay or Google Pay, help small businesses accept payments remotely. Many providers also support buy-now-pay-later (BNPL) solutions, digital invoicing, and recurring (card-on-file) purchases. But costs and store integrations differ.

Decide what checkout features and fraud tools your online setup needs, then explore options from the best e-commerce payment processing companies. Use this guide to learn how online payment processing works, what transaction fees you'll pay, and how to compare merchant account providers for your e-commerce store.

What is e-commerce credit card processing?

E-commerce credit card processing is a set of services and systems that let an online business accept, authorize, and settle card-not-present (CNP) transactions. Shopping cart software provides the customer-facing interface, while payment gateways and processors move data through authorization. Digital invoicing tools, recurring payments, and online stores all rely on e-commerce processing services. 

Do you need a payment gateway and a processor?

You need a payment gateway and processor to accept online payments. The gateway secures card data at checkout, while processors manage back-end routing and account management. One vendor may handle payment gateway and processor services, or you can use a third-party gateway that integrates with your merchant account provider.

Taking payments in person doesn’t require a gateway. You only need a processor and a card reader or terminal. 

How e-commerce payment processing works

E-commerce payment processing services connect your online checkout with the gateways, processors, card networks, and banks involved in completing a card transaction. Approvals or denials take seconds, but the online process is more complex behind the scenes.

During e-commerce credit card processing, transactions move through the following steps: 

• Online checkout: The customer enters their credit card information into your online checkout or selects a saved payment method. E-commerce platforms enable electronic payments with shopping cart integration (a customer interface). 
• Secure transmission: A gateway encrypts sensitive transaction data. It forwards the authorization request to the card processor. Data moves to the right card network (Visa, Mastercard, or American Express), then to the issuing bank (customer bank).
• Authorization: The issuing bank reviews transaction details, fund availability, and fraud signals. If approved, the issuer passes the authorization code back through the network, payment processor, and gateway to your online checkout. If denied, the bank sends a decline notice.
• Clearing: The e-commerce platform or payment processor transfers a batch of approved transactions to the acquiring bank. It routes them to the right card network, then to the issuing bank, which converts the authorization hold into a completed charge.
• Settlement and deposit: Credit card networks calculate fees and coordinate the transfer of funds from the issuing bank to the acquiring bank. Funds go to the merchant account, then into your business bank account.

How long do online credit card payments take to settle?

After authorization, the next steps (clearing, settlement, and deposit) take one to five business days. Some online credit card processing vendors deposit funds within one to three days. Others offer same-day or next-day settlement, but these services may cost extra. Check your provider’s documentation, processing agreement, or dashboard to confirm your e-commerce payment settlement time. 

E-commerce credit card processing fees

The publicly advertised flat-rate fees for domestic online card payments range from 2.5% to 3.5% plus 29 cents to 49 cents per transaction. Actual costs vary by payment method, pricing model, and other factors. 

At a minimum, each online credit card transaction fee includes:

• Interchange fees: Card networks set base interchange rates. This portion of the transaction cost goes to the card issuing bank (the customer’s bank).
• Network assessment fees: This fee covers network infrastructure costs. It goes to the card brand that routed the transaction. 
• Processor markup: Payment processors charge transaction fees to cover their routing, technology, and account management costs.

Established or high-volume businesses may qualify for lower processor markup rates, but interchange and assessment fees are nonnegotiable. That said, it never hurts to ask a provider to reduce card processing rates.

Additional online payment processing fees to check

Payment processing providers may charge fees for virtual terminal, gateway, fraud screening, or account services. Request complete fee schedules and sample merchant statements to see how rates differ between processors. Factor the total cost into your monthly budget. 

