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What Are Payment Gateways and How Can You Use Them on Your Site?

written by: Niki Fears•edited by: Michele McDonough•updated: 6/3/2010

Find out what payment gateways are and how you can easily use them to sell items and services from your website.

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    If your web site is offering a service or if you are selling any variety of products then you will, of course, need to be able to send invoices for goods or a bill for services rendered and to collect payment from your customers. While you do have a variety of methods for doing this, including setting up a merchant account and utilizing various methods to collect the billing information from your customers. You would then need to submit this information to the company where you hold the merchant account and then, they in turn, process the payment and finally you get paid. However, there is an easier way of getting paid by using a payment gateway.

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    What is a Payment Gateway?

    A payment gateway is a service or application used online to help merchants, service providers, and others collect payments from their customers. If you do anything online that you wish to get paid for, you will most likely need to use some sort of a payment gateway to help you collect billing information and to undergo the actually process of obtaining payment. Generally, a payment gateway is a service offered by a third party who handles the payment in exchange for a small fee, generally a percentage of the total amount being billed. They process the payment and place the money in your account, usually within 7-10 business days the funds are available depending on which service that you use.

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    Advantages of Using a Payment Gateway:

    There are several key advantages to using a payment gateway service. For one, their fees (if any) are generally quite lower than those associated with a merchant account. Secondly, there are no credit issues involved with using a payment gateway in contrast to merchant accounts. This is particularly important if you are a new business with no credit history to really speak of. Another great benefit is that there are no minimum sales amounts required as is the case with many merchant accounts which require a certain level of established credit card sales in order to utilize their service. If you are just starting your business or you are selling goods or services merely as a side business to earn a little extra money then you may be unable to obtain a merchant account. Lastly, using a payment gateway protects you from the hassle and costs of dealing with customer payments. That means you do not have to worry about getting stuck with a bad check or other such issue since the funds are handled for you.

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    How to Use Payment Gateways:

    Payment gateways are usually fairly simple to use by merely adding a few lines of code to your website or sending an email invoice to request payment. To learn more about how to use two of the most popular payment gateways check out this article on Google's “Check Out” service and the established standard PayPal. Some web editors even have built in tools to help you utilize payment gateways, such as the WYSIWYG PayPal button creator, you can also use standard programs such as Drupal for adding buttons. (To learn how to use Drupal to add buttons check out the following articles: How to Create and Add a PayPal Donation Button to Drupal Part 1, Small Business Web Hosting Options features several great web hosts that feature both PayPal and Google Checkout compatibility, this article on reviews another service that also offers easy to use PayPal feature. To find out more about using Google Checkout, read Five Reasons to Use Google Checkout.

    Whether you are a consultant offering your services or a power merchant with a full scale retail business, using a payment gateway can help to get you, and keep you in business and give your customers an easy way to do business with you.