Like it or not, your ecommerce business needs to accept credit card payments if you’re going to be successful. That’s because 42% of ecommerce shoppers prefer to pay by credit card, according to a 2017 survey of worldwide online retail payment methods. We understand that online credit card processing can be confusing: There are merchant accounts to open, payment gateways to integrate, and transaction fees to consider.
That’s why we’re here to help.
In this review, we’ll list the top online credit card processing services for ecommerce merchants. We’ll consider a myriad of factors, including price, ease of use, and range of features. But to really understand the value offered by an online credit card processing company, it helps to first understand how online credit card processing works.
We’re not going to sugarcoat it: Online credit card processing is complex. But it’s important to understand that the complexity is there in order to protect both the customer and the merchant. Without getting too in the weeds, here is how an online credit card payment is processed:
As you can see, the payment processor works closely with both the merchant account and the payment gateway. The combination of these three things are what make online credit card processing possible. Let’s learn more about merchant accounts and payment gateways, as these will help you determine the quality of service offered by a payment processor.
Merchant accounts and payment gateways are the two most important aspects when it comes to selecting an online credit card processing company to work with. Let’s learn a bit more about both:
A merchant account is a special type of bank account business owners need in order to accept credit card payments. Payment processors typically fall into two categories: ones that will provide your business with its own dedicated merchant account, and ones that lump all their clients into a single merchant account.
Having a dedicated merchant account provides your business with more stability, but is harder to get. You’ll have to go through an underwriting process so the processor can determine your merchant account risk level. Risk factors include your business model, industry, and average transaction amount. Your risk level will determine the terms of your contract, including your monthly and per-transaction fees.
Payment processors that will combine all their clients into a single merchant account are called aggregators. With aggregators the underwriting process isn’t nearly as intensive, and you won’t normally be charged a monthly fee for working with them. The tradeoff is that you are more likely to experience account holds and terminations working with an aggregator. This is because each client’s individual transactions can impact the broader pool of clients using the merchant account. Therefore, the aggregator will more heavily scrutinize each individual transaction.
Any business looking to accept credit card transactions needs a merchant account, but only online businesses need a payment gateway. A payment gateway is a software application that plugs into your ecommerce platform to authorize online payments. It exists because it’s prohibited to send transaction information directly from a website to a payment processor, for security reasons.
Some aggregators come with a payment gateway built in, while dedicated merchant accounts may require you pay an additional fee to use their payment gateway. Other payment processors don’t offer a payment gateway, meaning you’ll have to sign up for a payment gateway with a third-party service like Authorize.Net.
While looking for a payment processor and payment gateway, keep in mind that you will need to find products that are compatible with your ecommerce website. If your website is cloud-hosted through a major ecommerce platform provider like Shopify or BigCommerce, they will let you know which processors and gateways they work with. If you self-host your own ecommerce store, you can usually pick your own payment processor and gateway and integrate it with your website.
Aside from being able to process credit card payments through your payment gateway, there are some additional features you may look for in a payment processor. For example, if you run a subscription-based business you may want a processor that can handle recurring payments. You may also want a payment processor that can support a variety of alternative payment methods, such as digital wallets and ACH transfers. Finally, understand what kind of customer support your payment processor offers. Not being able to process credit card payments is literally a work-stopping issue for an ecommerce merchant, so you want to have a direct line to your payment processor at all hours.
As we mentioned, dedicated merchant accounts will charge you a monthly fee and a per-transaction fee, and sometimes an additional fee for a payment gateway. Aggregators typically don’t charge a monthly fee, but have higher per-transaction fees than what a dedicated merchant account would offer. They may also charge an additional fee for use of a payment gateway.
If you use a third-party payment gateway with your processor, you will likely also be charged a monthly fee and a per-transaction fee. And your payment processor and payment gateway may also charge you an initial setup fee.
