Online Credit Card Processing with a Payment Gateway: A Guide

A Short Guide to Online Credit Card Processing with a Payment Gateway

The way we shop has been changed forever by eCommerce and internet transactions. By simply using our credit cards, we are able to buy any product we want, from the comfort of our home. This is made possible thanks to several pieces of software, the most important of which is the payment gateway.

A payment gateway is an application that connects the eCommerce website to the seller’s merchant account. A customer will enter his information into a payment gateway, which will then notify the bank of an upcoming transaction. Payment gateways can also accept other payment methods such as eChecks and debit cards.

How payment gateways work

The online payment process is fairly complex, and it starts when the customer places an order. Because the transaction takes places over the internet, and the magnetic stripe is not swiped, nor the EMV chip dipped, it is processed as “card-not-present.” This means that the merchant will typically pay a slightly higher processing rate than you would with a face-to-face sale, because there is a higher risk of a chargeback.

The client’s information is then sent to the processor, which may or may not be the merchant account provider, depending on the company you work with. The processor then routes the information to the credit card association (such as MaterCard or Visa). This allows the credit card association to charge its interchange fee.

The next step is the approval of the transaction by the issuing bank. If the credit card is valid, not overcharged, and not frozen, the transaction normally goes through.  With the transaction approved the information is sent back from the issuing bank to the processor via the payment gateway. The final step involves the transfer of the funds into your merchant account, which usually happens within a few days.


Payment gateways usually come with several features, which may include:

  • Payment Information Storage: This features stores all of the customer’s information in a database, with the customer’s consent, in order to speed up transactions. If you have a lot of recurring customers, this feature is a great way to provide an extra bit of convenience. All information is encrypted by the gateway and stored separately from the website.
  • Encryption: All payment information is encrypted before it is transmitted to the processor.
  • Virtual Terminal: The virtual terminal is the digital version of the traditional terminal. It allows you to input credit card information on your web browser from your desktop, smartphone or tablet. It can also be used in conjunction with USB-connected card readers.
  • Recurring Billing: The best payment gateways allow you to set up subscription-based payments, along with billing intervals and trial periods.
  • PCI Compliance: Certain payment gateways are PCI compliant from the get go, meaning that the customer never leaves the website to place an order, and that all transactions take place on the gateway’s servers.

For more information on payment gateways and online credit card processing, or to open a merchant account, please call (888) 924-2743 or go to


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