Due to the rising popularity of online shopping and the events of the global pandemic, increasing numbers of consumers prefer to pay with credit over cash. Because of this, successful business owners should look into the benefits of credit card processing as well as the most cost-effective payment processors for their brand.
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Direct credit card processors work with major credit card companies to process payment transactions in-house.
When a customer makes a payment to a merchant, the online payment gateway records the card information, and the credit card processor transmits this data to the relevant credit card network (e.g., Visa or Mastercard) for approval.
The payment request is evaluated by the credit card issuer and is either approved or denied. If the transaction is approved, the card processor will ask the issuing bank to release the funds for the payment so that the merchant can have them.
There are several payment processing elements involved in every transaction:
Credit card processing fees can vary significantly depending on the processor you choose, so it’s best to look at any service fees, interchange fees, and other monthly fees that you may have to pay in exchange for accepting payments. They are often determined by the volume of transactions you process, so some merchants may be able to get discounts.
Payment processors charge a per-transaction fee and also charge additional service fees on a monthly or yearly basis. These service fees are usually a flat-rate number that is based on your volume of transactions, the payment gateway provider you use, and whether you are renting any hardware.
Interchange fees are typically fixed and not open for negotiation, averaging around 2% of the total value of your transaction. However, high-risk industries may have higher interchange fees than the average. In addition, larger businesses can have access to lower interchange fees since they process higher sales volumes.
Although small business owners may be hesitant to pay the fees associated with processing credit card payments, there are many perks of accepting online payment methods, such as increased sales and greater flexibility.
Payment processors are essential when it comes to ensuring the safety and reliability of online transactions. They are responsible for checking that the customer’s card data is accurate in order to prevent fraudulent transactions from taking place. Without payment processors, you will be unable to process payment information on your own.
Essentially, payment processors work together with the customer’s bank/credit card company and the business’s bank so that customers can buy your products or services. They also take care of accidental transactions but may charge a fee to reverse these payments.
To keep your business safe with eCommerce credit card processing, you should consider several things during the selection process, such as choosing a payment processor with a good reputation.
To help you choose the best credit card processor for your business, it’s worth doing your research and comparing several options based on these factors:
Once you’ve narrowed it down to several of your top options, these are some common warning signs to avoid in a card processor:
If you’ve decided to work with a payment processor, the first step is to set up your merchant account and a payment gateway. Depending on the size of your business, type of industry, and estimated processing volume, you may need to submit some information to the company.
After this, you may need to invest in hardware such as a card reader and a POS if you have a brick-and-mortar store or work with a website developer to enable eCommerce credit card processing on your site.
A merchant account acts like a bank account that allows companies to make and receive payments. To set up an account, you will need to work with a merchant account provider like Square or Stripe.
A payment gateway acts as a go-between for you and a credit card company, ensuring that the communication transmitted through it is secure. If you are looking for a payment gateway, some of the most popular card processors include PayPal, WePay, and Amazon Pay.
Several reasons why businesses may want to change credit card processing companies include issues related to expensive pricing, faulty equipment, or poor customer service. However, it is important to check for any termination fees you might have to pay.
Since credit card processing can be confusing if you’re new to the process, here are some of the basics.
Credit card payments are usually credited on the same day unless a payment is made after the cutoff time. It may take up to 1-2 business days.
Common credit card processing methods include swipe hardware, virtual terminals, and the use of mobile devices.
Visa is a card association, not a payment processor. The payment processor is what sends the payment information to Visa.
While a payment processor is what enables the transaction, a payment gateway is what communicates the approval or decline of payment transactions.
To get a payment processor, you will need to submit an application online to the relevant company.
Before you apply for an account with a merchant provider, do your research on the features, pricing, customer service, and reputation of the brand to ensure that you choose a card processing company that is the best fit for your business.
If you’re a high-risk business or have specific credit card processing needs, learn about what to do when a credit card processor turns you down, and feel free to browse our other guides on Processing Card!
