Best Payment Processors for Small Businesses and eCommerce

When you’re running a business, you’ll need to have one vital piece of the puzzle before you can begin making a profit: allowing customers to pay for the products and services that you provide for them. In the digital age, consumers prefer using credit or debit cards because they’re much more convenient.

Believe it or not, online payments have only been around for about two decades. With NFC-based payments, customers can make a payment with their smartphone, which makes purchases even more complicated for business owners.

Each payment method requires specific hardware and sometimes software that you’ll need in order to support them. After all, the more options you allow your customers, the more sales you can make at the end of the day.

The Different Types of Payment Methods

Customers have tons of options when it comes to paying for their purchases. Cash is still a popular method, but credit and debit cards are preferred among consumers. Merchants like yourself may prefer to be paid in cash because processing those payments requires little more than a cash register, and you’ll receive 100% of the profits.

You may also prefer paper checks, although they require you to go to the bank and run the risk of fraud or bouncing due to insufficient funds.

Customers may also prefer to pay in cash or check just as much as merchants, but most of them prefer to use their credit or debit cards. In order to process a debit or credit card payment, you’ll need a merchant account and processor to ensure that you receive your funds.

Credit Card Processing

Shockingly, credit cards have been around for more than 100 years! However, they have only become the most popular payment method for the past few decades. Because they are the most preferred payment method by consumers, it’s important that you will be able to process these payments.

Many businesses may think that they’ll be saving money by avoiding setting up a merchant account and paying any related fees. However, the additional sales you get from being able to provide your customers with the convenience of credit card payments will more than makeup for any of these fees and then some.

No matter what payment processing companies you work with, there is an interconnected banking and credit card processing network that speeds up the process of making purchases with credit cards. The transaction approval process can be complicated but is typically completed in just a few seconds.

Essentially, the consumer’s credit card data is submitted to the processing network. The bank which issued the card is contacted to ensure that there is enough credit available on the card to cover the entire cost of the purchase.

There are also anti-fraud checks completed. If there are no red flags, the transaction is approved. The payment processor companies process the transaction, pay the interchange to the issuing bank or credit card associations, and keep a processing charge.

Then, funds are released to your merchant account. It can take a few days before the money is deposited into your account.

Start Accepting Credit Card Payments Today! 

Debit Card Processing

Paying with a debit card is also a popular payment method, especially because there are still plenty of Americans out there who have a bank account but not a credit card. Debit card transactions are easier for online payment processing companies to process.

The issuing bank doesn’t need to take the time to decide whether to issue credit since the funds are already in the consumer’s bank account. As long as there are sufficient funds to cover the cost of the purchase, the transaction will be approved.

The risk for accepting debit cards is lower than it is with debit cards, which means that the interchange rates are much lower.

Start Accepting Debit Card Payments Today!

eCheck (ACH) Processing 

While it’s no longer incredibly common, you may come across consumers who still want to pay by check. You can accept paper checks without the need for a payment provider, and you’ll receive 100% of the sale price.

However, you will still have to make a trip to the bank in order to cash the check. You also run the risk of the check being rejected because of insufficient funds. Not to mention, you can also simply lose a paper check.

To eliminate these risks, you may want to consider eCheck processing. Not all merchants require them, but most providers offer eCheck processing as an additional service. You’ll typically be charged a monthly fee for it and a small transaction fee for every processed check.

In order to accept eCheck payments, you’ll need a check scanner that scans an electronic copy of the check. The electronic copy is then submitted to the customer’s bank to confirm that they have sufficient funds to cover the purchase. If there are sufficient funds, the transaction will be approved immediately.

Digital Wallets 

Digital wallets include payment methods that rely on near-field communication (NFC) technology. NFC payments use small, short-range radios in the payment device and the merchant’s credit card terminal. Currently, Apple Pay and Google Pay are the most popular forms of these payment methods.

Acceptance for NFC payment methods has been slow because the technology has only been around for a few years. However, you should expect more demand in the near future as the young folks who grew up with nothing but technology enter the workforce. NFC payment methods are tied to a customer’s credit or debit card. The transactions are processed just like a regular card transaction.

Learn More About Accepting NFC Payments. 

Payment Processing Methods

Credit and debit card transactions can be processed in a few different ways. You can expect the need for a traditional, full-service merchant account or a third-party payment processor. It’s important to note that eCheck payments go through your merchant account, but they are processed under an Automated Clearing House (ACH) system that is separate.

