Using Third Party Payment Processors

Not only are there hundreds of thousands of merchant account providers available to online business owners, but there are also companies that are called "third party payment processors" that also allow you to accept credit card payments via your website.  Often, the two types of processors are used interchangeably- you might see a bank merchant account and a third party payment processor both referred to as "merchant account", but there are some differences which we will talk about here.

What is a Merchant Account?

A Merchant Account allows a business or individual to accept credit cards as a payment method for products or services.  Internet merchant accounts require other specifics, like a shopping cart, the processor and a secure payment gateway that sends and receives card information from the user to the processor.  You may choose a turnkey solution that has all the necessary pieces put together for you already, or you may choose to shop for each of the different aspects required to set up your website to accept credit card payments.

What is a Third Party Payment Processor?

If you are not quite ready to get a merchant account, or you want the ability to offer additional payment options in addition to credit card payments, you can get an account with one of the numerous third party payment processors.  Basically, a third party payment processor is the "go between" between you and a merchant account provider.  They make it possible for you to accept credit card payments and a variety of other payment options, without the costs of a merchant account or the commitment usually required with a traditional merchant account.  You will typically pay higher per-transaction fees when you process payments through a third party payment processor as opposed to a merchant account, but it's sometimes worth the expense depending on your needs.

How to Choose Between the Two

If you are a new business, or looking into accepting online payments for the first time, you may want to consider a third party payment processor first.  They tend to have almost 100% approval rates, and often you can get an account without paying a dime upfront- you only pay when a credit card is processed based on the amount of the transaction.

The best thing to do when deciding whether to go the traditional merchant account route or a third party payment processor is find one or two within each category that you think look reputable, and compare their services and features with one another in relation to what you actually need.  If something isn't entirely clear, call the customer service and ask questions.  Here are some tips for  choosing a merchant account provider.