Credit Card Processing Guidelines for Ecommerce Businesses

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Accepting credit cards for payment is vital to online businesses; perhaps more so than for any other type of business. Studies show more than 90 percent of all online consumers rely on credit cards to make their online purchases, which means that businesses that choose to ignore credit card customers stand to lose the lion’s share of customers.

But while it may be obvious that accepting credit cards as a form of payment is essential to any online business, understanding the ins and outs of credit card processing in the world of ecommerce may not be quite so simple.

Most credit card payments are made via real-time processing guidelines, but some online retailers still prefer to use non-real-time processing. What’s the difference and how can you tell which is right for you? The following guidelines can help.

Real-time vs. non-real-time credit card processing

Real-time credit card processing is by far the most common type of online credit card processing. In a real-time processing environment, credit card information entered at the time of purchase is transmitted immediately to the credit card issuer and a code is returned by the issuer that determines whether or not the transaction is authorized or denied. Once an authorization is received, the transaction can be concluded.

In a non-real-time processing environment, credit card information is gathered via the merchant’s website, but the information is not processed until alter in the day, when all of the day’s receipts are entered manually for processing. This type of account utilizes either a physical terminal with a keypad or an online “virtual” terminal for entering credit card information by hand.

At first glance, the differences between the two accounts is obvious: real-time credit card processing systems are able to handle a much higher volume of sales in a much shorter period of time, since they do not rely on a human operator to enter credit card information for verification. All credit card information is entered only once by the purchaser, and the processing software does the rest. These systems use a special “gateway” or “weblink” to gather and then transmit the credit car information directly to the bank or financial institution that issued and oversees the account, and then waits to receive a code determining whether or not the transaction is approved. The approval decision is transmitted immediately via the same gateway to the merchant, who can then complete the transaction and issue a sales receipt to the customer via email or directly on the merchant’s site. All information transmitted over the gateway is encrypted to prevent credit card information from being stolen or “read” by third parties. Once the transaction has been completed, the total amount of the transaction is stored until the end of the day, when transactions are totaled and any daily fees, as well as discount and transaction fees, are deducted. The remaining amount is then transferred to the merchant’s business bank account. Real-time credit card processing has obvious advantages for large businesses and businesses that typically have a lot of transactions each day or during a short period of time. However, these systems are typically more expensive to operate than non-real-time systems.

As noted earlier, non-real-time systems gather credit card information from multiple sales and store it until a set time during the day when an operator enters the information associated with each transaction into a physical or virtual terminal for processing. Like real-time processing, credit card information is sent over a secure Internet connection to the card issuer, which then approves or denies the transaction. When a transaction is approved, customers are issued email verification and a receipt for their purchase. When a transaction is denied, the merchant usually issues an email explaining the denial and requesting the customer contact the merchant, either directly or via the website, to re-enter the credit card information. Non-real-time processing systems are less expensive than real-time processing systems, but because they rely on a person to physically enter credit card data from each day’s transactions, they are generally not a good solution for businesses doing a heavy volume of sales. Non-real-time processing systems can be a good choice for small online businesses that typically experience low levels of daily sales.

Both real-time and non-real-time systems usually also employ an address verification system, or AVS, to compare the address given during a credit card order with the address associated with the credit card account, as an added measure to protect against fraud.

No matter what type of online business you operate, there is a credit card processing solution that’s right for you. Your merchant services account provider is an excellent source of information regarding the credit card processing systems that are available, and can help you decide if a real-time or non-real-time system is the best choice for your business needs.

Karen Zabel is a freelance writer who writes about Credit Card .