Merchant Account and Payment Gateways

Merchant accounts are the most widely used methods for accepting both card-present and card-not-present transactions. This means they are ideal for stores with physical locations and eCommerce businesses. Processing rates may differ between card-present and card-not-present transactions because of the potential for risk.

Card-not-present transactions are typically keyed in manually or processed online using a payment gateway. Your merchant account provider and your payment gateway provider will typically be the same company so that transactions will continue to go smoothly. eCommerce merchants require a payment gateway in order to accept payments, but retailers don’t need them. These businesses also require high-risk processing for a variety of reasons.

Apply for a Merchant Account 

Third-Party Payment Processors

Third-party payment processors are also known as payment service providers or PSPs. They allow you to process credit and debit card transactions without a merchant account by combining all merchant accounts into one rather than issuing each business a unique account. This method eliminates many of the account fees but also has an increased risk of terminations. They also typically charge higher fees.

Payment Processor Vs. Payment Gateway

As we have mentioned, eCommerce businesses will require a payment gateway that allows them to accept online transactions. Both payment gateways and payment processors are two key items you’ll need for accepting payments from your customers. A payment processor is not the same as a payment gateway, however.

Payment Processor

A payment processor is the piece of the transactional puzzle that executes the transaction. It transmits data between the merchant, the issuing bank, and the acquiring bank. The processor also provides any software or hardware you’ll need in order to accept these types of payments.

To accept cards at your business, you’ll need a merchant account and a credit card online payment processor.

Payment Gateway

A payment gateway is a tool used by the merchant and the payment processor that transmits online payment data. Once the credit card information is input, it is sent to the processor to continue the process. The gateway also authorizes payments for any card-not-present transactions, acting as an online POS terminal.

Benefits of a Payment Gateway


A payment gateway offers security for your eCommerce store and its customers. This means that your customers can make purchases with confidence, which improves their overall experience. As you may know, online businesses are highly vulnerable to cyber-attacks. A payment gateway takes care of the security of the transaction to ensure that all funds get to their destination safely.

Works 24/7

When you use a payment gateway, your customers can shop at any time of day. After all, many people prefer to shop online because they can do it at their own convenience. This could mean during a Sunday afternoon or late at night. No matter what time your customers choose to shop online, you can accept their payments.

Main Elements of a Payment Processing System for Online Businesses 

There are three main elements you’ll need in order to accept online credit card transactions online:

  1. Payment gateway
  2. Payment processor
  3. Merchant account

These three elements work together so that once the customer goes to pay for the product, the payment gateway will send the transaction request to the proper entity, the payment processor processes the payment, and the funds end up in the merchant account.

Luckily, these elements don’t mean that you need to work with three different companies. One company can provide you with the payment gateway and merchant account while acting as the payment processor.

What is a Merchant Account?

Whether you have an online store or a physical location, in order to accept credit cards, you’ll need to set up a merchant account. This is a special type of bank account that acts as a holding place for your funds. When a transaction is cleared, the funds are then deposited into the merchant account and can be moved to your business bank account.

The reason we have these holding places is so that refunds can be issued, and fees can be paid directly from that account before being transferred to your business account.

Are You Having Trouble Getting a Merchant Account?

No matter what industry you’re in, it can be quite tiresome to get a merchant account through your bank. There is a ton of paperwork involved, and the requirements are always changing. Unfortunately, many businesses are labeled as high-risk, which means a bank will not be willing to issue you a merchant account at all if you fall into this category.

Apply for a High-Risk Merchant Account Today! 

The Process of Credit Card Transactions

Before diving into accepting credit and debit card transactions, it’s important that you know how they work.

  1. A merchant runs a customer’s credit card, and the data is sent with an authorization request to their payment processor.
  2. The processor sends that information to the card network and the issuing bank. The bank will approve or deny the transaction. Results are then sent back to the processor.
  3. Now that the processor has the approval or denial of the transaction, that information is sent to the payment gateway.
  4. The network transmits the data from the issuing bank to the acquiring bank. The approval of denial is then routed back to the merchant’s payment system.
  5. The acquiring bank performs interchange for each sale with the cardholder’s bank. If approved, the issuing bank then transfers the sale amount, subtracting the interchange fee, to the acquiring bank.
  6. The money is then deposited into the merchant account by the acquiring bank.

Best Payment System for Small Businesses and eCommerce

Are you ready to start accepting credit cards but don’t know where to start? No matter what type of business you have–brick and mortar or eCommerce— we can help you start accepting credit cards to boost your business and provide an extra level of security and convenience for your loyal customers.

For more information, contact us today or apply online for a merchant account.