Credit Card Processing  Promote Your Business
Credit Card Processing
ProMatch
Directory
Cost Report
  More Services

Credit card processing explained






Credit card processing explained

Explaining credit card processing

Consumers increasingly are turning to plastic over paper when they open their wallets. In 2009, credit cards were responsible for more than $2.5 trillion in transactions, according to the American Bankers Association. When you add another $1.63 trillion for debit and prepaid Visa and MasterCards transactions, according to Nilson Report, you quickly understand that plastic is a necessary payment option for most businesses.

Yet many small businesses still don't accept credit cards. If you're one of the laggards, the entire transaction may retain the aura of a mystic ritual — swipe a card, input some numbers, and money magically appears in the bank. In reality, though, credit card transactions involve coordination between multiple high-speed computer networks.

How the merchant account process works
When a merchant makes a sale and swipes a customer's credit card, the card number, the amount, and the merchant ID travel over the credit card processor's computer network. The credit card processor can either be a bank or a company that does nothing but provide credit card processing services.

From the processor's network the transaction goes to a credit card computer network. If the customer is using Visa, for example, the transaction will go to Visa's network. In turn, the electronic transaction goes to the bank that actually issued the card. The bank then checks the account and verifies the customer has adequate credit to cover the purchase. The bank then sends the merchant an authorization over the network. Now the sale is complete..

At the end of the business day, the merchant sends that day's charges, in a batch, to the credit card network for processing. The transactions travel via the merchant's credit card processor. Individual transactions are then stripped out and sent back to the individual cardholders' banks. Banks then debit cardholders' accounts and make appropriate payments to the merchant's credit card processor through the Fed reserve bank automatic clearing house

The credit card processor then credits the merchant's bank account for the transaction amount, minus its fees for the transaction. Those fees also go toward paying transaction fees to the issuing bank and the credit card network. Despite the use of computers, it can take two business days before the merchant's account is credited.

Opening a Merchant Account
Many small businesses go through a specialized credit card processor or an independent sales organization, commonly referred to as an "ISO." You need a merchant account to receive credit card payments.



Be the first to find this article helpful.

About the Author

Mike Mehsikomer, Quantum Merchant Services
7300 Hudson Blvd
Saint Paul, MN 55128
888-881-0657 x 707

Contact Author: request info

If you would like to re-print this article, please contact the author.
Need to find a credit card processor? Free quotes from credit card processing services.
Find Credit Card Processors

Related Topics

Credit Card Processing
Learn About the Different Methods of Card Processing
From outsized credit card terminals to portable mobile devices, payment through credit...

Tips on Preventing "Card Not Present"" Payment Frauds
This article throws light on useful tips to prevent fraud when neither the card nor the...

Vantiv Named by Forbes as One of the Fastest Growing Tech Companies
New release announcing Vantiv, Inc. being named one of America's Fastest Growing Tech...

What to Expect when Applying for a Merchant Account
Many processors operate with the expectation that you know the process and don't take...

Future Proof Credit Card Machine
The Vx520 (dual comm) is a future ready terminal (EMV and NFC READY) with many new...

Need to find a credit card processor? Free quotes from credit card processing services.

Other Related Topics

New Credit Card Surcharge Rules
A court settlement will affect surcharges for credit card transactions beginning January...

Merchant Accounts for Small Businesses
Merchant accounts for small businesses come in a variety of types, depending on your...

Top 10 Reasons to accept Credit Cards
Dont cut your self out of the pie. Impulse Spending! Customers spend more impulsively...

Are credit card processing fees too high?
One cost factor that retailers of all types deal with are credit card processing fees,...

Accept Credit Cards? How to Avoid Refund Fraud
Refund fraud is one of the most common kinds of credit card fraud. Fortunately, it can...

Editorial Disclaimer: The views expressed in articles published on this website are those of the authors alone. They do not represent the views or opinions of this website or its staff. The articles on this site do not constitute a recommendation or endorsement with respect to any views, company, or product. Authors affirm that article submissions are their original content or that they have permission to reproduce.

Free Cost Estimates   |   Credit Card Processing Companies Directory   |   Credit Card Processing Cost Report   |   Free Business Listing



Home   |   Articles & Videos   |   Affiliates   |   Networking Groups   |   Search by Category   |   Professionals

Terms of Use   |   Privacy   |   About Us   |   Contact Us   |   Member Login

© 2003-2014 - VentureStreet, LLC

Join Our Business Network