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Accepting Credit Cards Online 101 - Learn the Lingo

One of the most important aspects of starting on online business can also be the most complicated: Figuring out how to get paid! Your online customers can't pay you in cash, so unless your business is small enough to rely on money orders or mailed checks, you'll need to accept credit cards online.

Lucky for you, it's not rocket science. But you will have to learn a few new terms if you want to make good choices for your business. This quick glossary should help you begin to decipher the world of online credit card processing.

Merchant Account: A merchant account is a special kind of bank account that allows businesses to accept credit cards. This applies to brick-and-mortar shops as well as e-commerce businesses. When a customer makes a payment via credit card, the funds are credited into your merchant account, and then paid out to you on a schedule determined by your account provider.

Card-Not-Present Merchant Account: If your customers aren't present to sign a receipt for their purchases, you need what's known as a "card-not-present" merchant account. This applies to businesses that accept credit cards online, as well as mail order/telephone order (MOTO) businesses. Card-not-present merchant accounts can be more difficult to get approved for than traditional merchant accounts, because they are considered more high risk.

PCI-Compliance: PCI-compliance is a set of standards that ensure credit card data security for online transactions. Major card issuers like Visa and MasterCard care a lot about PCI-compliance, and you could face penalties if your e-commerce business doesn't meet the standards. PCI-compliance standards are different depending on the size and type of your business. Learn more about PCI-compliance.

Online Payment Processor: An online payment processor is a company that "facilitates" online payments. Some payment processors help you get a merchant account. Some provide and/or set up your payment gateway (see below). Some do both. Online payment Processors are also known more specifically as Internet Payment Service Providers, or IPSPs.

Internet Payment Service Provider (IPSP): See above.

Shopping Cart: Your shopping cart is a page on your website that collects the items your customers select for purchase, then allows your customers to enter their shipping and credit card information. Your payment gateway uses the credit card info gathered by the shopping to process the transaction.

Payment Gateway: An online payment gateway is a piece of software that performs the magic of moving money from your customers' credit card accounts into your merchant account. A payment gateway is not the same as a shopping cart--but the two do need to be able to "communicate."

Payment Gateway Integration: When your customers enter their payment information into your online shopping cart, your payment gateway collects and processes that information. In order for this process to work seamlessly, your payment gateway needs to be "integrated" with your shopping cart. Payment gateway integration can be a big tech headache, so it's important to make sure your payment gateway and your shopping cart are easily compatible. If you work with a reputable online payment processor, they will be able to advise you about choosing a shopping cart that integrates with their payment gateway.


Instabill is an online payment processor specializing in high risk merchant accounts.