Here are some additional fees you may pay for accepting credit card payments online:

• Payment gateway fee: This fee may be included in your online processing rate or charged separately. It covers the gateway technology for routing online transactions.
• Monthly or account fees: Processors may charge fees for statements, merchant account services, or Payment Card Industry Data Security Standard (PCI DSS) compliance programs.
• Monthly minimum charges: If your agreement requires you to process a certain amount of sales each month, you may pay a fee for not meeting that threshold.
• E-commerce platform fees: Online store services may require a subscription. Some charge additional per-transaction fees if you use a third-party processor.
• Verification or fraud tool fees: The cost of optional services for fraud screening, such as card code or address verification (CVV or AVS).  
• Cross-border fees: Transactions involving credit cards issued in another country may incur additional fees.
• Currency-conversion fees: Processors may charge a fee to convert the transaction or payout from one currency to another.
• Chargeback or dispute fees: This fee may apply when a customer disputes an online transaction with their credit card company. 
• Early termination fees: Some card processors require one- to three-year agreements and charge a fee if they or you cancel the contract before it expires.

Flat-rate vs. interchange-plus for online credit card processing 

Flat-rate pricing is predictable and usually has a simple application process. The interchange-plus model is more transparent, and total costs may be lower. Compare flat-rate vs. interchange-plus pricing by calculating your effective rate under both models.

Consider these differences: 

• How the flat-rate model works: Providers bundle all costs into set rates for each transaction category, such as card-on-file, invoiced, and online payments. The same percentage and fixed fee apply to all transactions in the category. 
• When to choose flat-rate pricing: If you recently opened your online store, process less than $5,000 monthly, or need processing services immediately, consider a flat-rate provider. 
• How the interchange-plus model works: Processors pass the exact wholesale cost of the transaction to you plus their markup. The percentage and fixed fee vary by card brand and type, payment method, and more.
• When to choose interchange-plus pricing: If you process over $5,000 monthly, accept a lot of debit cards, or want to track individual fees, go with the interchange-plus model.

How to compare online payment processors for small business

Outline your main requirements for accepting credit cards online, then evaluate how well each processor supports your setup. Test relevant software, like invoicing or analytics tools, and go through checkout as a shopper to gauge the overall experience. Compare rates, fraud tools, and merchant services. 

Identify your payment processing needs

Look at your current setup and sales patterns. Pull sales reports from your accounting system (sales by payment method) or merchant dashboard to get an idea of your transaction volume and average order size. Note any specific requirements, such as international payments, a card-on-file vault, or nonprofit processing services. 

Take stock of the following: 

• What payment methods will you accept online? In addition to credit and debit cards, consider accepting digital wallets like Apple Pay, cryptocurrency, ACH, and buy now, pay later. 
• Which sales channels do you use?  Include existing platforms and those you want to add, such as invoices, payment links, phone orders, online checkout, or in-person payments.
• Do you need software integrations? Processing systems can connect to your current website or e-commerce platform and customer relationship management (CRM), inventory, and accounting software.

Start with processors who meet your criteria

Review documentation to see how sales channels, integrations, and other tools work. Confirm specific functionality during a demo or trial. 

Compare these points:

• Sales channels: See if you can manage all channels in one place, if additional fees apply, and whether customers check out on your platform or are redirected.
• Integrations: Confirm the integration works with your setup, check when it was last updated, and verify which information syncs automatically (orders, refunds, inventory, and payouts).
• Business-specific requirements: Consider how features and costs differ for building an online store, accepting international payments, or managing subscriptions. 

Compare online processing rates, fees, and funding times

Online card processors may have similar CNP rates. But some charge very different fees for invoicing or payment links. Other costs may increase your total effective rate.

Follow these steps to compare rates:

• List the processing percentage and fixed fee for each payment method.
• Highlight methods that require an add-on or specific subscription tier. 
• Write down all additional costs, including platform and chargeback fees.
• Establish base figures for calculations (monthly sales, number of transactions, and payment method or sales channel mix). 
• Find your effective rate for each e-commerce payment processing service by dividing total monthly processing costs by total monthly processed sales, then multiplying by 100. 

For each provider, look up the standard payout time and any fees related to instant or expedited payouts. Also, check payout details in the processor’s online dashboard. The system should let you verify the sales, refunds, and fees associated with each payout.

Assess fraud prevention, reporting, and chargeback tools

E-commerce payment processing services typically provide online tools to track disputes and financial data. The right payment service providers and payment gateways ensure security while providing a frictionless online payment experience.