In terms of the per-transaction fees, most online credit card processors charge what is known as interchange plus pricing. This is expressed as a small percentage of the total cost of the purchase, plus a small fixed fee. The percentage is determined by the credit card network, while the payment processor sets the fixed fee. Percentages typically range between 1% and 3%, while the fixed fee can be between $0.10 and $0.50.
Now that we know exactly how online credit card processing works, and what to look for in a credit card processor, here are our picks for the best online credit card processing companies:
The payment processor Fattmerchant is a provider of dedicated merchant accounts at flat, affordable rates. Ecommerce merchants will want to sign up for Fattmerchant’s Shopping Cart plan, which allows you to use Fattmerchant’s payment gateway (offered through Authorize.Net) or integrate with your current payment gateway. You’ll also have the freedom to create a self-hosted checkout process than can be customized to match your business’s branding.
To use the Shopping Cart plan your business will have to pay $99 per month and a markup of $0.15 per transaction plus the interchange fee. Fattmerchant plans are month-to-month, and can be cancelled at any time for no additional cost. Plus all plans come with 24/7 technical support, tokenization and encryption, chargeback monitoring, and an integration with QuickBooks. For an additional fee you can get ACH transaction processing.
If you operate a brick-and-mortar business along with an online store, Fattmerchant can provide you with a card terminal, virtual terminal, and tools to process mobile transactions.
Square is probably the most recognizable name on our list. It is an aggregator of merchant accounts, meaning that you will share your merchant account with a variety of other Square clients. The good news is that Square provides its customers with a payment gateway at no additional cost, integrates with almost every ecommerce platform on the market, and does not charge a monthly fee.
However, Square’s rates for online transactions is 2.9% + $0.30, which is fairly high. And if you want to set up recurring payments, Square will charge you 3.5% + $0.30 per transaction. But with Square you get a range of additional free tools, including Square’s point of sale system and a free mobile magstripe reader to process in-person transactions.
Square’s security features are also among the best in the industry, and are backed by 24/7 customer support. For omnichannel merchants, Square sells a variety of POS hardware.
PayPal is one of the most reputable online payment processing companies in the industry. It’s another aggregator that comes with its own payment gateway (the payment gateway can be used independent of the payment processor for $25 per month) and integrates with pretty much any and every ecommerce platform and POS system on the market. You can also send invoices with PayPal at no additional fee, and accept mobile payments from PayPal Here.
The big catch with PayPal is that you cannot self-host your own checkout page for free. Instead, customers must be redirected to a PayPal hosted site to complete checkout. To host your own payment page you must pay an additional $30 per month. Payment processing fees are the same as Square’s: 2.9% + $0.30. To support recurring payments you must also pay $10 a month.
If you’re a nonprofit organization, PayPal will offer you discounted payment processing rates. You’ll also get 24/7 customer support with PayPal. With over 200 million users around the world, PayPal is seen as one of the most trustworthy and reliable payment processors on the market.
If you consider yourself technically advanced, you may want to work with Stripe as your payment processor. Like Square and PayPal, Stripe is an aggregator that provides its own payment gateway at no additional charge. It offers a suite of developer tools that allow you to integrate payment processing into your website in a number of different ways. You can build your own custom payments page, embed a payment form on your website, send invoices, and receive ACH payments.
Stripe’s security suite is known as Radar, a machine-learning fraud system that trains on data across millions of global companies to help differentiate between fraudulent and legitimate purchases. You can add an additional layer of protection with 3D Secure, which prompts customers to complete a verification step before completing their purchase. Stripe also offers dispute management and 24/7 support.
In terms of cost, Stripe also charges 2.9% + $0.30 per transaction. ACH transfers, however, cost only 0.8% + $0.30. Other charges to be aware of include a 0.4% fee on recurring payments after your first $1 million in payments processed, and a chargeback fee of $15. There are also no setup or PCI compliance fees.
The last payment processor we’ll mention is Shopify Payments. It’s similar to the aforementioned aggregators in the sense that it offers a payment processing rate of 2.9% + $0.30. It’s also powered by Stripe, which means you are really just using a branded version of Stripe’s service. However, unlike Stripe or those other aggregators, Shopify Payments comes included with your Shopify website. In other words, you’re ecommerce store and payment processor come as part of a complete package.
