How Does Online Credit Card Processing Work?

Online credit card processing is made possible through the usage of virtual terminals. These are the digital equivalent of the machines used in stores where customers swipe their cards. Virtual terminals allow customers to enter their credit card data into a form, and then complete the transaction over the web. E-commerce merchants will typically rent their virtual terminals from companies that specialize in online payment processing. The merchant may pay a fee monthly, or through a percentage of each transaction.

Virtual terminals are completely digital and do not utilize any type of hardware. Because customers are unable to swipe their cards, all their payment information must be entered manually. While virtual terminals are quite convenient, they are not the best solution for processing a large volume of payments.

Online Payment Options

Many online vendors will specialize in different types of credit card processing. For example, some specialize in donations, while others will specialize in registration for events or product purchases. The vendor will provide a digital interface which is specific to the type of transactions that the merchant intends to process. Some online credit card payments must be integrated with management software, with one example being membership sites. Advanced software which is payment enabled can process transactions directly. This software is convenient because it allows companies to handle a larger volume of payments, and reduces the need for double entry, which is time consuming.

Online Credit Card Verification

Security is a critical aspect of processing credit card payments over the web. Verification is the mechanism by which the person who attempts to use the card is identified as being the rightful owner. This protects cardholders against fraud, and works in a number of different ways.

The CCV or credit card verification number is one example. This is the three digit code located on the back of the card, and it ensures that the person who is trying to make an online payment is actually in physical possession of it, instead of just having the credit card number. This is why it is important to safeguard the primary card number as well as the CCV on the back.

Other companies such as VeriSign ensure that any credit card data transmitted is done so through a site which is secure and authenticated. Their SSL tools are some of the most rigorous on the web, while still allowing merchants and consumers to conveniently process payments.