Look at these tools to see how ease of use and price differ: 

• Examine fraud prevention tools. See which features come with online processing and which ones cost extra. Check for options like risk scoring, AVS/CVV checks, 3D Secure, automatic blocking or review, and any coverage for fraudulent chargebacks.
• Compare the chargeback handling process. Look at what the provider handles vs. the merchant. For example, Shopify collects evidence and responds to disputes, whereas Stripe only assists if you add the Smart Disputes service.
• Evaluate reporting tools. Set up free accounts, join demos, and review documentation. See how easy it is to create and export reports, find the previous day’s processing details, and pull up sales by payment or channel. 

Credit card processing companies offering merchant account services

Providers may offer merchant services, like point-of-sale software or hosted payment pages, in addition to processing online card payments. E-commerce platforms often have built-in payment processing. To find the best value for your business, compare services, tools, and fees between top credit card processors.

Online payment processors include:

• Stripe: Payment processing has built-in fraud prevention, and you can embed Stripe checkout on your website or use hosted payment pages. Online transactions start at 2.9% plus 30 cents. 
• Square: Set up a basic online store or booking site through Square or add payment buttons to your website. Online transactions cost 3.3% plus 30 cents with Square Free, and 2.9% plus 30 cents on Plus and Premium plans.
• PayPal: Add PayPal checkout to your site to accept PayPal payments, credit cards, Venmo, digital wallets, and Pay Later. Credit and debit card transactions cost 2.99% plus 49 cents (standard checkout) or 2.89% plus 29 cents (expanded).  
• Helcim: Build a free, fully hosted online store, use payment pages or links, or integrate Helcim’s checkout with your website. Online transactions have a .50%-plus-25-cent markup on interchange rates for merchants processing under $50,000 monthly.
• Stax: Pay 15 cents on top of interchange rates per CNP transaction. Stax subscriptions start at $99 and include e-commerce integrations, hosted payment pages, pay links, and an analytics dashboard.
• Shopify: Get an online store with built-in payment processing through Shopify. It provides a website builder and inventory management tools. Online rates range from 2.5% to 3.5% plus 30 cents, and subscriptions start at $39 monthly.

E-commerce payment security, fraud prevention, and PCI compliance basics 

E-commerce payment security requires data protection measures and fraud controls. All parties, from processors to merchants, must take steps to protect customer information and prevent unauthorized CNP purchases. PCI-compliant systems collect, transfer, and store data securely, while fraud tools verify purchase details and look for fraud signals.

For PCI DSS compliance, online retailers are responsible for securing access, networks, and software on their end. This includes using multi-factor authentication and updating websites and plug-ins. 

You can reduce your PCI compliance burden by shifting data and processes from your systems to those provided by e-commerce processing companies. For example, embed the provider’s shopping cart software on your website instead of building a custom checkout. Or save card-on-file data to the processor’s vault rather than storing it on your system. These tools often use tokenization to replace sensitive payment information with a unique code. 

But PCI compliance alone won’t stop fraud. According to Visa’s Global E-Commerce Payments and Fraud report, small and mid-sized businesses experienced an average of 3.7 different types of fraud attacks in the previous year. The most common types were refund or policy abuse, real-time payment fraud, card testing, identity theft, and phishing, pharming, or whaling.

Common low-cost or free fraud tools include CVV, AVS, and 3D Secure. However, risks may be higher when selling electronics, luxury goods, event tickets, gift cards, or digital products like subscriptions. In these cases, online sellers may use automatic risk scoring and custom fraud rules to flag or block suspicious transactions. 

How to sell online and accept payments remotely

To set up credit card processing for e-commerce, choose a platform and processor, configure payments and security, and test your system. You may need to adjust sales tax collection settings in your online store software or enable fraud features from your card processing account.

Before accepting credit card payments online, place test orders to confirm the system works correctly, then complete one small live transaction. Make sure the checkout page is accessible on mobile devices. Verify taxes adjust for different customer locations or products and receipts show the right information.

After setting up online payment processing, track authorization, failed payments, and checkout completion rates. These metrics can help you identify problems in your setup. 

Dawn Allcot contributed to this article.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.