Merchant Account VS Payment Gateway

Setting up an Ecommerce website can get confusing and make you pay for unexpected fees if you don’t have a better understanding with merchant account vs. payment gateway.

Merchant Account VS Payment Gateway: What Is a Payment Gateway?

A payment gateway is a service offered a financial institution to process credit card transactions for your business. If your clients or customers are purchasing products or service from your online store, they enter their credit card identification number in the checkout or billing process. Your online store sends that information to your payment gateway to authorize or to decline the transaction and to process the payment.

Merchant Account VS Payment Gateway: What Is a Merchant Account?

A merchant account is an online bank account that temporarily holds the merchant’s money before being moved to the merchant’s actual bank account. When a successful sale has been made, the money from the credit card payment will be moved to the merchant account, and it will stay there within 2-3 days before being transferred to the business bank account. Your merchant account serves as your temporary bank account for the money incurred from online sales.

Merchant Account VS Payment Gateway: How Do They Work Together

A merchant account vs. payment gateway works together by processing the credit card payment made by your customer until the money incurred by a successful sale is deposited to your bank account. It begins when your shopping cart at your online store computes the total amount of product to be purchased by your client, the customer’s billing info, and them forwards all data to your payment gateway.

The payment gateway will forward the data to your credit card processor for authorization. After the data has been received by your credit card processor, it will be verified, and then the approval code will be sent back to the payment gateway.  After the payment gateway has received the approval code, the transaction will be settled automatically. Transaction settlements may last for few minutes or few hours depending in the item being purchased. Also, merchants selling custom products can settle the transaction manually the next day. After the payment transaction has been settled, the payment gateway sends the approval code to the shopping cart to inform the customer for successful payment made.   The best thing about merchant processing the best is that all these things can happen in less than a minute.

Things to Consider in Looking for Merchant Account VS Payment Gateway Solutions

When looking for companies that provide payment gateway and merchant account solutions, choose those companies that do not offer long term contract. Through this way, you can easily cancel your merchant account contract if you don’t want dealing with penalty charges or fees. Also, choose merchant processing service providers that do not require your website to get live first before getting an approval. Through this way, you can get your payment gateway setup and then tested before your online store goes live. Also, make sure that you understand all of the things stated in the contract to prevent your business from paying for hidden costs and services that you don’t need.