A customer recently asked this question:

What pieces do I need to process credit cards?  I know of the merchant account, payment gateway, and payment processor.  Is this right?  What are  good ways to deal with each of these (aside from a TransFS auction, of course)?

My answer:

That is correct except “merchant account” and “payment processor” are actually the same thing.  So what you really need is just a payment processor and a gateway.  The “account” part of merchant account is kind of a misnomer, since it’s just a pass-through account, the funds are collected into the account at the end of the day from visa/mastercard/amex and then deposited at the beginning of the next day (or longer if you have a lousy processor).

My advice for a gateway is – get one that is easy to integrate and that is processor-agnostic.  Some gateways are processor-specific or captive gateways, so that switching requires you actually rip out code.  If you use a processor-agnostic gateway, switching processors is as easy as a phone call or email.

Also, my opinion on gateways is that bigger is better.  Auth.net is the largest, and I think best for most people, it is among the cheapest, there are *lots* of libraries and code samples around the net which makes it easy to integrate, it works with the largest number of processors and they have the resources to ensure that they rarely go down.

My advice for the merchant account / processor is – 1. get interchange plus pricing   and   2. get a zero-cancellation fee contract.  Both are standard on TransFS and they are the two best ways to not get ripped off (if your switching costs are zero then you keep the processor honest).