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Accept Credit Cards

A merchant account is a contract under which an acquiring bank extends a line of credit to a merchant, who wishes to accept payment card transactions of a particular card association brand.

Without such a contract, one cannot accept payments by any of the major credit card brands.

Methods of processing credit cards

Today a majority of credit card transactions are sent electronically to merchant processing bank for authorization, capture and deposit.

The method of processing credit cards will vary by industry. In all circumstances either the entire magnetic strip is read by a swipe through a credit card terminal/reader or the credit card information is manually keyed in to a credit card terminal, a computer or website.

Whenever practical it is best to swipe a credit card because the rates will be much lower and the incidence of stolen credit card number fraud is greatly reduced.

Credit card terminal

A credit card terminal is a stand-alone piece of electronic equipment that allows a merchant to swipe or key-enter a credit card's information as well as additional information required to process a credit card transaction.

A credit card terminal is a dedicated piece of equipment that only processes credit cards (although it is common for related transactions including gift cards and check verification to also be performed.)

A credit card terminal typically must be plugged in to a power supply and connected to a telephone line. However, some terminals may be powered by batteries, communicate over the Internet or through the cellular phone networks.

When a credit card is processed (either swiped through the magnetic stripe reader or keyed in to the keypad), it contacts the network to verify if the credit card can be authorized.

The most popular credit card terminals consist of a modem, keypad, printer, magnetic stripe reader, power supply and memory card. As with computers, there is a wide range of memory capacities and other features like built-in printers and debit card pin pads that affect the manufacturing cost of a credit card terminal.

Payment gateway

A payment gateway is an e-commerce service that authorizes payments for e-businesses and online retailers.

It is the equivalent of a physical POS (point-of-sale) terminal located in most retail outlets.

Merchant Account Provider

A merchant account provider is typically a separate company from the payment gateway. Some merchant account providers have their own payment gateways but the majority of companies use 3rd party payment gateways.

The gateway usually has 2 components:

  • a) the virtual terminal that can allow for a merchant to securely login and key in credit card numbers; or,

  • b) have the website's shopping-cart connect to the gateway via an API to allow for real time processing from the merchant's website.