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Payment by credit card is one of the most common payment methods on the internet. Therefore, many online retailers optimize their online shops to offer this method of payment.

Credit cards are a very sensible choice of payment in e-commerce and offer many advantages for both retailers and customers, but some disadvantages should be considered. Here is a quick overview into credit cards as a payment method.

How do credit cards work?

Which payment method is the most widely used can vary a lot from a country to another. In some countries, like Germany, other payment methods are more popular than credit cards, and therefore few people own credit cards. A credit card can be used to withdraw money at ATM machines or for cashless payments. Unlike the debit card, the credit card can be overdrawn. As a means of payment, the credit card is attractive because it grants the user a "variable consumer credit". The credit limit depends on the creditworthiness of the customer.

Advantages of credit cards for merchants


advantages credit cards

One of the biggest advantages of credit cards compared to other payment methods is obvious: it’s the most popular on the internet. Numerous online shops are pressured into  accepting credit card payments in order to compete with other online shops. Payments through credit cards require that the credit card holder be over 18, so age checks are performed automatically at checkout. This way, retailers are able to ensure that their customers are adults.

Another advantage of credit card payments is the standard integration: Nearly every PSP offers the possibility to pay with credit card. Currently, retailers who sell internationally are at an advantage if they accept payments through Visa, Mastercard or American Express, which are available globally.

3-D Secure offers high protection against fraud for retailers and customers both. The CVV-Code, or Card Verification Value number, on the backside of the credit card serves as another security level when making e-payments. An online purchase can only be completed with proper information, which includes the credit card number, name of the holder and the date of expiration.

The majority of PSPs only charge small fees (from 1 to 3% of the payment) to process orders paid by credit card. Payments made by credit cards are normally accepted immediately by retailers, and orders are quickly fulfilled and delivered.

Credit cards are also a popular method at POS (point of sale), which is another advantage for retailers.

Disadvantages of accepting credit cards

disadvantages credit cards

Despite the many advantages of credit cards, there are also a few disadvantages to be considered. There are high fraud rates with credit card payments, although these risks can be minimized through the use of 3D Secure, although the conversion rate can be negatively affected by 3D Secure, because the payment process is more complex for customers. Depending on the country and industry of the retailer, many retailers avoid using 3D secure and create a bigger risk for fraud.

Furthermore, the customer may also order a chargeback for up to 90 days after the purchase is completed for the entire amount of the original purchase. In the case of micropayments purchases, the fees can be even more than the original purchase price.

Credit cards can be used all over the world, although there is an innumerable amount of regional credit card producers. In order to guarantee a good conversion rate, retailers must accept many credit cards, so that their customers may pay with their regional cards.

A further disadvantage of payment is that customers must manually enter their credit card numbers as well as other data. With the 3D Secure process, customers must fill out additional information and this in turn reduces the conversion rate.

A payment per credit card offers the customer no anonymity. If, for example, a business offers adult entertainment through credit card payment, they must calculate for a lower number of customers.

In addition, retailers may lose their ability to accept credit card payments if they reach certain fraud rates. Businesses will not lose their ability to accept credit cards immediately, but they must prove that they are finding solutions to reduce the amount of fraud committed through their shops in order to continue using that method.

PSP for credit card payments

Are you an online retailer who wants to offer international credit card payment for your online shop? There are certain criteria that you need to look for where choosing a payment service provider. When deciding on a PSP, you should assess both the advantages and disadvantages of credit card payments in order optimize your shop’s profits.

An important factor in choosing the right PSP is of the largest possible expansion of credit card payment acceptance, both regionally and globally, in the industry that your shop is active in. Only when you offer your customers the possibility to pay with their credit cards do you positively affect the conversion rate of the transactions.

Payment Provider

3D Secure authentication

3D Secure offers higher security, meaning that additional costs for customers. Therefore it’s ideal to choose a PSP who primarily deals with fraud management in order to avoid chargebacks and credit card fraud - in other words, a dynamic, 3D secure system.

This means that the proper rules are in place for when additional input is and isn’t necessary. For example, customers located in the same country as the online shop may not need to enter additional information for orders less than 100€.

In addition, you should consider a PSP that offers a PCI Certification, fulfilling the PCI-data standards.

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