Credit card processing is confusing, expensive, and overwhelming. Creating this payment processing helps gain a better understanding of what are the charges you have to pay. Also, get to know the options available at your disposal. The companies processing credit cards provide payment processing and help better understanding. However, it is a must to know about the process working, the involved parties, the risks, the processing fees, and more.
Credit card processing involved parties
Many parties are involved and there are essential roles of many people as customers use their card for payment. The parties involved are:
- Merchant– The business accepting payment and requires credit card processing.
- Issuing Bank– It refers to the cardholder’s bank. The bank issues to their customers the card as a part of the card associations. These issuing banks pay for the cardholder’s purchases made to the acquiring banks. Thus, it is the responsibility of the cardholder to pay the amount back by credit card processing agreement.
- Card Association– MasterCard, VISA, Discover, and American Express. They are the governing bodies’ settings arbitrate between issuing and acquiring banks and setting interchange rates. They are accountable for improving and maintaining their networks of the respective card.
- Cardholder– The credit card owner who is a customer using the credit card for the purchase.
- Acquiring Bank: This is the business bank. They have the merchant’s funds. They accept the funds during the sale as a card is authorized and then deposit the same into the business’s bank account.
- Payment Processor: The Company processing credit cards handles the purchases batching and processing made using debit, credit, or gift card payments. They typically assist with technical details and offer customer service, acting as intermediaries to the banks and card associations anytime. You can contact them from anywhere.
Process of Payment
Using a credit card has become common for customers to make payments. Know here the credit card processing for payments and the role of each entity:
- It begins with a customer using a credit card and buying an item.
- The credit card requires swiping through a terminal processing such that the card is acknowledged and helps to charge. The next step is the terminal contacting the company for authorization of the online credit card processing.
- The card receives authorization.
- The company processing the credit card sends payment to the business’s bank via a legal merchant services provider.
- The business bank makes the payment as a deposit into the bank account of the connected merchant.
- At the month-end, the statement is sent to businesses as an interchange for every month’s transactions. It is a set fee as per the companies of credit card set for merchants to accept for payment their cards.
Service Fees for Credit Card Processing
The merchant services pay attention to ensure you do not overpay for credit card processing or mobile credit card processing. Yet you must know the type of fees that are associated with transactions.
Transaction fees are associated with every transaction. They can be per transaction and they are the mandatory fees with credit card processing. The companies set it.
The interchange rates rely on the card type. The expensive part is in maintaining the card cashback, rewards, and perks as the interchange. Debit cards are economical, but credit cards for business are the most expensive.
These occur once. It includes early termination fees, terminal fees, PCI compliance fees, reprogramming fees, chargeback, address verification fees, setup fees, payment gateway fees, and retrieval fees.
There are many things to keep a watch on the statement every month of online credit card processing. The merchant services providers earn profits with businesses as they are not aware of the fees they are paying for. Thus, understand the fees involved and ask for direct interchange fees per transaction cost. Also, ensure there are no online credit card processing fees or hidden charges.
Many providers earn extra profit, besides the interchange, by charging non-mandatory merchant fees to the businesses. These fees are frequently seen on your monthly statement but are not a requirement for credit card payment acceptance.
However, it is best to clarify the monthly minimum fees, batch fees, statement fees, annual fees, next day funding fees, IRS report fees, and check each month statement. Knowing the charges and fees involved is a must so that you do not end up overpaying.