How to choose which credit cards to accept in ecommerce

Ecommerce businesses must accept credit cards as forms of payment. Online store owners are free to choose which credit cards shoppers can use. This decision is entirely up to the business owner and needs to be based on thorough research and financial status. There are perks to accepting certain cards and drawbacks to accepting others.

Merchant accounts and payment gateways

First and foremost, ecommerce businesses need a merchant account and a payment gateway to accept credit card payments online (1). Banks provide enterprises with merchant accounts after business owners apply for them, similarly to loans. The bank then extends a line of credit to the company. There are often initiation and monthly fees associated with merchant accounts.

Payment gateways are corporations that handle online transactions and credit card payments. They connect the buyer's bank account to the business's merchant account. Ecommerce businesses need both to accept credit cards. Payment gateways often charge monthly fees, as well.

In fact, fees are the biggest determining factor for ecommerce shop owners when deciding which credit cards to accept.

Visa and MasterCard

Visa and MasterCard are widely accepted, and it is highly recommended that ecommerce businesses allow customers to use these cards as forms of payment. These two corporations are credit card processors (2). They do not issue cards directly. They work with a variety of banks to offer users debit cards, credit cards and checking accounts sponsored by the Visa and MasterCard brands. These companies make money on transactions carried out with their sponsored cards. During a credit card transaction, Visa and MasterCard work with acquiring banks, issuing banks and the network connecting the two to complete payments.

The good thing about accepting Visa and MasterCard is that their per-transaction fees, which are small amounts of money charged to the ecommerce merchant, are typically lower than other credit cards. They usually charge vendors about 2 percent of the transaction price.

American Express and Discover

American Express and Discover are two credit cards that are accepted less frequently than Visa and MasterCard. These are premium rewards cards that fall into a more exclusive card bracket.

Amex and Discover are card issuers. They do not partner with banks to provide consumers with credit cards, debit cards or checking accounts. The cards these corporations offer are marketed directly to people and businesses. Amex and Discover card holders are typically more secure in their finances and the scope of people with these cards is much narrower than Visa and MasterCard.

Amex and Discover also charge higher per-transaction fees. Merchants are charged closer to 2.89 percent each time a consumer with an Amex card makes a purchase. This increase can add up to great sums over time and makes a big difference for ecommerce business owners. If an ecommerce business wants to include Amex card holders in their consumer pool, a monthly fee may be a possibility (3). This way, vendors only pay a flat rate, as opposed to per-transaction fees.

In addition, Discover is very loyal to its customers and provides them perks that may be detrimental to merchants. For instance, they offer full refunds on items up to $500, which could potentially have a negative impact on business owners.

Additional fees

It's important to note that credit card processing fees can fluctuate and come from unexpected places. Debit and credit card processing fees may vary, even if the card processor is the same. Whether a merchant enters a card number manually or swipes it through a machine can affect the fees associated with the transaction.

1. "Accepting Credit Cards and PayPal on Your Ecommerce Site"

2. "Why Aren't American Express and Discover Cards Accepted Everywhere?"

3. "Which Credit Cards Should Your Small Business Accept?"