Online Credit Card Processing Explained


Internet Merchant Accounts to Accept Credit Cards OnlineCredit Card Processing Systems have many steps and not all credit card processing services are the same. Many companies offer a service known as third-party credit card processing where they company processes credit card transactions on your behalf using THEIR merchant account. This is not the same thing as having your own merchant account and has many disadvantages including:

  • Third party processors typically charge much higher discount rates and transaction fees. The third party processor has a merchant account that has its own fees that the processor has to pay, and the processor must then mark these fees up substantially to make a profit. When you get your own merchant account with CyoGate for a business conducting Internet, mail order, and phone order transactions, the discount rate for credit card processing can be as much as half or less than that of third party processors. The processing costs with third party processors are typically very high.

  • Third party processors typically hold your money for a long time before paying you the money that you. The typical wait time is from two to four WEEKS! When you have your own merchant account with CyoGate, you typically get your money in only two to three business days, although it can take longer if you require a high risk merchant account.

  • When third party processors process credit cards, the third party processor's name appears on the credit card statement along with the merchant's business name; and with some third party processors, the merchant's business name might not even appear on their customer's statement, at all! This looks extremely unprofessional for merchants and is bad for business. When you have your own merchant account with CyoGate, only your business name will appear on your customer's statement - not ours!

  • When third party processors hold funds, it is typically not FDIC insured. That means that if the processor goes out of business, it is unlikely the merchants will ever be able to recover the funds that were being held. When you get a real merchant account with CyoGate, your merchant account is issued by Wells Fargo Bank and it is FDIC insured!


Outlined below is a brief description of how a typical credit processing system works:

  1. The e-commerce transaction is submitted to a gateway such as CyoGate. The transaction can usually be either only authorized or authorized and captured at once.

  2. If the transaction was only authorized, the merchant must capture the transaction (i.e. flag it for settlement).

  3. The gateway (i.e. CyoGate) will settle all captured transactions, refunds, and voice authorizations at the end of the day by securely routing them to a payment processor.

  4. The payment processor continues to route the transaction to the issuing bank (purchaser's bank) to request the funds.

  5. The issuing bank approves transfer of money to the acquiring bank which in turn credits the merchant's bank account.

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Retail & Internet Merchant Accounts

An Internet Merchant Account is sometimes referred to as a "MOTO" (Mail Order & Telephone Order) Account because they all require the ability to process a credit card payment when there is no physical credit card present to be swiped. A standard retail "swipe" merchant account does not allow processing of these "card-not-present" transactions.

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High Risk Merchant Accounts

If the domestic banks are denying your merchant application because they believe your industry is considered high risk, CyoGate can help! We have an offshore network of merchant processing partners that enable us to provide low cost, high risk merchant solutions to a much wider range of businesses and industries.

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Internet Payment Gateway

The CyoGate Internet Payment Gateway offers one of the quickest and most cost effective ways to accept and process credit card and electronic check payments online. Our payment gateway works with most existing merchant accounts and supports hundreds of popular web shopping carts and eCommerce platforms.

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