What’s a Credit Card Gateway?

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A credit card gateway is one element of a suite of e-commerce software packages that, when incorporated into a website, allows online shoppers to pay for goods and services with VISA, MasterCard, Discover, American Express or ATM.

To purchase items online, visitors add products to a virtual “shopping cart” that holds the items while calculating a current charge card. The shopping cart is provided by the host’s ecommerce package which can run from $50 – $100 per month or more depending on the features. The customer clicks on the “Buy” or “Buy” button when the shopping is complete and is transferred to a page generated by a secure server. This server hosts the credit card gateway. All data passed between the secure server and the customer’s computer is encrypted along the way and is only decrypted at the destination point. Before the negotiation begins, the secure server transmits a certificate of authenticity to the client’s browser to verify its legitimacy and identity. In case of problems with the certificate, the browser warns the customer not to continue with the transaction.

Assuming this “handshake” goes well, the customer then provides their name, address, and credit card information, and clicks “submit” or “send.” The information is encrypted by the browser, then sent to the secure server and decrypted upon arrival. The software protocols in the credit card gateway use the information you provide to verify the availability of funds and to ensure that your credit card has not expired, been lost or stolen. This only takes a few seconds. When the transaction is approved, a receipt is generated for the customer and the funds are transferred to the seller’s bank account.

Companies that offer a credit card gateway typically charge certain fees to the merchant. These vary widely, but below is an example of charges that may be incurred:

One-time setup fee: $200 – $600 (USD)

Secure Transaction Fee (monthly): $15 – $30

Technical Support + Admin Report Fee (monthly): $10 – $15

Percentage commission per sale (volume/card dependent): 2.5% – 3.5%

Transaction fee for each sale: $0.25

Quotient/Minimum Monthly Fee: $15 – $25

The “monthly minimum” fee only applies if the percentage fees + transaction fees for a given month do not match or exceed the minimum amount. The commission percentage of each transaction varies based on the card used and the volume of sales generated by the merchant. High volume sales collect lower percentage commissions. This fee is actually called the Discount Rate, which can be confusing since it’s a fee.

Credit card gateways are often bundled with ecommerce packages, but can also be offered on their own. Some companies will eliminate some fees while charging more for others, or the rates may be much lower in all areas. Deeply discounted gateways may sacrifice customer service to the merchant or have frequent downtime or other considerations, so thorough research is advised.

For those interested in an ecommerce website and credit card gateway without the time to investigate or set it up, a reputable website design company is the answer. With basic information about the products you want to sell and how many you want to offer, they’ll put together a proposition that will cover everything from your ecommerce host package to design and features. They will also configure the shopping cart to integrate with the credit card gateway and give your site a professional look that will likely increase your sales.

A low-cost alternative to a credit card gateway for small businesses is a service like PayPal or iBill, which provides a built-in shopping cart/gateway for easy online shopping. There are no sign-up fees, no monthly or minimum fees, and transaction fees are modest.

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