When you first dive into the world of online giving and try to figure out the many terms surrounding processing credit and debit cards online it can be overwhelming! Where do you even start? 

Good thing you're here, because we'll help you navigate the payment industry like a pro.

First Things First

To set the stage, we'll be talking specifically about processing online transactions—whether it's donations, event payments, or other types of online transactions. We'll intentionally skip the part about physical credit card terminals.

What Is A Merchant Account?

Before you start processing online giving, you need a merchant account, but what is it?

A merchant account is what establishes a business relationship between you and your merchant services provider. Essentially, it is a bank account for your organization's online giving transactions.

With traditional credit card processing services, you cannot take payments until after you apply and are approved for a merchant account

What Is A Payment Processor

A payment processor is the bank or entity that actually processes the payment request

When you sign up for a merchant account, it's often in conjunction with a payment processor. You'll go through a rigorous underwriting process since they are the ones responsible for the risk involved in processing transactions and moving money from one person to another organization.

What Is a Payment Gateway?

A payment gateway allows merchants to accept credit card donations by facilitating a secure payment transaction through the transfer of information between a payment portal (like your website or mobile app) and the payment processor. 

Payment Gateways process credit & debit cards as well as bank account (ACH) transactions online through a website or e-commerce platform.

Payment Gateways offer many features that can help automate your organization, like recurring or scheduled transactions, secure tokenization of sensitive account numbers, and robust reporting.

How does all of this work together?

When customers give with a credit card, payment gateways connect merchant accounts with payment processors by transferring credit card information between the bank that issued the credit card and the bank account for your organization.

  • A person gives online
  • The payment gateway transfers the transaction information to a payment processor
  • The payment processor confirms that the money exists in the cardholder's account (credit card or bank account) and transfers the funds to the merchant account bank.

Why doesn't Stripe doesn't mention a merchant account?

In an effort to simplify the complexity of the payment industry, Stripe consolidates the Merchant Account, Payment Processor, and Payment Gateway into a single company.

While the simplicity is admittedly nice and easy to understand since you no longer need to understand how these three services work together, it comes at the expense of a higher percentage of fees you end up paying for processing credit cards. They and other similar companies charge a flat rate that typically starts at 2.9% + $0.30 per transactions. 

Read more about how My Well processing fees compare to other companies.

Interchange Plus Pricing

By leveraging a merchant account and payment gateway, you have the ability to save a significant amount of money that can be re-invested into your ministry at the expense of some complexity.

The most cost effective pricing method is called Interchange Plus Pricing. This allows you to pay significantly reduced rates based on the actual card type used in a transaction.

For a regular Visa card, the cost might be 2.5% per transaction. With a debit card, you might see a fee as low as 0.8% per transaction. And through My Well, you are charged 0% for bank account (ACH) transactions.

Depending on how well you communicate to your givers, you have the power to increase your money for ministry and decrease fees by simply encouraging your donors to give by bank account.

Next Steps

We hope this article helped you better understand how the various services work together! If you have more questions, please reach out using the chat icon in the bottom right of any page on our site.

If you're ready to stop over paying for giving, head on over to our Get Started form, and we'll help you quickly and easily setup your Merchant Account so you can begin processing online giving for your ministry!

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