What is credit card processing and how does it operate?
Whatever technique you use to take debit or credit card transactions, you should be aware of what takes place during the transaction. What is the process for which the funds from the client’s credit card appear in your account?
Different stakeholders are needed for credit card processing:
- The merchant, who is the one who collects the money.
- Then there’s the cardholder, the person who pays for your product or service utilizing a credit card.
- A third party is an issuing bank, which is the financial entity that issued the credit card to the cardholder, thereby providing a revolving loan.
- Next, there’s the acquiring bank, which would be the bank that accepts payments and processes credit cards in place of the merchant.
When you utilize a third-party payment processing service, the “acquiring bank” is substituted by the payment processing provider. You are not required to open a different merchant bank account to receive credit card payments via these services therefore it is much more efficient.
There are three methods for accepting credit card payments.
With the rise of e-commerce and digital payments, businesses and service providers who do not provide their consumers with card payment choices risk losing business.
You have the ability to accept credit card payments from your consumers in a variety of ways. Some of these alternatives are listed below.
- Traditional point-of-sale systems – When marketing goods and services in a physical location, a point-of-sale system can help you accept several kinds of payments, including debit and credit cards.
- Mobile POS systems – Instead of having customers waste time at a check-out counter, a mobile POS system uses mobile phones, tablets, or other devices to operate as a “register” for credit card payments.
- POS systems, including online payment processing options – Checkout options allow users to directly accept debit or credit card payments through their e-commerce shopping cards without requiring a merchant account.
Consider the following specifications when selecting a credit card processing system.
There are numerous more aspects to take into consideration when deciding to open a merchant account for credit card processing. Total cost, processing fees, ease of use, and security are all factors to consider.
What are the fees associated with credit card purchases?
An interchange fee is charged by the bank that provided the card, and a discount rate is charged by the acquiring bank. Both forms of fees are typically a percentage of the transaction, though a flat price per money transfer may be available.
Charges for processing credit cards go beyond exchange fees. Payment processing fees, setup fees, and monthly gateway access fees, among others, should be considered by merchants. Your payment system sends data about each transaction to the card issuer through a payment gateway.
Considerations when choosing a credit card processing system
When deciding which credit card processor to use, make sure to do your research. Review the Better Business Bureau’s ratings and reviews online. Additionally, you may want to contact other business owners within your trade to find out which insurance companies they use.
Make sure the processing fees are reasonable. In the case of a credit card processing company fixing up a merchant account, make sure that it will report your company’s credit repayment history to a large business credit reporting agency to help build a credit history for your business.
You might not be able to skip the expense of accepting credit and debit payments, but you can’t do without it. You should take the time to research all your options in order to best satisfy your clients.
Infographic Created By Clover, Credit Card Processing Solutions For Small Business