A payment gateway is the service that automates the payment transaction process between the shopper and merchant or the business that is selling the goods or services. It is typically a third-party service that is basically a system of computer processes that process, verify, and accept or decline credit card transactions on behalf of the merchant through secure Internet connections. The payment gateway is the infrastructure that allows a merchant to accept credit card and other forms of electronic payment. When referring to payment gateways used for Internet transactions, it may also be called an IP payment gateway.

Ever wondered how important it was to give the option to your customers to pay with their credit card on your site? Here are 10 reasons why it’s a must.

1. More sales:  Credit Card customers buy 25 times more merchandise than customers who pay cash.
2. Impulse sales:  Credit Cards give customers freedom to spend for previously unplanned merchandise.
3. Larger Volume:  Accepting credit cards helps you achieve higher unit sales and extra orders.
4. More Expensive Merchandise:  Credit card customers are often less conscious of slight price differences  and will seek out the business that accepts credit cards rather than the discounter  or wholesaler who does not.
5. Enhanced Advertising:  Since customers are more likely to shop at businesses where they have credit acceptance, they tend to look for and read these ads first.
6. Steadier Sales:  Credit Card acceptance smooths business peaks.  Cash shoppers buy heavily on paydays and just before holidays.  Credit customers buy whenever the need arises.
7. Air Miles:  Many customers will charge big ticket purchases just to accumulate air miles.
8. Customer Loyalty:  Research shows customers who spend on credit tend to return to the same business where they spent money before.
9. Cashless Society:  The trend in electronic payment systems indicates that credit cards and debit cards are quickly becoming preferred methods of payment.
10. Competitive Advantage:  The company that has the most flexible payment systems has a definite edge over its competition.

The list goes on and on. As you can see, it’s very important to accept credit card on your website.

When you apply for a new merchant account, you are asked to submit various documents to prove that you are a legitimate business and that you are responsible enough to manage customers secure billing information.

Once you have submitted your application for your new account, the merchant services provider will discuss the your rates and monthly processing fees. One of he items you will see is call qualified, mid-qualified and non-qualified rates. It is important to know what these terms mean and how it affects your customers and fee schedule. See below for a brief summary of each type of rate.

Qualified:

• When a transaction is processed in accordance with the rules and standards established in the Payment Processing Agreement, signed by the merchant and the processing bank, and
• It involves a regular consumer credit card.

For example, for an internet-based merchant, the internet interchange categories will be defined as Qualified, while for a physical retailer only transactions where cards are swiped through a terminal will be Qualified.

Mid-Qualified:

• When a consumer credit card is keyed into a credit card terminal instead of being swiped or
• The cardholder uses a rewards card, business-to-business or another special type of card

The transaction is charged a discount rate that is less favorable than the Qualified. This rate is called a “Mid-Qualified Rate.”

Non-Qualified:

• When a special kind of credit card is used (like a rewards card or a business card), or
• A payment is not processed in accordance with the rules established in the Payment Processing Agreement, or
• It does not comply with some applicable security requirements,

The transaction is charged a discount rate that is less favorable than both the Qualified and Mid-Qualified Rates. This rate is called a “Non-Qualified Rate.”

Check back for more posts that discuss important business tips that can help you save money on credit card processing.

Many businesses are either moving online completely or building an Internet presence for their offline or brick and mortar store. One of the steps that business owners take, when they migrate online, is they add a shopping cart or payment page to their website so they can accept credit card payments from their customers. There are many merchant accounts providers that can help you get your business ready to accept an online payment. It doesn’t matter who you work with, the process is the same for everyone.

Below are the steps that it takes to process a payment online.

1. The customer submits his/her credit card to the payment form for payment.
2. The Gateway provider routes the data on behalf of the merchant through the following steps.
3. The Gateway securely passes the transaction information through a secure connection to the Processor. The Merchant Bank’s Processor submits the transaction to the credit card company such as Visa or MasterCard. The credit card company routes the transaction to the bank that issued the credit card to the paying customer.
4. The issuing bank approves or declines the transaction based on the customer’s available funds/billing information and passes the transaction results back to the credit card network. The credit card network relays the transaction results to the merchant bank’s processor. The processor relays the transaction results to the Gateway company.
5. The Gateway company stores the transaction results and sends them to the website for the customer and merchant to see.
6. The merchant delivers goods or services to the buyer.
7. The issuing bank sends the appropriate funds for the transaction to the credit card network, which passes the funds to the merchant’s bank. The bank then deposits the funds into the merchant’s bank account. This is called ‘settlement’, and typically the transaction funds are deposited into the merchant’s primary bank account within two to four business days.

There are literally millions of online transactions processed every second across the  world. Every transaction follows the above steps in order for the customer to pay the merchant for the products or services for which they have ordered.

For more information or to start processing credit card payments, visit the website MavenMethods.com.