Buyers Guide To Credit Card Processing

Credit card processing is also known as payment processing.  It is a system of accepting credit cards through merchant accounts.  The entities that make up the credit card processing system are the credit card issuing bank, consumer, merchant services account, acquiring processor/acquiring bank, and the merchant. It is beneficial for your business to accept credit card payments because you will increase your sales by accepting another means of payment.  You can lose a potential customer by not accepting credit cards.

Most businesses that accept credit cards have merchant accounts. Merchant accounts are obtained through banks or credit card processing providers. A merchant is a customer of a processor or acquirer that accepts credit cards.  Merchant accounts are a type of bank account that allows businesses to accept payments by debit or credit cards.  It is an agreement between a retailer and payment processor for the settlement of accredit/debit card transactions.  There are many different types of credit card processing companies available to businesses.

A few points to consider when shopping for Credit Card Processing:

• By having a good credit card processing service you can increase your businesses sales.
• Flexibility to offer your customers many payment options.
• Remember that it is crucial for your processing company to demonstrate exceptional customer service in the event that your business comes across any problems or has any maintenance type questions.

Frequently asked questions about Credit Card Processing:

Q.  Why does my business need a credit card processing service?
A.  First and foremost it will increase sales for your business.  With a credit card processing service you are allowing your business to accept more forms of payment which means your average customer will more than likely spend more.

Q.  What key things should I consider when looking for a credit card processing service?
A.  Key things to compare credit card processing vendors are: the cost per month, start-up costs, account set-up time, pos features and internet based features, average approval rating, and accessible customer service.

Q.  What are the different types of credit card processing companies?
A.  There are many companies available that offer credit card processing services including; banks, 3rd party merchant accounts (an independent processor that processes credit cards and distributes funds), Independent Sales Organizations (represents banks or third party processors and has an agreement to sell the services of the banks or third party processors and is permitted to mark up the fees and sign up merchants), an association, and a financial service provider.

Industry Jargon for Credit Card Processing:

Acquiring Financial Institution
An Acquiring Financial Institution contracts with the bank and merchants to enable credit card transactions. The acquirer deposits the daily credit card totals and debits the end-of-month processing fees from the merchants accounts.

Cardholder
Any individual who holds a payment card account and uses it to purchase goods and services is a cardholder.

Card Not Present
This occurs when the card is not present at the time of transaction (such as a mail order or telephone order). The credit card data must be manually entered into the terminal versus swiping a cards magnetic stripe through the terminal.

Chargeback 
A credit card transaction that is billed back to the merchant after the sale has been settled.  Chargebacks are initiated by the card issuer on behalf of the cardholder.  Typical cardholder disputes entail product delivery failure or product/service dissatisfaction. Cardholders are encouraged to acquire satisfaction from the merchant before disputing the bill with the credit card issuer.

Discount Rate
A percentage of sales amounts or fees charged by the bank for processing credit card transactions.

Independent Sales Organization (ISO)
ISO is an Independent Sales Organization which represents banks or third party processors. The ISO has an agreement to sell the services of the banks or third party processors and is permitted to mark up the fees and sign up merchants.

Interchange
The standardized electronic exchange of financial and non-financial data associated with sale and credit data between merchant acquirers and card issuers on various types of MasterCard and Visa transactions.

Merchant
A merchant is a customer of a processor or acquirer that accepts credit cards.

Mail Order/Telephone Order (MOTO)
MOTO is a credit card transaction that is initiated by mail, e-mail, or telephone.

Non-Qualified Transaction Fees
Transactions that are processed at a higher interchange rate which do not meet Visa/MasterCard criteria for that particular merchant.

Secure Payment Gateway
Secure Payment Gateway companies which help other processors conduct secure business on the internet using Secure Socket Layer (SSL) technology.

Third Party Processor
A Third Party Processor is an independent processor that processes credit cards and distributes funds.

Value Added Reseller (VAR)
VAR is a third-party vendor which enhances or modifies existing hardware or software and in-turn adds value to the services provided by the processor or acquirer.