Ecommerce Credit Card Processing: Everything You Need to Know

Michael E.
Michael E.
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Starting your online business can be a lot of fun. You’ve got awesome products for sale, a beautiful website, and even started marketing your brand. But when it comes down to it, there’s something more important than any of those things – namely, getting paid.

The topic of ecommerce credit card processing can be a little off-putting because, at first glance, it seems like a complex system that’s hard to understand. But spending a little time doing your research will pay off in sales for your ecommerce store.

Table of Contents

In this simple guide, we’ve broken down how ecommerce credit card processing works so that you can make decisions that get those payments rolling in. Ready to get started? Let’s go!

What Is Ecommerce Credit Card Processing?

When your customer purchases from your online store using a credit card, it doesn’t just happen instantly (although it may seem like it on the customer’s end). What’s happening beneath the surface is a process that’s moving the funds from your customer’s credit card to your merchant account.

Credit Card Processing Simplified Process

This all happens via a gateway: a secure interface that processes the customer’s payment securely and speedily. Therefore, choosing a reliable gateway is essential to the success of your ecommerce business.

Imagine your customers are ready to check out on your ecommerce website, and they are redirected to a third-party website for payment. That’s a little off-putting, right? Nowadays, online shoppers expect to be able to check out seamlessly within the website they’re buying from, and they’ll feel suspicious of your business if they can’t.

Ecommerce credit card processing integrates the checkout experience with the customer journey. Your payment gateway appears to be a part of your website, not a third party’s, which builds essential trust with your customer.

Why Is Ecommerce Credit Card Processing Important for Your Business?

There are several reasons why having an effective credit card processing system in place is essential for your business. Let’s take a look at some of them.

Wins the Customer’s Trust

The checkout experience can make or break an online shopper’s buying decision. After a smooth shopping experience, consumers expect a fast and simple checkout process.

This crucial point of the customer experience is when the shopper will start questioning their decision, and any hitches at checkout will cause them to abandon their cart. Online shoppers will only buy from a brand that seems trustworthy to them.

Ensures Security

Using a reliable payment gateway will ensure that your customer’s financial information is kept secure through a process called payment tokenization. Holding onto a customer’s credit card details for later use is sometimes beneficial, but storing this information yourself can lead to major data breaches.

Tokenization replaces the actual credit card details with an encrypted alphanumeric code, which is then used to represent the credit card information if needed in the future. If your ecommerce business offers recurring services, tokenization becomes critically important.

Increases Customer Loyalty

A study found that a good checkout experience will radically increase the likelihood of a customer making repeat purchases from an online business. It found that 76% of respondents choose a merchant over other merchants offering lower prices because they “consider a satisfying checkout experience to be highly influential to their shopping experience.”

Increases Sales

Still not quite convinced about the importance of ecommerce credit card processing? Take a look at these statistics. 87% of online shoppers will choose to abandon their cart if the checkout becomes too complicated, with 55% of them completely losing interest in the brand. Moreover, 86% of consumers say they’re willing to pay more for an improved customer experience.

Key Parties Involved in Ecommerce Credit Card Processing

To fully understand how credit card processing works for your ecommerce business, it’s important to know the main parties that are involved in any given transaction. They are:

  • The payment processor. This is a financial services provider that looks after the entire process of exchanging money from the customer’s credit card to your bank account.

  • The payment gateway. This is a platform by which your website connects with the payment processor, making it possible for customers to pay with their credit cards without leaving your brand’s website.

  • The merchant account. Your business can’t receive payments without having a merchant bank account. This is where the customer’s funds are deposited once their credit card transaction has been processed.

How Do Ecommerce Credit Card Payments Work?

While nothing is visible to customers from the outside and they are just waiting for a payment to go through, there is actually a whole process of several steps behind it, which take place as follows.

  1. The customer enters their credit card information into a form that’s embedded in your website.

  2. The payment details get encrypted by the payment gateway and are then sent to the payment processor.

  3. The payment processor checks with the customer’s issuing bank to make sure there are enough funds in their account to make the purchase, and the bank either authorizes or declines the transaction.

  4. The payment processor reports back to the payment gateway whether the transaction has been authorized or declined by the bank.

  5. If the transaction is authorized, the customer will get a confirmation that their order has gone through successfully.

  6. The payment processor then takes the funds from the customer’s bank account and puts them in the merchant account.

If we look at this entire process, it's quite amazing that it usually only takes a few seconds, even though there are so many different parties involved.

How to Choose the Right Payment Processing Platform

Now that you’ve got an idea of how credit card processing works in ecommerce, it’s time to choose a payment processing platform. To do this, several factors should be taken into careful consideration:

Is It Secure?

