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Accepting online payments: the ultimate how-to guide

by Levi Cooperman | October 23/2007 | cost-of-goods-sold

How do I start accepting credit cards online?

That’s a very common question everyone here at FreshBooks hears from people calling and e-mailing in. I’ll try answering the best way I know how: through a little question-and-answer session.

Here are the questions we usually ask someone who calls in:

1. Where are you based?

If you’re in the USA—you have a lot of options. Canada—you have a few options. The rest of the world—sadly, very few options. If you are outside of the United States or Canada, we usually skip to recommending PayPal and leave it at that. There are more options, but FreshBooks doesn’t support them yet. We hope to soon, but in the meantime, PayPal is your best bet.

2. Do you already have a merchant account?

Or more to the point, do you even know what a merchant account is?

A merchant account is essentially a bank account that handles your funds received via credit cards. They normally take a percentage off of every transaction. This is called a “discount rate.” If you have a storefront or a retail business and you are swiping people’s cards, then you already have a merchant account.

If you want to start accepting payments online, you’ll need to give your merchant provider a call and ask for an Internet merchant account—this is different from a regular merchant account, because it gives you the ability to process credit cards without the card being physically present for the transaction.

3. If you do have a merchant account, do you already have an account with a payment gateway like or PayPal?

If so, chances are you already know what you’re doing and you aren’t even reading this article. If you don’t, then you can read on and I’ll give some more details on what a payment gateway is and what the options are.

A payment gateway is kind of like the middleman between your customer and you or your merchant account. They normally have a merchant login where you can manage your account, run reports, submit refunds, and even send invoices. None of them have the advanced capabilities of FreshBooks, but if you run a retail business or a storefront and all you want to do is send one invoice online and get paid, you can probably do that directly through your payment gateway. (We’re all about honesty here at FreshBooks!)

Of course, if you want to start managing all your invoices, keep track of everything and get paid faster, then you can use FreshBooks in conjunction with a payment gateway.

Payment gateways usually charge a monthly fee (PayPal is the only exception) and sometimes a setup fee. Many of them also require an online merchant account, but will usually help you get one if you don’t already have one.

Here are your options when it comes to payment gateways:


The big daddy of them all. PayPal is incredibly useful and powerful and scary at the same time. The standard offering is free to use and provides any very small business that wants to quickly accept payments online a near-perfect solution. You can read all about PayPal from any number of sources. They have a number of offerings that work with FreshBooks:

  • **PayPal Standard:** This is the basic PayPal account. To start collecting on your FreshBooks invoices with PayPal Standard, you just need to enter your PayPal ID in your FreshBooks settings. When you send an invoice, there will be a link to pay and it will take your customer to a confirmation page that shows the total amount and provides a link to PayPal. Your customer then clicks that button and follows the instructions on PayPal’s site to pay the invoice. After they complete their payment, they must click “Return to Merchant,” at which point they’re directed back to FreshBooks and your invoice gets updated as “paid.” You can see a demonstration of this entire process in this blog post.
  • **PayPal Payflow Pro:** This is PayPal’s new offering, which they recently purchased from VeriSign. It is a fully functional payment gateway that you can use with FreshBooks to collect one-time payments as well as automatically charge your customer’s credit card. Payflow Pro requires you to obtain an Internet merchant account. It has proven to be a very flexible solution and gives you all the features you’ll ever need in a payment gateway. The service has not been as reliable since PayPal took it over, but it’s still top-notch.
  • **PayPal Website Payments Pro:** I’m not sure of the history behind PayPal Website Payments Pro (let’s shorten it to PayPal WPP so I don’t get a cramp typing this article), but I think PayPal created this service before they decided to purchase Payflow Pro from VeriSign because from the customer’s perspective it is almost identical. It provides all the same functionality, except that you don’t need to go out and get a merchant account. This is advantageous if you don’t like paperwork and/or your business is fairly new. Getting a merchant account can sometimes take some time and they make it more difficult if you are just starting out. Some of the downsides for FreshBooks users is that it is only available in the USA (the UK version is just a re-badged version of Payflow Pro). It is also controlled by PayPal and they won’t let you send recurring transactions, so you can’t use it to automatically charge your customer’s credit card.

That pretty much covers their offerings; you can read more about PayPal here. They also have something called Express Payment that is available if you have WPP, but express payment is just PayPal Standard on steroids. It will provide more consistency, but it still requires your customer to have a PayPal account.


Authorize.Net has built a very good reputation as the leader in online payment gateways for small business. They have a great solution with a no-nonsense gateway that just works. They provide a more direct solution than PayPal Standard, allowing your customer to seamlessly pay you with a credit card without having to leave your FreshBooks account. This offers a completely branded payment experience for your customers. Authorize.Net’s prices are reasonable and from what we have experienced, their service is great. When you refer people to sign up to a payment gateway, no news is good news; we’ve received largely positive feedback from new customers getting going with Authorize.Net and existing customers continuing to use the service.

Get a discount on Authorize.Net services by signing up through us.

The rest

FreshBooks has integrated with a host of other payment gateways. A select group of them are capable of handling automatically charging your customer’s credit card on a recurring basis. They include: Landmark (a smaller provider with excellent rates and easy online signup), Payment Processing Inc. (a U.S.-based service that actually purchased what was formerly a Canadian gateway, Paradata), iTransact (a larger gateway that also has a good reputation from our standpoint because we haven’t received any complaints), Linkpoint (ditto to iTransact), PSiGate (a Canadian gateway—yaay Canada!—they are a great solution if you are a Canadian business).

The outliers

A special payment gateway that doesn’t actually process credit cards is Electracash. They can enable you to collect your payment with something called an eCheck on the U.S.-based ACH (Automated Clearing House) network. This is a cool service, but be warned it doesn’t work for Canadian businesses, and they usually insist on holding back a certain amount of money for a designated time period until you become a more trusted merchant. and PayPal Payflow Pro also process ACH payments, but they will still charge a percentage instead of the low per-transaction fees Electracash charges.

The final one worth mention is To be honest I don’t know much about, except they seem to be very simple to get set up and will work with very small businesses much like PayPal. They also offer their services to countries outside of the US and Canada.

In conclusion

I am a big believer in giving your customers an easy option to pay you because any barriers to payment you can remove will increase your cash flow and that is arguably the best thing you can do for your small business. If you want to get going immediately, PayPal is a great place to start. If you are ready for the next step, then take your pick of payment gateways that work seamlessly with FreshBooks.

If you are thirsting for more knowledge, check out the FAQ inside our help manual. Good luck, and happy collecting!

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