# Gateway, merchant account, the difference?



## printpuller (Jan 25, 2008)

I signed up for Shopify and they say I need to select a gateway. What is the difference, and function between a gateway and merchant account
and who actually processes the credit card Shopify, the gateway or the merchant account? trying to sort out what does what


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## sunnydayz (Jun 22, 2007)

The gateway is the company that processes your payments, the merchant account is the actuall business bank account the money goes into.


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## printpuller (Jan 25, 2008)

so my bank just just takes in the money from the transaction and doesn't actually handle the credit card transaction?


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## sunnydayz (Jun 22, 2007)

Thats usually the way it works  I think you can have a merchant account with a gateway processor thru your bank but usually when doing online business they are usually seperate.


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## Rodney (Nov 3, 2004)

printpuller said:


> so my bank just just takes in the money from the transaction and doesn't actually handle the credit card transaction?


*The way I've looked at it is:*

You need a "merchant account" to accept credit cards. This gives you an account with Visa/MC (and others if you apply) so you can accept those cards at your business.

If you are processing sales in person, you would take the customer's card and swipe it through your machine and the machine would contact the customer's bank to make sure the funds are available for the purchase.

When you process credit cards online, you don't have a machine like that. So the "GATEWAY" is your "swiper machine" in this case. Your shopping cart (or shopify) allows the customer to securely enter their billing information and cc number online in the secure online forms. When they click the ORDER button, the customer's payment information is sent through the GATEWAY and the GATEWAY electronically contacts the customer's bank to make sure the funds are available and then the GATEWAY notifies your shopping cart (or shopify) to approve or decline the order. The customer never has to leave your site when all this happens and your business name shows up on their credit card statement.

The most popular online payment gateway for merchant accounts is AUTHORIZE.net. I recommend finding a merchant account that comes with this payment gateway. 

A merchant account usually has monthly fees that cover billing statements, a percentage of each transaction and the gateway fees.

There are companies like PayPal that will allow you to accept credit cards without having a merchant account. 

The customer goes to checkout and then get stransferred to PayPal's website for payment. If the customer has a PayPal account, they can login to their PayPal account and send the money to your account for the order total and then get sent back to your shopping cart. If the customer doesn't have a PayPal account, they can just securely enter their credit card details on the PayPal site without signing up for an account. A regular PayPal account has no monthly fees, they just charge a percentage of the transaction. It's less "seamless" because the customer has to leave your website to make a purchase and the credit card statement shows PayPal*BUSINESS NAME instead of just your business name. To make things more confusing, PayPal also offers an actual "merchant account" service option now as well that has a monthly fee.

Hope this helps


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## sunnydayz (Jun 22, 2007)

Thank you Rodney that is a great explanation


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