How Online Bill Pay with a Credit Card Works

With online bill pay, credit card payments are accepted and processed through gateway services or merchant business accounts. In both cases, processing internet ecommerce payments for products and services becomes an easy and simple process, for both customers and internet merchants.

Payment Gateway Services

A credit card payment gateway service handles the credit card transaction. They authorize payment and transfer requests. The gateway service protects the merchant from fraudulent transactions by securely verifying the transaction.  They provide a layer of security and protection for both the merchant and customer. Gateway services do not provide fund holding services, instead, they direct the authorizations.

Merchant Accounts

Merchant accounts are differentiated from bank accounts because they are designated specifically for credit card transaction payments. Generally, once a payment is authorized, the payment is transferred into the merchant account, which then holds the funds for a short period of time and then the funds are transferred into the merchant’s regular bank account.

Online Bill Pay Process

First, the customer places their order with an online ecommerce merchant. Next, the customer provides their credit card information for the transaction. The information is converted to encryption style information and is processed through the credit card payment gateway service.

The information then travels to the customer’s credit card company.  The card company provides information about the card's validity and balance. If the credit card company denies the transaction, a code is transmitted to determine the reason for denial. If approved, the processing company transmits a credit authorization code to notify the merchant that the transaction is approved. The credit card processing company then sends a transfer request to the credit card company for payment. The funds are then transferred into the merchant account.

The merchant account holds the funds for the designated period of time, then the funds are transferred into the regular bank account of the merchant.

Benefits of Using Online Bill Pay Services

The primary benefit of having online bill pay is the convenience of credit card payments. In some cases, merchants also accept e-checks, wire transfers and debit card payments. Generally, the processing of other bill pay services works like credit card transactions.

Online merchants that utilize online bill pay services create immediate access to order processing for their customers and increase their processing abilities.  The process is easy and fast. Ecommerce businesses can complete financial transactions without manually entering the information saving time and reducing errors.

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