Credit Card Processing Explained

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Credit Card Processing Explained

Many companies nowadays make sales either exclusively online or on stores, or in both. Whatever the situation of your particular business is, credit card processing it is something useful for any business owner to consider. Having credit card processing is a decision that may be easy for you to make. What makes it more complicated is selecting a merchant provider of accounting because this decision may have greater repercussions in your bottom line.

Credit card processing once started is not a complex process. However, it is important to keep in mind the additional costs that this service implies like: fees, rates, limits and customer care. The latter should not be disregarded because it is a crucial one and when not included in the decision making can give business owners many headaches. Credit card processing is a concept that although known, people have little understanding of the implications and the process that it involves.

Let us say that you are processing a credit card and you do it either from a store or from your website.

The merchant will process the card using point of sales software or through software when the purchase is done online. Then, the software will transmit the information from the credit card and the amount of the purchase to the bank where the acquisition was done.

Your business will sent a confirmation to the acquiring bank after having reviewed the details of the transaction. The funds are then transferred from the emitting bank to the merchant account. That is how credit card processing works and how merchants receive their money in concept of their sales. This process seems to be rather simple; however there are some fees and rates that you need to consider.

One of them is the first-time fee that is charged only once to get it started.

There are also transactions fees that are paid by the seller on every transaction. A one-time fee is charged in order to get started. The Transaction fee which the merchant pays for every transaction. There is also a Discount rate which is a flat percentage charged to the merchant for every transaction. Lastly, there is a Rate of return of charge which is a percentage of monthly sales “held” in reserve to offset the cost of fraudulent transactions.