"If you have an online business, you need a merchant account to keep up. That's because most people, if not all, who purchase online expect to be able to pay online. After all, that's one of the reasons why they're buying through their computers - they don't need the hassle of mailing a check or coming down to a store to pay. If you have an online business and your website isn't capable yet of accepting credit cards, then you could be in trouble.

The following are the most basic requirements for applying for a merchant account:

• You must be the primary owner of a business.

• You must have a business license (Tax ID) or DBA (SS#), a checking account, a driver's license and good credit record.

The chances of your application being approved will also depend on factors related to your website which should:

• be active

• contain company name or DBA name

• present products and prices, terms of service, refund policy, shipping methods, privacy policy and content details

• have an active, working and adequately backed up shopping cart (check out page)

When considering to get a merchant account, you will have a choice between applying with a merchant bank or a merchant service provider. Each one will have their own basic and unique benefits. Some companies give their clients free credit card terminals as part of their plan. It is important, however, to know the difference between the two - merchant bank and merchant service provider.

First Data Corporation Network is used by banks during credit card payment process. This company is the one responsible for clearing the credit card transactions. While MSPs are those responsible for providing processing solutions to merchants and they are recognized for these advantages over merchant banks:

• MSP companies have many bank affiliates which implies they have very high approval rates.

• MSPs make suggestions on the best packages or solutions while banks offer limited options.

• MSPs are more open during negotiations regarding contract terms and rates.

The next thing that you should familiarize yourself with are payment gateways. These are companies that provide links from your website to your merchant account. They also supply virtual terminals to be used to enter credit card transactions manually online. Without payment gateways, internet or any other kinds of electronic transactions aren't secure.

There are many companies that offer a 24 hour access to virtual terminals for reporting, processing, and check payments and other steps to complete the transactions. Orders can be made via your website through batch uploading or manually via the virtual terminal. Here are the details of how a payment gateway works:

1. Buyer/customer types in payment into a secure site (shopping cart/checkout).

2. Details are sent to the Payment Gateway for evaluation and approval.

3. Payment gateway sends the transaction to a merchant bank.

4. The Merchant Bank sends the transaction to a credit card-issuing bank for confirmation.

5. Credit card bank verifies the transaction and sends a response code indicating denial or approval back to the merchant bank.

6. Merchant bank passes the response to the payment gateway.

7. Payment gateway displays payment information to the buyer/customer.

If you are an online merchant, you understand the importance of a credit card processor and how it affects your business and your customers. As a result of the stiff competition in the business industry these days, an online credit card processing gateway is needed to keep up with the times.

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