Credit card processing plus#
Credit card processing series#

Credit card processing is an extremely competitive business, so explore your options. Most important, consider interchange fees and any monthly minimum fees that may apply. Also, look at monthly statement fees and gateway access fees. First, take a look at the cost of all fees, including fees for applying and getting set up. It’s similar to choosing a credit card as a consumer. Selecting a Credit Card Processor If you’re a business owner or merchant, there are several factors to consider when choosing a credit card processor.

Credit card processing plus#

There is another model called interchange plus, which charges a percentage of the amount plus a small fixed fee per transaction. There are different pricing models that payment processors use, including a flat-rate model and tiered pricing. There’s also an assessment or service fee charged by the payment network. Fees can include what’s called the interchange fee, which is the base cost of processing the transaction and the largest cost associated with the process. The merchant pays these fees, which are often referred to as “merchant fees” or “processing fees.” The typical merchant fee for a credit card transaction is 2 to 3% of the amount of the sale. During the settlement process, credit card processing fees are collected from the banks involved, and those fees are subtracted from the transaction. Costs Associated With Credit Card Processing There are substantial costs associated with credit card processing. Settlement then occurs, and funds are moved from credit card issuers to the merchant, who is paid for the sale. The next step is clearing, which is when the bank issuing the card transmits the transaction information to the processing bank. But for the merchant, credit card processing continues. Clearing After the payment has been authorized, the cardholder typically considers the transaction complete. If authorization is approved, the issuing bank will transmit the approval back through the card network to the merchant bank and, ultimately, the merchant. That institution will approve or deny the request, based on whether the account is in good standing and has sufficient credit. That information is sent to the credit card network, such as Visa, Mastercard, American Express, or Discover, and presented to the bank or credit union that issued the credit card. Payment Authentication The merchant then transmits the request for payment authorization through technology called a gateway to the payment processing company. This is the first step in the process of how credit card payments work. The cardholder can also enter the account information online, through an app, or over the phone. Payment Authorization Payment authorization begins when the cardholder uses the card to make a purchase by swiping, tapping, or inserting the card if they’re paying for something in person. Recommended: Credit Card Terms, Explained Stages of Credit Card Processing There are several different components of credit card payment processing, which can help you understand the way credit cards work. Finally comes the settlement of the accounts, which is when the bank issuing the card pays the processing bank, and the merchant receives the money for the purchase. This is when the bank issuing the card relays the transaction to the bank processing it. First, the charge is authorized, which means the cardholder is given permission to make the purchase, and the merchant is given permission to accept it.

Credit card processing series#

How Credit Card Processing Works When a consumer uses a credit card to buy something, that kicks off a series of events. As a business owner, you’ll want to understand the steps and stages involved. For merchants, credit card payment processing is an extremely important part of accepting credit card payments. It involves a series of actions that deliver the money we spend to the merchants we buy from. Credit card processing is something most of us never think about, but it’s key to the way our credit cards work.