Payment Gateway vs Merchant Account

Payment gateway and merchant account are two of the most commonly using words in the payment processing industry. However, many people still don’t know what they really mean. There is not much difference between a merchant account and a payment gateway. They are almost synonymous with each other. However, there are subtle differences that make them different from one another.

Businesses manage to save time and bring in revenue while providing other benefits like convenience and value. They also bring in new methods of generating interchange revenue with business cards.

A payment gateway is your online business partner that enables transactions through credit cards. It helps you encrypt confidential information to protect it from fraud and threats. The chargeback risk is also minimizing by using a secure payment gateway. You can save time by using automated tools that allow automatic updates of information to make payments, refunds, cancellations, etc. This allows your business to keep pace with the market requirements and customer demands.

A merchant account is a type of account that enables companies and individuals (merchants) to accept credit cards as payment for goods and services sold over the Internet or through other point-of-sale systems. The merchant account issuer, known as an acquirer, creates a complex relationship between banks and financial institutions to route transactions over the payment network. A merchant account has other benefits like customer loyalty programs, recurring billing, etc.

With both these services you accept credit cards for your business that give you the opportunity to increase sales by saving them from cash or checks. They are easy to set up and will work for you as soon as you open an account. But, what should be the deciding factor between choosing a merchant account or payment gateway?

Well, to begin with, there are certain things that must be kept in mind before making a choice between a payment gateway or merchant account. You need to figure out which of them is preferable and which is most suitable for your business. Here are some of the main factors that will help you make a decision:

Which type of technology do you prefer? Currently, there are two types of technologies used to process payments such as Internet Protocol (IP) and radio frequency (RF). The payment gateway works on IP whereas the merchant account uses RF. With IP technology, the payment gateway sends encrypted data to the client’s browser for verification of information related to the transaction. RF uses a programmed credit card reader that receives information after it is read by an antenna.

What type of business do you run? This is another factor that will help you decide whether you need a payment gateway or merchant account. If your business needs to process credit card transactions then you will need to open a merchant account. However, if you want to use your website or application for taking payments securely without any hassle of dealing with credit cards directly, set up a payment gateway instead.

How much are you willing to pay? When deciding between merchant accounts vs payment gateways, you should consider the costs involved in opening and maintaining an account. There are fees, monthly charges and other expenses that may be associated with both these services. You need to compare and contrast all these costs and choose the service accordingly.

Do you or your business have a bad credit history or no credit history? If your answer is yes, then you will need to pay a bit extra for setting up an account with a payment gateway. The reason is that the payment gateway does not have agreements with all financial institutions. The merchant account providers are quite flexible when it comes to extending this service to customers with bad credit history or no credit history at all.

Merchant accounts require a contract and they have a higher set-up fee as compared to payment gateways. You need not sign any contracts with the latter, but there are monthly fees you will have to pay for using their services. In addition, most payment gateways provide free trial periods so that you can test the service before making a decision. There is no such thing as merchant accounts. They do not offer any trial periods and you will need to sign a contract with them by making the initial payment they demand.

This is all about selling your products online using credit cards. So what are you waiting for? If you wish to increase your sales then consider setting up one of these services today! It’s never too late to join the online shopping bandwagon.

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