How Do Online Credit Card Systems Work? Top 9 Benefits

According to the Fed research from 2021, the average American holds three credit cards. This stat proves that the merchants that do not accept credit card payments face the risk of losing massive business each year. However, even the merchants that accept credit cards conventionally today face the risk of losing business if they do not adapt to the modern-day consumer’s needs. With the increase in online transactions and eCommerce adoption, merchants must go the extra mile and accept these credit cards online.

How Do Credit Cards Work Online?

Conventionally credit cards were designed to be used only in an in-person “swipe” transaction. However, most merchants have started accepting credit cards online with current payment processing systems. The savvy consumer now chooses to pay their bills by entering their credit card details (card number, CVV, and pin) on the payment portals.

Here’s the quick process of how merchants get started with their online credit card accepting journey:

  • Partner with a reliable payment gateway: The payment gateway provider will create the necessary iFrame or Hosted Payment Portal for the consumers to enter their credit card details. Ideally, merchants should partner with a PCI-compliant payment gateway provider. Such compliance ensures that no sensitive customer information stays on the merchant’s systems after completing the transaction. In addition, they will not accrue the full responsibility of the checkoff list the PCI-DSS requires because this fintech services provider will help manage the compliance.
  • Adopt AVS and ACH: Adopting address verification and ACH check verification systems will help merchants negotiate a lower processing fee on consumer transactions.
  • Accept different types of cards: Merchants should ensure that they accept cards from various card issuers such as Visa, Discover, Mastercard, and American Express.
  • Start accepting credit cards: Once they have the necessary technology, they should advertise that they accept credit cards on their website.


What are the Benefits of Adopting Digital Payments like Credit Cards and ACH?

Benefits for Merchants

Self-Serve and Self Check-out

With digital payment such as online ACH and credit cards, merchants support self-serve shopping queues even in an in-person store. This technology also allows them to accept credit card payments in a card-not-present situation. 

Better Customer Experience with Contactless Payments

Modern-day credit cards have an embedded microchip that lets consumers carry out transactions without swiping them. The need for accepting credit cards online or on a modern microchip card machine increased since the COVID pandemic to support contactless payments

Lessens Processing Fees

Depending on the card, the processing fee for online transactions is usually higher than in-person transactions due to increased risk. However, Visa may be lowering fees for online and in-store purchases at some small merchants with $250,000 or less in annual consumer credit-card volume. When business owners get encouraged to use ACH as their preferred online payment acceptance policy, they save even more on their merchant processing fees.

Automated Recurring Payments

Merchants with a loyal customer base often offer a subscription plan to their customers. With ACH and credit card digital payments, they create automated recurring bills. This technology helps merchants charge the concerned amount dynamically on a set schedule on their customer’s checking account or credit card. 

Protects Merchants’ Risk of Bad Checks

A recent study by the Evidence-Based Cybersecurity Research Group shows that check fraud has been on the rise since August 2021. While checks were the most popular way of paying a balance in full, especially for more significant amounts, they are no longer as popular. In fact, paper-check-based transactions are only used in a few business transactions nowadays.

As Nacha strengthens the security regulations for online check processing, fewer businesses accept paper checks. With standards like account validation that went into effect March 19, 2022, merchants appreciate the lower than credit card merchant fees they pay while enjoying less risk with check verification rules in place. 


Benefits for Consumers

Exclusive Discounts

Issuing banks often partner with credit card issuers to create rewards cards that offer additional benefits to their users. Some of the most innovative credit card users leverage the points on their cards to get exclusive access to expensive clubs and business class flights for free. NY Times recently produced an article on Brian Kelly, a former Wall Street executive popularly known as “The Points Guy.” Brian managed to travel the whole world by maximizing the points accumulated on his frequent flyer credit cards.  

Lesser Risk

Digital payments are often more secure than carrying cash to spend on goods and services. A transaction using mobile or another form of online payment gives a receipt, usually by text or email, that consumers possess if they needed to replace or refund purchases.

Additionally, fintech providers integrate protection for digital payments with several layers of authentication to prevent misuse. If someone loses their card, they can easily block unauthorized use by making a single call. In fact, some premium cards offer a 24×7 concierge service to handle fraud and card loss. 

Price Protection Offers

The safety offered by digital payments also comes in insurance schemes. Many secured credit card issuers offer an insurance program that covers the user on several fronts. These include:

  • Return protection coverage
  • Fraud protection
  • Price protection
  • Extended warranties
  • Cellphone protection

Grace Period

The biggest benefit of using credit cards is the extended billing cycle. The controlled use of credit cards helps consumers spend money that they don’t have. As long as they pay their bills in full each month, they don’t need to pay heavy interest on the borrowed money. Credit cards also help individuals build their credit history and a strong credit score that gets them low-interest loans, preferred pricing for certain items like supply deliveries, and a good reputation for employers who pull the credit history of potential employees before hiring them. 

To make the credit card offers more lucrative, the issuing banks often waive off annual fees and interest charges for their customers who use their credit cards beyond a specific limit every year.


Top Digital Payment Methods

Credit Cards

A credit card is one of the most popular digital payment methods. They not only help with cash advances in times of need but also help save money. Merchants that do not accept credit cards risk missing out on sizeable business opportunities. Ideally, merchants should accept all major credit cards, online and in-person, if they have a conventional brick-and-mortar store. Some merchants that have a cloud-based eCommerce business model may get away with accepting cards just online.

Hosted Payment Portals

More and more merchants are actively adopting hosted payment portals to process money online. Tech-savvy merchants are not restricted to geographical constraints with a conventional physical store. Instead, they ship their products/services across the globe with low shipping costs. By incorporating hosted payment portals on their websites, they seamlessly accept payments over the internet.

Merchants need to partner with a reliable payment processor to adopt these payment pages on their website for security and compliance measures. Moreover, the best payment processors offer favorable payment technologies that help them automate and process payments much more seamlessly.

Mobile Wallets and Apps

The rise of mobile apps and wallets such as Samsung Pay, Apple Pay, and Google Pay made consumers’ and merchants’ lives easier. Now the merchants don’t spend several minutes looking for the exact change on cash transactions. In fact, they accept payments via this contactless NFC (Near Field Communication) technology with advanced card machines. With this technology, customers waiting to pay their bills in long queues gain the option to tap and pay via their NFC-enabled smartwatch/token or scan a QR code for instant payment. They also save money with lower processing fees on small transactions when using mobile wallets.

Merchants that accept credit cards online possess the advantage of conducting business online. With the right payment technologies, they can directly deduct the concerned bill amounts from their customers’ bank accountsNot to forget, accepting digital payment methods such as ACH solutions also helps them leverage the cash discount program.


If you are a business owner who wants to start accepting ACH and credit cards online, reach out to us today. We help merchants with low processing fees and complementary technologies that make payment collections easy and efficient. Schedule a call with one of our top financial experts.


Date originally published: May 08, 2022 

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