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What is a Credit Card Payment Gateway?


If you are new to e-commerce, you may be wondering just what a credit card payment gateway is. Simply put, a credit card payment gateway is a program that encrypts your customers' personal and financial information. This protects both you and your customers from theft. If you have ever purchased an item online, you have used an online gateway without even knowing it!

The Online Shopping Process

To understand how a credit card processor works, it helps to know the steps of an online business transaction:

  • The customer places an item in her shopping cart.
  • Once the customer proceeds to checkout, her personal and financial information is encrypted into a secure form, one that offers Secure Socket Layer encryption. On a webpage, this encryption is noted by the prefix https rather than http.
  • Once the information is encrypted, it is transferred to an online payment gateway service, which routes the information to the correct bank or financial institution.
  • This causes the customer's credit card to be debited, and your merchant account to be credited.
  • Once everything clears, you can then download the money from your merchant account to your business bank account.

The Credit Card Gateway's Purpose

Here are the basic concepts of a credit card gateway:

  • A credit card gateway is separate from your shopping cart software. It is the interface between your website and the customer's financial institution.
  • An online payment gateway protects credit card information by encrypting any potentially sensitive information, such as a credit card number.
  • Its basic function is to forward the encrypted credit card information to the financial institution from your website. This keeps the transaction safe between the customer and you, and you and the financial institution.
  • The beauty of a credit card gateway is that it is a hassle-free process that protects everyone involved from theft.

Selecting the Best Credit Card Gateway

Many shopping cart programs come with their own online payment gateway. But if you need to shop for a separate one, or simply want to comparison shop, note the following:

  • Obviously, you must make sure your credit card processing gateway is compatible with your shopping cart software.
  • Most credit card gateways charge a fee for the service, so it may be worthwhile to shop around for the best deals.
  • There may be different rates and fees for different amounts or kinds of services. Read the contracts before you sign, so you know exactly what you are obligated to pay.
  • One of the most popular payment gateways for small online businesses is PayPal, but there are several other options available out there. Do the research and make sure you are dealing with a reputable company before you sign anything.

If you have a website and want to accept payments online, then a credit card payment gateway will play a crucial role in your e-commerce needs. Both you and your customers will be reassured with the protection and security an online payment gateway provides.


Sarah Baker is a documentary filmmaker and writer currently living in New Bern, NC. Her first book, Lucky Stars: Janet Gaynor and Charles Farrell, will be published December 2009. Read more about her.

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