Payment Gateway vs Merchant Account
This post will provide a high level overview of how merchant accounts and payment gateways work together. We’ll start with basic definitions of each.
A ‘payment gateway’ is a browser-based application that allows a shopping cart to transmit credit card data in a real-time, secure environment, to a credit card processor. Most online payment gateways also have a virtual terminal feature that allows merchants to process manual transactions as well.
A ‘merchant account’ is an account set up with a credit card processor that allows the business to accept credit cards from their customers. The processor’s primary function is to authorize the transaction, capture the funds from the customer’s credit card, and deposit them into the merchant’s business checking account.
How does a payment gateway and a merchant account work together?
Okay, so let’s say someone just bought something off your website (congrats!).
Here’s how it works:
- your shopping cart computes the total, captures the customer’s billing info, and posts all data to your payment gateway.
- the payment gateway transmits the data securely to your credit card processor for an authorization code.
- your merchant account processor verifies the credit card and sends back an approval or decline code to the payment gateway.
- if approved, the credit card processor captures funds from the cardholder and deposits the funds into your checking account (normally 2 business days).
- if declined, a decline code is sent back that can help you understand why the card is not getting approved.
- if the payment gateway receives an approval code from your credit card processor, most will settle the transaction that night automatically. Some merchants that make custom products may choose to manually settle the transaction at a later date.
- the payment gateway transmits both approval and decline codes back to the shopping cart to alert the customer to the outcome of the transaction.
All of this happens in just a couple seconds…pretty amazing technology!
Be sure to check for compatibility
First thing you want to do is make sure the payment gateway you’re using is going to be compatible with your shopping cart. Most shopping carts will list compatible gateways in their ecommerce section. If you’re not sure, call us at 888-383-8056. Our internet merchant account specialists will check your shopping cart for gateway compatibility.
Once you’ve established that the payment gateway will be compatible with your cart, you need to set up a merchant account. The merchant account needs to be set up before the payment gateway is set up, as the gateway is programmed with the merchant account information. Make sense?
Then, once your merchant account is approved, the payment gateway is configured and your account is set up and ready to go. You’re looking at 1-2 days to get an account approved and set up.
Advantages of our payment gateway and merchant account solutions
There are 3 compelling reasons to choose us:
- There is no long term contract for you to sign. That means if you ever want to cancel the merchant account, you won’t have to pay a penalty.
- You don’t have to pay a monthly minimum fee during times when your sales volume is low.
- Your site does not need to be live to get approved. This way you can get your payment gateway set up and tested before you go live. Many processors require a live site before they’ll even review your account.
We hope this post has helped you better understand the relationship between a payment gateway vs a merchant account.
If you have any additional questions or need a payment gateway – merchant account solution, call us today at 888-383-8056 or apply online here.
