Payment processing on internet is done through credit cards. To process payment you require an online merchant account and provide your visitors secure(SSL) line so that the data they provide is kept safe.

Merchant accounts are special accounts that provide merchants with the ability to accept and process credit card transactions. In other words, a merchant account handles transferring the funds from the shopper's credit card to the merchant's bank account.

For a merchant account you have to apply with a processing bank to have a merchant account dedicated to your business. After you get it you are responsible for it in every way. You would need have a payment gateway also which would take the information from credit cards of your buyers and process the transaction and pass information to your bank to complete the transaction. A gateway is generally not included with the account.

Merchant accounts are quite costly.

An alternative option to accept payment on the net is to use the services of payment processors that do not require you to have a merchant account and carry out the transactions through their own merchant account. They are also known as third party processors.More...

A third-party processor allows businesses and individuals to accept credit card payments through its own merchant account. All you need to do is to apply for an account with the third party processor which would use its own criteria to decide whether or not you'll be eligible. You do not deal with the bank at all. Third party processor also provides you the payment gateway interface which you would use at your site.

When you are just beginning, it is good idea to start with a third party processor(TPP). You can move on to merchant account later when your business has grown to a good extent.

There is another angle also. You need to put quite a security measures and monitoring to provide safe transactions for your customers and to check credit card frauds. This requires increased monetary input. When you work through TPP, this all is their job and they it very efficiently.

There is plethora of TPPs that you can choose from. While some offer free setup, others would ask you for a setup fee. Transaction fee also vary a great deal. TPPs would take a percentage of every transaction that you do through them.

Paypal is a well known and trusted TPP. You don't need any set up fee and they charge you only per transaction. Paypal accepts payment from more than 45 countries.

2Checkout( 2checkout.com) would charge you $49 fee for set up. After that the only charges are per transaction.

These are the two processors that i use routinely and have no complaints.

Authorize.net, Linkpoint, Plugnpay are some of other widely used processors.

After you have opened your account, you need to create a special link which would take your customers to the payment processor site with information on money to be transacted and information about the account (Yours) where it needs to be put in.

Some TPPs would like you to provide info about your product and price at their website beforehand and then provide you a link with your id and product id included, which you can place as the order link.

Others like Paypal make you go through a wizard that asks you information and price of the products and creates a button which you can use as the order button.

That is all. It is that easy.