To ensure that your customers’ credit card information isn’t compromised in a data breach, it’s important to have security measures in place. First, your ecommerce website must have an SSL certificate (secure sockets layer certificate). This adds an extra layer of security to any transactions on a website.

Second, you’ll need a payment processor compliant with the Payment Card Industry Data Security Standard (or PCI DSS). Any company that accepts, processes, or stores credit card information has to be PCI compliant—that means both you and your payment processing platform.

Does It Accept a Variety of Payment Methods?

In today’s digital landscape, online shoppers expect to be offered flexibility in their form of payment. Your customer won’t necessarily be holding their credit card in their hand when purchasing from you. Some customers will want to use their credit card information that’s stored in a digital wallet, such as PayPal, Apple Pay, or Google Pay.

Does It Support International Transactions?

If your ecommerce business offers its products or services overseas, you’ll want to be sure you’re choosing a credit card processing platform that can accept foreign payments and convert pricing into the customer’s currency.

What Kind of Fees Are There?

Every payment processing platform will have some fees associated with it. Careful consideration should be given to these fees to keep your business bringing in the maximum amount of profit.

There are sometimes setup costs for getting started with a payment processor and often a monthly subscription fee for the service. You’ll also find that transaction fees are taken from every individual sale, normally a small percentage plus a small flat fee.

What Integrations Does It Offer?

The best ecommerce credit card processing platforms can integrate with other software your business uses to streamline your business processes. Some integrate with bookkeeping software, such as QuickBooks, allowing you to keep track of the accounting side of your transactions, while others integrate with email marketing software, letting you add customers to your email subscriber list at checkout.

How Fast Does It Deposit Funds?

You don’t want to wait two weeks for a payment to come through to your merchant account when the customer makes a purchase. The best payment processing platforms give you access to the funds from transactions by the next day, and some even deposit the funds the same day.

Does It Offer Good Customer Support?

When an issue arises with your payment processing platform, it could turn into a disaster if they don’t offer customer support to help you resolve the problem. Look for a platform that has 24/7 support available.

Best Ecommerce Payment Processing Platforms

Let’s take a look at some of the leading ecommerce credit card processing platforms and the benefits each has to offer.


Stripe is a very popular choice among big companies such as Instacart, Zoom, and Lyft, but it’s useful for all sizes of businesses. Stripe offers customizable checkout flows, and 24/7 customer support, and accepts payments in more than 135 different currencies. Deposits arrive in your merchant account 1-2 days after the transaction has been processed.

Pricing for Stripe is pay-as-you-go, taking a 2.9% cut plus $0.30 per transaction.


Square offers a suite of tools that make running an ecommerce business easier, from credit card payments to inventory tracking and analytics to invoicing. They even have an online store builder where you can build your ecommerce website entirely using their software. Deposits arrive in your merchant account as soon as the next day. They offer live phone support and dispute management.

Pricing for Square is pay-as-you-go, taking 2.9% plus $0.30 per transaction.


PayPal is an ecommerce checkout solution that offers customers many ways to pay—and no, they don’t need a PayPal account. PayPal allows ecommerce businesses to offer pay-later options to customers and even accept payments with cryptocurrencies. They process all major credit and debit cards in more than 100 currencies. You can easily connect PayPal to your ecommerce platform without any coding.

Pricing for PayPal is pay-as-you-go and a little higher than others, at 3.49% plus $0.49 per transaction.

Shopify Payments

Shopify is one of the best ecommerce platforms out there and offers a payment processing system that runs through Stripe. This allows Shopify users to skip signing up with third-party software and lets them accept payments right from the get-go. Shopify Payments gives you an overview of your business’s finances, allowing you to track orders and payments all in one place. You can receive deposits in 1-3 business days.

Pricing for Shopify Payments depends on your Shopify subscription level. For basic Shopify users, it takes 2.9% plus $0.30 per transaction.

WooCommerce Payments

If your ecommerce website is built on WordPress, WooCommerce Payments is a way to run your business and manage your payments all in one place. WooCommerce Payments allows you to accept various payment methods, including credit cards, debit cards, Apple Pay, and Google Pay. It accepts over 135 currencies and offers 24/7 support via chat.

Pricing for WooCommerce Payments is pay-as-you-go, taking 2.9% plus $0.30 from each transaction processed.

Final Words

Being informed about credit card processing is important if you want to run a profitable ecommerce business. Every business has different needs, so compare your options carefully and choose a reliable credit card processor for a smooth and secure checkout process.

Then comes the fun part: watching those payments roll in.

If you don't have an online store yet, be sure to also check out our Best Picks for Ecommerce Platforms. There you will find our detailed ranking of the best providers resulting from our study.

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I used to sell everything online. Today I teach others to do the same. As an ecommerce consultant, I explore opportunities and test new strategies to leverage what others have yet to see.