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How Does an Online Store Handle Credit Card Orders?

If you want to open an online store, you'll need a way to accept credit card orders. That's easier said than done - credit card transactions are a complex process, and scores of companies offer products that claim to handle the details for you. No matter what you do, however, you'll need three basic things to accept credit cards: a secure way to transmit the card number from the user's browser to your Web server, a merchant account with a bank and payment processing software to link your Web server to the bank.

Security

The most popular way to transmit credit card data securely over the Web is with the secure socket layer (SSL) protocol. You (or your Internet service provider) will need to use a Web server that supports SSL, and your customers' Web browser must also support SSL (most do). You'll also need a digital certificate that identifies you as a legitimate business - these are available for a fee from companies such as VeriSign.

Merchant accounts

You'll need a special bank account in order to accept credit card orders. Most banks offer merchant accounts - the problem is figuring out which one offers the best price, typically calculated as a percentage of each credit card order you submit. Most banks charge higher fees for what they consider risky accounts, such as those with large numbers of charge backs or fraudulent charges.

Payment processing

This is where things get really tricky. Dozens of companies offer transaction processing software that sends the right information to everyone involved in the sale - your bank, the customer's bank, the bank issuing the credit card and so on. But most banks work with a handful of the biggest companies, including Authorize.Net and CyberCash. Some processors lease their services to you for a monthly fee, while others combine a monthly fee with some percentage of your sales.
If all of this sounds complicated, don't worry - there are a number of firms that provide online businesses with e-commerce packages combining everything you need to accept credit cards. These companies can help you get an online merchant account, they take care of all the back-office transaction processing, and many even include services that allow you to create and manage your own online store.