Merchant Account Vs Payment Gateway – Everything You Need to Know

As a business owner, you need to be able to accept credit and debit card payments from your customers. In order to do this, you will need either a merchant account or a payment gateway. But what’s the difference between the two? And which one is best for your business?

Merchant Account Vs Payment Gateway – Detailed Comparison

If you’re looking for a detailed comparison of merchant accounts vs payment gateways, you’ve come to the right place. We’ll go over everything you need to know about each option, including the benefits and drawbacks, so that you can make the best decision for your business.

What is a Merchant Account?

A merchant account is a type of bank account that allows businesses to accept credit and debit card payments. In order to set up a merchant account, you will need to partner with a bank or other financial institution.

There are a few different types of merchant accounts, including:

Retail merchant accounts: These are the most common type of merchant account and are typically used by businesses that have a physical location where they accept credit and debit card payments.
MOTO merchant accounts: MOTO stands for “mail order/telephone order” and these merchant accounts are typically used by businesses that take orders over the phone or online.
High-risk merchant accounts: These merchant accounts are typically used by businesses that are considered to be high risk, such as those in the adult entertainment or gambling industries.

Benefits of a Merchant Account

There are a few benefits that come with setting up a merchant account, including:

You’ll have more control over your finances: With a merchant account, you’ll be able to keep your business finances separate from your personal finances. This can be helpful come tax time.
You can build your business credit: If you use a merchant account and make all of your payments on time, you can help build your business credit. This can come in handy if you ever need to take out a loan for your business.
You can offer credit to your customers: If you have a retail merchant account, you’ll be able to offer credit to your customers. This can help you increase sales and grow your business.

Drawbacks of a Merchant Account

There are also a few drawbacks that come with setting up a merchant account, including:

You’ll need to pay fees: In order to set up and maintain a merchant account, you’ll need to pay various fees, such as an annual fee, a monthly statement fee, and sometimes even a per-transaction fee.
You may need to put down a deposit: Some merchant account providers may require you to put down a deposit, which can be anywhere from a few hundred to a few thousand dollars.
You’ll need good credit: In order to qualify for a merchant account, you’ll need to have good personal and business credit. If you don’t, you may have a hard time getting approved.

What is a Payment Gateway?

A payment gateway is an online service that allows businesses to accept credit and debit card payments. In order to set up a payment gateway, you will need to partner with a payment processor.

There are a few different types of payment gateways, including:

Hosted payment gateways: These payment gateways are hosted by the payment processor, which means that you don’t need to worry about hosting the gateway yourself. This can be helpful if you don’t have the resources or expertise to host a gateway on your own.
Self-hosted payment gateways: These payment gateways are hosted by you, which means that you’ll need to have the resources and expertise to host the gateway yourself. This can be helpful if you want more control over your payment gateway.
Redirect payment gateways: These payment gateways redirect your customers to the payment processor’s website to complete the payment. This can be helpful if you want to outsource the payment process to a third party.

Benefits of a Payment Gateway

There are a few benefits that come with setting up a payment gateway, including:

You’ll be able to accept credit and debit card payments: With a payment gateway, you’ll be able to accept credit and debit card payments from your customers. This can be helpful if you want to increase sales and grow your business.
You can automate your billing process: With a payment gateway, you can automate your billing process. This can be helpful if you want to save time and money on billing and invoicing.
You can reduce fraud: With a payment gateway, you can reduce the risk of fraud by setting up fraud prevention tools. This can be helpful if you want to protect your business from fraudulent charges.

Drawbacks of a Payment Gateway

There are also a few drawbacks that come with setting up a payment gateway, including:

You’ll need to pay fees: In order to set up and maintain a payment gateway, you’ll need to pay various fees, such as an annual fee, a monthly statement fee, and sometimes even a per-transaction fee.
You may need to put down a deposit: Some payment gateway providers may require you to put down a deposit, which can be anywhere from a few hundred to a few thousand dollars.
You’ll need good credit: In order to qualify for a payment gateway, you’ll need to have good personal and business credit. If you don’t, you may have a hard time getting approved.

Now you should have a better understanding of the difference between a merchant account and a payment gateway. If you’re not sure which one is right for your business, it’s always best to speak with a professional to get expert advice.