# merchant account vs. card authorization service



## annaylee (Sep 3, 2006)

does anyone know the difference between a merchant account and credit card authorization service? do you need both?


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## Rodney (Nov 3, 2004)

A merchant account usually includes a "gateway" service. 

The gateway is used to authorize the customer's credit at the time of the sale for the amount of the total order. 

The authorization would then need to be "finalized" and charged once you actually ship out the merchandise. You get the money in your bank account about 2-3 days after the order is "finalized".

I'm not sure if where you are reading "card authorization service" is the same thing as a "gateway". 

Where do you see those terms?


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## annaylee (Sep 3, 2006)

I was reading an old interview about "busted tees". The end of the article talks about the services they used to start their site. The authorization service and merchant service is listed separately. I was wondering if you need both and what the differences are. 

http://nickgray.net/busted_tees_jakob_lodwick.html


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## Tshirtcrib (Jul 21, 2006)

You need both to be able to accept credit cards on websites. The merchant account is the actual ability to retrieve funds for an individuals bank accout, such as www.authorize.net. The gateway is a secured service that transmits the data through a gateway from your site to the actual processng terminal thus allowing you to charge another individuals credit card.
Explained as easy as possible, you need both to be able to accept credit cards as an on-line merchant.


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## Twinge (Apr 26, 2005)

Many people combine the two however, through Paypal for example.


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## zhenjie (Aug 27, 2006)

Paypal really isn't a 'merchant account' in the traditional sense. it's really its own Payment gateway where they process transactions on your behalf and the funds go into their account before they forward it into yours.

A merchant account is one that is generally offered by a bank for users to process and receive Credit Card transactions. The funds are then deposited into your bank account the next day after it does its daily processing batch. Most, if not all the banks will have a card authorization service/payment gateway that users have to intergrate into their website or shopping cart. The bank's gateways aren't always the best as they are very simple API's so there are a host of 3rd party payment gateways that offer a better card authoriation service (usually easier to implement into a site or look better).


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## Twinge (Apr 26, 2005)

zhenjie said:


> Paypal really isn't a 'merchant account' in the traditional sense. it's really its own Payment gateway where they process transactions on your behalf and the funds go into their account before they forward it into yours.


True, but it can still be used in place of having both. You simply need to drain the Paypal account into your bank account regularily.


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## kenfuji (Sep 15, 2006)

what i would do is make the website so you get the CC info from the customer in a SSL form or over the phone and get a manual portal instead of using an online merchant gateway.

that way you can take cc orders online, over the phone or local customers with CC swipes


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## Rodney (Nov 3, 2004)

> what i would do is make the website so you get the CC info from the customer in a SSL form or over the phone and get a manual portal instead of using an online merchant gateway


I used to do it that way, but it can make processing lots of orders pretty slow.

An online gateway can do things "on the fly" like Adddress Matching (AVS), fraud checking, CVV code matching, making sure the customer has the money for the order, etc. That way, if there is a problem with the order, the customer knows instantly and can double check their information, use a different card, different payment method, etc.

When you try to process this offline, you have to manually do a lot of that which can take up a lot of time

With a merchant account and gateway, you can still take orders over the phone, in person, online, by fax, or any way you choose.


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## zhenjie (Aug 27, 2006)

Twinge said:


> True, but it can still be used in place of having both. You simply need to drain the Paypal account into your bank account regularily.


Defiinitely. For a start-ups and those new to eCommerce its a fantastic service. But when you start establishing yourself I always recommend a proper merchant account and gateway as it allows full control over the money instead of letting Paypal take control of it. I've heard some horror stories with Paypal and them holding or suspending accounts with some merchants.


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## Twinge (Apr 26, 2005)

zhenjie said:


> Defiinitely. For a start-ups and those new to eCommerce its a fantastic service. But when you start establishing yourself I always recommend a proper merchant account and gateway as it allows full control over the money instead of letting Paypal take control of it. I've heard some horror stories with Paypal and them holding or suspending accounts with some merchants.


Oh, I'm aware of those stories =) I'll probably look into something else when I'm doing enough sales to make it worth it. But for someone doing a relatively small number of orders Paypal is more affordable to work with. Just drain your Paypal account into your bank account often so there isn't any money for them to freeze.


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## lgiglio1 (Sep 29, 2006)

How would you suggest being set up if I am going to travel to events to sell t-shirts and want to be able to take credit card payments? Would I need to have a computer with me and Internet access? I am completely new to this. Thanks.


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## zhenjie (Aug 27, 2006)

lgiglio1 said:


> How would you suggest being set up if I am going to travel to events to sell t-shirts and want to be able to take credit card payments? Would I need to have a computer with me and Internet access? I am completely new to this. Thanks.


A mobile terminal perhaps. All it needs is access to a phone line or you can use your cell in some cases depending on the terminal you receive. That should let you swipe cards and have them approved on the spot.


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## Twinge (Apr 26, 2005)

The other, probably more common, method is to have a manul card slider for events and you later process the cards by hand after the event at an electronic terminal. This way you don't need electricity and a phone line at your booth, which won't be available at all in some cases.


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## Solmu (Aug 15, 2005)

Though manual card crunchers do have their disadvantages (namely, you can't check to see if the card is rejected _before_ giving the shirt to your customer, and legitimate customers may be turned off by them as extremely insecure).


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## Jasonda (Aug 16, 2006)

Twinge said:


> The other, probably more common, method is to have a manul card slider for events and you later process the cards by hand after the event at an electronic terminal. This way you don't need electricity and a phone line at your booth, which won't be available at all in some cases.


I really hate those things. So much room for error - writing the date wrong, forgetting to get a signature, forgetting to write the sale amount. One time I slid it through wrong and I didn't get an imprint of the card number, so I had to chase the guy through the crowd to get him to come back and do it again. He was not a happy camper! 

Plus, as Lewis mentioned there's always the security issue. People are not happy having their credit card info floating around on a little piece of paper somewhere.

Still, they are much better than not accepting credit cards at all. Sometimes 1/3 of my sales in a day would come from cards.


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## Rodney (Nov 3, 2004)

> People are not happy having their credit card info floating around on a little piece of paper somewhere.


I recently had one of my cards compromised from an online purchase. It's not only offline transactions you have to be leary of 

Sometimes all it takes is one shady employee from an online (or offline) company, and your card is "out there".


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## Twinge (Apr 26, 2005)

Jasonda said:


> Still, they are much better than not accepting credit cards at all. Sometimes 1/3 of my sales in a day would come from cards.


And that's the key point. I never said manual sliders were easy or fun (not too fond of them either, myself). If you CAN get a phone line and electricity to your booth to run a full credit card machine, great - if not, the manual sliders are still going to be better and more professional that just writing all the info on paper forms.


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