Credit Card Processing

Credit card processing is a service that allows a merchant to accept credit card and debit card payments from anywhere in the world. Millions of people worldwide use credit cards on a daily basis to make purchases for anything from gas and groceries to a down payment on a car. With credit cards and debit cards becoming the standard way of purchasing goods and services, a merchant needs to accept these cards or risk losing customers. There are numerous organizations that handle credit card processing, and although the basic process is the same, the fees, features, and corresponding customer service can vary widely. When choosing a credit card processing company, consider all aspects of the service being provided and the associated costs to determine the one that is best suited for your business.

How Credit Card Processing Works

Credit card processing works via an interchange, which is the flow of money and information through a gateway. A cardholder, the person who has a credit card or debit card (further referred to only as credit card) is able to make a purchase for goods or services in either a retail store or through the internet provided the merchant accepts credit cards. Typically cards that are accepted are Visa®, MasterCard®, American Express®, Discover®, and debit cards.

Credit card information is entered manually, imprinted, swiped at a Point of Sale terminal, or entered into a virtual terminal. The merchant, the person accepting credit cards for goods or services, stores all of the credit card transactions in a batch and then later sends the batch to the acquiring institution, usually at day’s end. The acquiring institution is a bank or business that provides the credit card processing service. The acquiring institution then sends the transaction batch to the card association, which is a gateway network, such as MasterCard® or Visa®.

The card association then debits the issuer, the bank or business that issued the card to the cardholder, and credits the acquiring institution. Once the acquiring institution is paid, the merchant receives his payment, which is the amount of the transaction less the transaction processing fee, known as a discount rate. The typical interchange process takes place within three days.

Fees and Features Associated With Credit Card Processing

There are numerous merchant fees associated with credit card processing. Although the cost of the fees depend upon the credit card processing service (acquiring institution), the types of fees are fairly consistent throughout. Startup costs are assessed for setting up a merchant account and a payment gateway. Monthly costs involve transaction fees, statement fees, chargeback fees, gateway fees, and monthly minimum fees. For the transaction fees, the average rate ranges from 2.5% to 5% and the transaction fees are typically thirty to fifty cents per transaction. Address verification fees are additional.

Customer Service/Technical Support

Customer service and technical support can vary in hours of availability as well as in the method of contact, such as a toll free number, email, fax, or online chat. Depending on the acquiring institution you select, your features can include a virtual terminal, a payment gateway, a merchant account, a P.O.S. credit card swiping machine, eCheck availability, an online shopping cart, and recurring billing.

Fraud Protection

Fraud protection usually entails address verification, real time processing (cards are accepted or declined usually instantaneously), SSL (Secure Socket Layer), TLS (Transport Layer Security) and a three digit CVV2. SSL and its current successor TLS are cryptic protocols that provide data integrity and communications security for networks. The three digit CVV2 is a Card Security Code (CSC) printed as a three digit number found on the back of a credit card and is frequently used for phone, internet, mail, or fax purchases as proof that the cardholder actually has the card in hand. The CVV2 is also known as a CVC2, or CCID.

Error And Disputes

If a transaction processing error occurs or if a customer disputes a transaction, this is called a chargeback. In these instances, the issuer will return the transaction in question to the acquiring institution for resolution. The acquiring institution will forward the chargeback to the merchant, who can either choose to accept the chargeback or contest it. On disputed issues such as a cardholder claiming a fraudulent charge, this is often where a cardholder’s signature or CVV2 is used as evidence that the purchase was made by the cardholder.

Find Out Your Credit Card Options Now!

Choosing an acquiring institution as your credit card processor involves consideration of your type of business in line with the services they offer and the various associated fees. Credit card choices are abundant in today’s marketplace and have become a standard way of life for many people worldwide. Business owners can use our credit card chaser above, free of charge, to input information just once and receive information on the most appropriate card processors and providers. It just takes minutes to make a great business decision. Why not do it now?

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Disclaimer: This content is not provided or commissioned by American Express, Visa, MasterCard, Discover, or any other credit card company or issuer. The opinions expressed here are the author's alone, not those of any credit card company or issuer, and have not been reviewed, approved or otherwise endorsed by any credit card company or issuer. Credit Card Chaser may be compensated through various affiliate programs with advertisers. As always, Credit Card Chaser is an independent website commmitted to helping people research credit card offers and find the best credit card!