The price you pay for payment processing depends on the Shopify plan you sign up for. Rates start at 2.9% + $0.30 and can go as low as 2.4% + $0.30. Shopify provides you with a payment gateway, but will charge you a fee ranging between 0.5% and 2% if you decide to use a third-party service. Therefore, you pretty much have to use Shopify Payments if you have a Shopify website. However, that’s not a bad thing: Shopify accounts also come with a POS, shipping discounts, and SEO tools. Plans start at $29 per month for a basic Shopify store and go all the way up to $299 per month for enterprise merchants.
We’ve given you our recommendations, but we also reached out to ecommerce merchants to get their feedback on the best online credit card processing companies. Here is what they had to say:
“As the owner of two ecommerce companies, we use one payment processor for both sites: PayPal. It syncs easily with our ecommerce platform. Customers can place orders on our websites without leaving our checkout page, and they can place an order through PayPal’s checkout system and easily return to our sites. Since almost everyone has a PayPal account, this is a great option for our customers”
—Mark Lindamood, Wallet Gear
“We have been increasingly focusing on Stripe for card payments. The Stripe transaction fees are not the lowest (they are also not the worst), but the team at Stripe has done a great job with making it easy for other software providers to integrate with them. This is important for us because it has enabled us to link all parts of the order process directly to our cloud accounting software, reducing bookkeeping time and helping us to keep our accounts accurate. This improved information has enabled us to take advantage of business opportunities that we would have struggled to support otherwise.”
—Gareth Rowland, The Crafted Cup
“I utilize PayPal as the payment processor for my ecommerce business because of its dashboard simplicity, lack of monthly charges, instant account approval, easy integration with Shopify, and because it is widely trusted by consumers worldwide. I believe PayPal has a fairly simple web interface, which makes it convenient to manage the payments received from customers and keep track of my transactions online.”
—Hassan Alnassir, Premium Joy
“We use Stripe, which is a great credit card processor for online-only businesses. It’s powerful, secure, easy to use, gives instant access to a wide array of credit card processing tools, and has many other useful features. Stripe handles more types of payments than Square. It has no monthly fees, charges fair processing rates, and has very few added costs. Being flexible and scalable, it allows online businesses to build a payment processing platform from scratch with top-tier developer tools. I like that Stripe offers round-the-clock live customer support and has a very simple pricing structure. Besides, I don’t have to worry about data security because Stripe only allows fully secure gateway connections in which payment data is entered directly into their servers.”
—Kevin Begola, Titanium Buzz
“The payment gateway Authorize.Net is best for organizations trying to optimize for every percentage point because it works with one’s own merchant account. You can work directly with your own bank or through a broker to negotiate your rates on credit card transactions. Authorize.Net is just the gateway to the merchant account, and as such, they only charge a flat fee per transaction (in the neighborhood of $0.10 per). On the other hand, providers like PayPal and Stripe bundle the merchant service with the gateway so the setup and administration are easier since there is a single point of contact. However, that does come with their higher rates vs. Authorize.Net.”
—David Alpern, Endertech
The last bit of advice we’ll give you is that it is important to pick the online credit card processing company that makes the most sense for your business. Only you know if you need a credit card processor that support recurring payments, or allows customers to pay via Apple Pay. Make a list of the things you value in a processor, and start your search there. Your goal should be to find a credit card processor that can serve as a partner in helping your ecommerce business grow.
Matthew Speiser is a former staff writer at Fundera.
He has written extensively about ecommerce, marketing and sales, and payroll and HR solutions, but is particularly knowledgeable about merchant services. Prior to Fundera, Matthew was an editorial lead at Google and an intern reporter at Business Insider. Matthew was also a co-author for Startup Guide—a series of guidebooks designed to assist entrepreneurs in different cities around the world.