Anatomy of a Credit Card Transaction
When searching for the best credit card processor, it’s essential to have a basic understanding of the credit card transaction. This knowledge will help limit frustrations and help you secure the lowest fees. There are billions of credit card transactions performed each year. In a matter of seconds, a person can pay with their card, and information is sent to approve or reject the purchase.
The entire process begins when a credit card or credit card number is presented. The company will then be sent the electronic information from the credit card. If the cardholder has not reached his or her credit limit, the bank will authorize the card and send this information back to the merchant. This process takes only a matter of seconds. The credit card company will charge a fee for this service at different stages.
There are some key components and actions to the credit card processing transaction.
The cardholder is the person that owns the credit or debit card issued by a bank or a credit company. The cardholder is then going to use this card to make a payment and insert it into the terminal.
The merchant is the business that is trying to secure the payment. Many merchants accept debit and credit cards since this is a popular method of payment. The merchant is charged a fee for the processing of the credit information. Smaller business may have a minimum purchase amount such as $10 to allow a customer to use their credit or debit card.
This bank or financial institution has an association with the credit card. The merchant needs to create a merchant account with the acquirer to accept payment from a debit or credit card. The acquirer will give the merchant the software or the equipment they need to process these transactions. They will also handle customer service issues. The acquirer will get the funds from the credit card company and deposit them into the merchant’s business checking account. These services often use a membership model to watch the daily operations and transactions of the merchant accounts.
Visa, MasterCard, Discover, and American Express can be representative of smaller financial institutions that support the credit card processing system. They are responsible for the fees and the qualifications for the cards.
Visa and Mastercard can be representative of smaller financial institutions that support the credit card processing system. They are responsible for the fees and the qualifications for the cards.
How They Work Together
A consumer presents his or her credit card for payment. The merchant runs the card through their equipment/software and payment information sends to the card network. The issuing bank either approves or denies the transaction. The credit card company uses its network to send this information. If the transaction is approved, the money transfers from the credit card company into the merchant’s account. The software will wait less than one business day to settle the account. The price of the purchase charges to the cardholder along with any interest or fees. The cardholder will need to make a payment on a future monthly billing statement.
Don’t Take On The Credit Card Processors By Yourself
Since 2009, IdealCost.com has helped hundreds of companies nationwide reduce their merchant account fees through identifying and fixing hidden profit, overcharges, fake fees, and billing errors. Clients have saved $300-$20,000 per month on their credit card processing fees without going through the hassle of changing their processing vendor, bank or equipment. Switching credit card processors should be a last resort, only reserved for funding delays, poor customer service or technical difficulties. See if you qualify for IdealCost.com’s monthly savings program by uploading your most recent merchant statement for a free analysis. You’ll receive an estimate within 24 business hours.