How to Accept Payments Online

When you make a sale online, you want to be sure you get paid.  However, getting that money to the bank is only the very beginning.  Other factors you must take into consideration include protection against information theft, expediency of payment, and not losing too much of your sale to the middleman.

There are two main options to consider when it comes to accepting a credit card payment online.  You can either open your own merchant account or you can use a third party merchant account (also known as a payment gateway) like PayPal or Google Checkout.

Opening a merchant account is the more time-involved and possibly more expensive choice of these two options.  It requires you, as a vendor, to find a bank that can offer you the best deal.  If you’re a small vendor or if you don’t do many online credit card sales, this is probably an inadvisable route.  There are quite a few fees associated with opening your own merchant account, depending upon the bank you choose to do business with.  Common fees include application fees, transaction fees, monthly fees, and annual fees.  For most people, the sum of these fees is too great to justify opening their own merchant account.

For this reason, the last fifteen years have seen a huge influx of third party merchant account services.  Third party merchant accounts handle all aspects of the credit card transaction and then cut you a check at the end of each billing cycle.  The established ones are very safe and user-friendly, and free up your time for handling other aspects of the business.  The downside, of course, is the per-transaction fee they take from your sales.  However, there are usually no other charges for working with a third party merchant account.  Let’s take a look at some of the big ones: PayPal, Google Checkout, 2CheckOut, and

Since the eBay boom, PayPal has been a household name.  Definitely a leader in online credit card transactions, PayPal has a reputation for being a safe, easy, and effective way to do business.  The standard business plan for vendors charges no monthly or setup fee; its only 2.9% of your monthly sales plus 30 cents for each transaction if you’re selling less than $3,000 per month.  Rates for you get lower as your sales go beyond that benchmark.  It’s easy, safe, and customers don’t even have to have PayPal accounts.

Google Checkout charges the exact same rates, making these two third party merchants quite competitive.  There are pros and cons to both, of course.  Google Checkout can be smarter from the advertising perspective.  If you’re using Google AdSense or are a top hit in Google Shopping, Google Checkout is a smart way to go.  PayPal could be advantageous to you though if you think your customers would prefer to use accounts they already have established rather than enter their credit card information into Google Checkout.  Both have solid fraud protection policies and good chargeback policies that ensure you get paid no matter what.

If you are selling a subscription-based product – anything from vitamin supplements to literary journals – or you want to pick your own shopping cart, 2CheckOut might be the kind of service you need.  The per-transaction rate is higher than PayPal and Google Checkout (4.5% + $0.45 per transaction) and there is a $49 application fee, but the flexibility of choosing your own shopping cart and the ability to sell a subscription-based product without any of the hassle is a major benefit for those who need it. is the other big name in the business that you might want to look into.  The prices are highest here, but it’s an excellent option for sellers who have an overseas market. charges a $99 set-up fee, a $20 monthly fee, a $0.10 transaction fee, and a batch fee (per batch of transactions processed) of $0.25.  More fees than the major competitors, yes, but the fraud prevention tools are outstanding and the freedom allowed to vendors who want to have their site look a specific way makes a great value service.

There’s definitely a sense of professionalism and credibility customers recognize in businesses, consciously or not, when they don’t have to go the way of PayPal or Google Checkout.  While those services are the cheapest, you might find that it’s worth it to your company to not have to route your customers through PayPal every time you make a sale.  Using a third party merchant like or 2CheckOut gives your site a cleaner, more professional look, as if you had a merchant account yourself.

Should you opt for one of these services, the last step would be finding the best shopping cart platform for your business.  Consider if you’re willing to pay other sites a commission for sending sales your way.  If so, factor that into your shopping cart choice.  Does your shopping cart have the aesthetic look you want?  Does it look like a thousand other web pages you’ve seen?  If so, is that a problem, or does your business need to differentiate itself from others in that area?  Also, you should think about everything your business needs from a shopping cart.  Do you want to offer coupon codes, gift receipts, discounts for buying certain items together, etc.?  The more complex your needs, the higher the price you can expect to pay, of course.

Much like the payment gateways discussed above, there are many types of shopping carts to fit many different needs.  Great free platforms like Prestashop and OpenCart exist, but many web designers are willing to work with you to design a cart specifically tailored to your needs.  Free shopping carts can be wonderful fits for small start-ups.  However, once your business has grown to the point of needing a more powerful and professional cart, working with a designer might be your best fit.