Basic Facts About Authorize.Net

Our clients are predominently e-commerce and MO / TO businesses and we are constantly answering inquiries about payment gateways and virtual terminals. To be sure, our free Authorize.Net merchant account is a quite substantial reason for all this interest. But we also learn a lot from these inquiries and the biggest lesson so far has been that there is quite a bit of confusion about what a payment gateway does in the credit card processing chain. In this post I will attempt to disspell at least some of that misunderstanding.

How Does Authorize.Net Compares to a Physical Terminal?

So a payment gateway is a service for collecting and securely transmitting payment information, which is the function also performed by the point of sale (POS) credit card machine. Authorize.Net serves as the link between your e-commerce merchant account and the processor who established it and manages it for you.

As it is to be expected, there are quite a few differences between the functions performed by a POS machine and Authorize.Net and the most conspicuous one is that the former collects the payment data directly from the customer's bank card by "reading" the its magnetic stripe. The gateway, in contrast, collects the information that the customer has manually inputed into the checkout's payment form. Yet, this is actually just a minor technical detail.

Once the information is gathered, both Authorize.Net and the credit card machine encrypt it before transmitting it to the merchant services provider for protection against cyber criminals. The processor then communicates the payment data to the card issuer, who either approves or declines the payment and routes its response back to the merchant through the same channel.

How Much Should You Pay for Authorize.Net?

This is the number one question we get, by far. OK, even though all payment gateways at the end perform the same functions, there can be substantial differences in their pricing. Authorize.Net usually costs roughly $20 per month, but some providers may charge you $10 or less. You may also be charged a set-up fee of up to $100 and there will most likely be a per-transaction authorization fee, usually of $0.10 per transaction.

It is essential that you understand that the payment gateway fees are quite separate from the merchant services fees. To help you understand why this is the case, I will use the POS machine analogy again. You may be charged a monthly fee for the terminal, especially if it has some fancy features for accounting integration or for managing inventory. When looking into pricing proposals, you need to evaluate the whole package, including the merchant services rates and fees. You cannot afford to allow yourself to be blinded by impossibly low headline rates. As usual, if it looks too good to be true, it always is. Authorize.Net and payment processing are certainly no exception to this rule.