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What the Heck is a Merchant Account?

What the heck is a merchant account and do I need a payment gateway?

Do you want to open an online store, but all the details and the jargon confuse the process? You are not alone. Getting a store up and running online is a daunting task, but let’s see if I can help with a couple of terms.

Merchant Accounts

Merchant accounts and Payment gateways are two items that come up immediately. When I began my first eCommerce store, this was the first item on the agenda. I had to try and understand what these terms were and how to get them set up.

Let’s see if I can simplify the terms.

A merchant account is an agreement between your business and a company that processes credit card or bank payments of some type. The merchant account allows a seller to collect money from a buyer, usually by credit card. Every store you buy from using a credit card (swipe or insert) is using a merchant account to process the card. Many companies and even most banks offer this service. However, be aware that the fees may vary a lot from different companies.

Some of the possible fees charged:

  • Monthly access fees
  • Per transaction fees
  • Percentage of transaction fees
  • miscellaneous fees (add-ons for extra services)

The good news is some do not charge all these different fees making it simpler to make a choice.

Payment Gateway

A payment gateway is a method of connecting your online store to your merchant account. The gateway can be a plugin or a script to place somewhere on your website. It opens the “gate” for your customer’s credit card to securely pass from your site to your merchant account for processing.

The plugin or script is usually provided by the merchant account company to allow you to use their services.

If the merchant account is with someone other than your bank, they will then send the money, minus the agreed-upon fees, to your bank in a day or two.

Some Back Story

I started working on my first online store in 2006, launching it in January of 2007. Few companies, other than banks, offered the ability for customers to pay online. I only recall one option at the time, Paypal. They offered several choices, and I chose the easiest, but maybe not the best at the time just starting.

Paypal was huge in the tech industry but was lesser known to the public in general. That first store sold B2C and therein lie the problem. Many consumers didn’t have Paypal accounts and didn’t understand they could pay with a credit card. And consumers were not yet as trusting to put their credit card number into a website.

Many months the fees were greater than the profit. A recipe for disaster.

Payment Gateways for WordPress
Payment Gateways from WooCommerce

My Current Choice – Stripe

I heard about Stripe not long after they launched and after researching as best I could, I changed my gateway and merchant account over to them. I’m still happy with that decision.

They do not charge a standard monthly fee, choosing only to charge 2.9% of the total + $.30 per transaction. Period.


You make a $10 sale on your website through Stripe. Your total fee from them is $.59. Sell $100 and your charge is $3.20. Simple math to keep it simple.

Other competitors are comparable to Stripe, so your current choices are plentiful. Choose wisely.

Then we need to discuss the requirement of SSL (secure socket layer) certificates. I know, more weird stuff to understand.

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