An online merchant account is an indispensable part of any web based business as it is supposed to accept credit card payments from clients and customers. It is a good idea to spend some time to understand the different components of internet credit card processing before you choose a merchant provider to partner with.

There are three layers that exist between the customer and bank account when the credit card payment is made through your website. The first layer is called payment gateway. This layer includes accepting billing information like a credit card number, credit card type, expiry date, payment amount and other validation steps.

The second layer is called an online merchant account in which a merchant account with a bank facilitates in accepting credit card payments from clients. The payment gateway sends the billing information to the online merchant account provider. Fraud protection should be the primary concern while choosing an online merchant account provider.

The third layer includes integration of your website with the service providers of a payment gateway service and merchant account. You can follow the web integration instructions given by various providers.

Also, the cost of the merchant providers is a point of concern. The cost of the online merchant account provider includes an up front application fee; on-going fixed fee; fixed transaction fee; termination fee and other miscellaneous fees.

An upfront application fee is taken by internet merchant account providers to cover the cost that is involved in processing the application form. Whether or not you open an account with them, most of the service providers charge you this fee. However, you may also choose to open an account with the providers who do not charge you with this fee.

An on-going fixed fee includes the fee that many online merchant account providers charge you on monthly basis and varies from each provider.

A transaction fee is the fixed fee that you need to pay to the online merchant account provider after each sale. This fee remains constant irrespective of the amount of sale.

A termination fee is the fee that merchant account providers take in case you terminate your merchant account before the contracted period of time. This period may vary from one to three years.

Miscellaneous fees include some special fees, for example, when a customer asks for the refund and wants their credit card to be credited.

So, before you choose to open an online merchant account you need to read the contract carefully and understand various cost components very carefully.

Setting up an online merchant account is also a tricky process. After choosing an online merchant account provider, you need to furnish a lot of information asked by the acquiring bank. The information includes your business history and performance, business accounts, predicted turnover of business, expected transaction volumes on credit cards, expected frequency of transactions, detail of your suppliers and so on. Also, separate merchant accounts are required to be opened with the bank for your online sales and sales in person.