Are you considering integrating credit card processing into your business operations but feeling a bit overwhelmed or confused by all the technical jargon? You’re not alone. Processors and payment providers use words like ‘merchant services,’ ‘chargeback fees,’ and ‘interchange-plus pricing’, which can make it difficult to comprehend what credit card processing means. To save you time and hassle, let us break down the fundamentals of how credit card processing works – from start to finish – so you have clarity around this important part of running a business.
What Is Credit Card Processing?
Credit card processing is the practice of collecting payment for goods and services through credit cards. It involves several steps that ultimately provide merchants with a secure method of accepting credit cards as payment from customers. Credit card processing consists of multiple components, including credit card terminals, payment gateways, merchant accounts, and credit networks.
Defining Terms
Credit card processing is an important part of running a business as it allows businesses to provide customers with safe and secure payment options. By understanding the terms associated with credit card processing and how credit cards work, you can make more informed decisions about integrating credit cards into your business operations.
- Merchant – A merchant is a person or company that accepts credit cards as payment for goods and services.
- Chargeback – A chargeback is an event in which a customer disputes a credit card purchase with their credit card provider. The credit card issuer then processes the chargeback, returning the funds to the customer and charging the merchant back for the transaction amount plus any additional fees.
- Interchange-Plus Pricing – Interchange-plus pricing is a pricing method used by credit card processors where they add a fixed markup on top of credit card interchange rates. This model allows merchants to have more control over their credit card processing costs as it enables them to choose what type of credit cards they want to accept and how much risk they are willing to assume when processing those credit cards.
- Payment Gateway – A payment gateway is a software application that allows credit card transactions to be securely processed online and in person. This technology serves as a bridge between the credit card network, merchant account, credit card processing service provider, and consumer’s credit or debit card.
- Merchant Account – A merchant account is an agreement with a bank or financial institution that allows merchants to accept credit cards and other forms of payment for their goods and services.
- Credit Networks – Credit networks are companies that process credit card transactions on behalf of merchants and consumers. They also provide fraud protection to ensure secure credit card payments.
- Terminals – Credit card terminals are physical credit card readers that allow merchants to securely accept credit or debit cards in person.
How Does It Work?
Credit card processing is a relatively simple process. When a customer presents their credit or debit card to make a purchase, the credit card terminal reads the information and sends it to the credit network for authorization. The credit network then sends an approval code back to the credit card terminal. The merchant then captures this code and processes the credit card transaction securely.
The merchant’s bank will then release funds from the credit networks into their merchant account minus any fees associated with the credit card processing service provider. These fees typically include interchange fees (set by major credit networks), chargeback fees (if applicable), and any other additional costs related to using that particular processor’s services.
Different Methods of Card Processing
There are several different methods of credit card processing, each offering its own advantages and disadvantages. The most popular credit card processing solutions include point-of-sale terminals, online payment gateways, mobile credit card readers, and virtual terminals.
- Point-of-Sale Terminals – Point-of-sale terminals are physical credit card readers that allow merchants to accept credit or debit cards in person. These machines typically come with a built-in printer for receipts and a chip reader for EMV transactions.
- Online Payment Gateways – Online payment gateways are software programs that enable merchants to securely process credit card payments online. This type of credit card processing is typically used for e-commerce stores and allows customers to enter their credit card information directly into the merchant’s website.
- Mobile Credit Card Readers – Mobile credit card readers are small credit card readers that attach to a smartphone or tablet and enable merchants to accept credit cards on the go. These credit card processing solutions are typically used by small businesses or those who need to accept payments at multiple locations.
- Virtual Terminals – Virtual terminals are software programs that allow merchants to process credit cards without a physical credit card reader. This type of credit card processing is often used for phone orders or mail orders as it requires no additional hardware.
How to Choose a Merchant Services Provider for Your Business
Choosing the right credit card processing provider can be a challenge. There are a few key things to consider when selecting a credit card processor, such as transaction fees, customer service, and fraud protection.
- Transaction Fees – Transaction fees are one of the most important factors to consider when choosing a credit card processor. It’s important to understand each merchant services provider’s rate structure so you can ensure that you’re not overpaying for credit card processing.
- Customer Service – A good credit card processor should provide excellent customer service in case you ever have any issues with your credit card transactions or need help setting up your account.
- Fraud Protection – Lastly, make sure to choose a credit card processing provider that offers fraud protection measures like address verification and card security code verification. This will help protect your business from fraudulent credit card transactions and chargebacks.
No Fees Credit Card Processing with Xccept
Xccept offers credit card processing with zero transaction fees, no setup costs, and no monthly fees. With our credit card processing solution, you get 24/7 customer support, secure credit card transactions, fraud protection measures, and an easy-to-use online dashboard.
Find out how our zero fees credit card processing program works and start processing credit cards more efficiently today. Sign up for Xccept by applying here.
