Female employee taking electronic payment from customer
The best credit card processors support all types of online transactions and integrate seamlessly with various e-commerce platforms. — Getty Images/ jacoblund

A successful e-commerce business must accept credit card payments. But what about digital wallets like Apple Pay or Google Pay? Or buy-now-pay-later (BNPL) solutions, digital invoices, and recurring payments, like in-app subscriptions? The best credit card processors support all types of online transactions and integrate seamlessly with various e-commerce platforms.

However, e-commerce credit card processing companies may have hidden fees or unwieldy checkout interfaces. Either one can impact your profits or sales volume. Learn how online payment processing works, what transaction fees you'll pay, and how to compare merchant account providers for your online store.

Understanding e-commerce payment processing services

After a customer adds an item to their shopping cart, they view payment options and check out. What takes seconds online involves many steps behind the scenes. E-commerce platforms enable electronic payments with shopping cart integration (a customer interface). Payment gateways encrypt data and send it to your credit card processor.

From there, your payment processor connects with credit card networks, which request authorization from the cardholder's bank account. The information circles back through your credit card processing service and payment gateway, informing customers of a transaction's approval or denial.

With a traditional merchant account provider, you may have to submit batch requests to your credit card processor with all credit card transactions at the end of the day. But e-commerce platforms often handle this aspect automatically. Best of all, you can view sales volume and online payments via your mobile processing app or online portal.

[Read more: How to Choose E-commerce Shipping Software]

How to sell online and accept payments virtually

Accepting credit card payments can help you expand your e-commerce business. Indeed, Comscore’s State of Digital Commerce found that online retail sales exceeded "$1 trillion in online retail consumer spend for the first time in the U.S. This reflects a 21% increase in spend year-over-year (YoY)." Yet, competition is stiff, and consumer experience at checkout is critical. The right payment service providers and payment gateways ensure security while providing a frictionless online payment experience.

Aside from payment processing, some vendors offer customizable end-to-end solutions for online retail and restaurant sales. For example, with Helcim, you can build an online shopping experience in four steps. Restaurant options include pickup or delivery, whereas e-commerce shoppers can choose to sign in as a customer or check out as a guest.

To accept credit card payments, you will need to consider the following:

  • Does your current website support e-commerce credit card processing? For instance, web hosts like GoDaddy let you process credit cards through GoDaddy Payments.
  • Can you incorporate a payment gateway into your e-commerce platform that supports your desired payment options? Or will you need to upgrade to a new content management system like WooCommerce or PrestaShop?
  • What types of payment options do your customers want? Most payment processors support major credit and debit cards. But you may want to allow digital wallets like Apple Pay, Google Pay, and PayPal.
  • Is all of your business online? Or do you process payments over the phone, through invoices or payment links, or at a physical location? Estimate the amount of card-not-present transactions, in-person payments, and other formats you may require.
  • Does your online store qualify as a high-risk business, or are there any other factors that could affect your merchant account approval? Certain e-commerce credit card processing companies charge higher transaction fees for startups or companies in certain industries.
  • Do you need assistance with the Payment Card Industry Data Security Standard (PCI DSS)? Some credit card payment processors assist with PCI compliance, whereas others require you to self-certify.
  • Will your payment processor support third-party integrations? While shopping cart integration is essential, you may also want to connect your customer relationship management (CRM), accounting, and inventory programs.

In addition to processing fees, some payment processors have monthly fees for statements, PCI compliance, or merchant accounts.

Online credit card payments: pricing and fees

Major payment processors must pay transaction fees to credit card payment networks and issuing banks to cover interchange rates. On top of this, they add a markup for their expenses. Typically, a debit card has a lower processing fee than a credit card. However, rates vary by payment method, pricing model, and other factors.

Some payment service providers require a monthly subscription along with per-transaction fees. Others charge additional fees for payment gateways, a virtual terminal, and PCI compliance. Therefore, you should clarify the pricing structure and all fees before signing a contract.

Here are some fees you may pay for accepting credit card payments at your online store:

  • Flat-rate pricing: A credit card processor like Square uses flat-rate pricing, meaning you pay the same transaction fee for all online payments through your e-commerce store. Electronic payments processed through a virtual terminal or in person may have different rates.
  • Interchange-plus pricing: Payment Depot or National Processing uses the interchange-plus pricing model. Processing fees vary by credit card and payment method. For example, American Express cards generally have higher transaction fees than Visa.
  • Early termination fees: A financial services provider may require an online business to sign a one- to three-year agreement. If you or the credit card processor cancels the contract, you may pay a substantial fee.
  • Monthly fees: In addition to processing fees, some payment processors have monthly fees for statements, PCI compliance, or merchant accounts. You may also pay if you fail to meet a minimum monthly amount of credit card transactions.
  • Chargeback fees: When a customer disputes online transactions with credit card companies, payment processors apply chargeback fees to your merchant account. The amount varies by provider.

[Read more: A Guide to Understanding Credit Card Processing]

Credit card processing companies offering a merchant account

Consider creating an online merchant account with a payment service that lets you process credit card transactions through your existing platform or as part of an integrated system. You have many options to choose from, including well-known payment processors like Flagship Merchant Services, Stax, and Payment Depot.

For online stores, check out Square or Shopify. While processing costs can be higher than interchange-plus rates, small businesses with lower sales volumes appreciate the simplicity of flat-rate pricing.

This article was originally written by Dawn Allcot.

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