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Registered: ‎08-13-2019

Payment Gateway. and Merchant Account

You don't need both—there are many payment processing solutions available such as Stripe that combine the payment gateway with the merchant account as one service.

A payment gateway basically provides fundamental core services relating to credit card transactions (handling purchases, refunds, chargebacks, etc.)

A merchant account is sort of like a holding account where all the money from your customers' credit card purchases gets dumped into temporarily and then funds from the merchant account periodically get deposited into your regular business bank account. The frequency which funds are deposited depends on the merchant account.

There are also two types of merchant accounts to be aware of—dedicated (just for your business) and aggregate (where funds from different businesses are pooled together). A dedicated merchant account gives you a little more flexibility and control (e.g. you can negotiate lower fees), but aggregate accounts are faster and easier to setup.

The advantage of having the payment gateway separate from your merchant account is that you can shop around for the best fees/rates, and you can switch out just one component (gateway or merchant account) without affecting the other.

The advantage of having a combined solution is that it greatly simplifies things and makes it fast and easy to add credit card payment processing to your website/business through one unified service. The disadvantage is that you may end up paying higher fees/rates and you also don't have the option of shopping around and swapping out just one component (gateway or merchant account).