Do you carry cash in your pocket? Chances are much less, because at today’s latest connected, secured, and convenient technology it has become next to impossible. And even if you carry cash, it sure will not exceed more than 50$ – 100$. Nobody is blamed for it is not practical to carry a piece of paper where every step there’s a fear of losing or getting it robbed. This is where the credit card payment processing company plays its role.
Let’s assume that when people go out to dine, they mostly pay either through debit or credit cards. Who on earth has time to count each penny when you are given the convenient option to just swipe your card after a good enjoyable meal? Also, it is much safer and the easiest option.
The finest part about the Credit Card Payment Processing Company is as follows.
- It simplifies your process of accounting
- It reduces the risk of robberies and theft
- Makes you one of the strongest competitors in the market
- The chances of profit increases as consumers prefer those places where cash payments are the easy option
Before going into the depth of Credit Card Processing Payment, let’s take a look at what exactly is the Payment Processor.
Payment Processor
If you are looking to take up payment through debit, credit, or digitally, you must first collaborate with the acquirer, also called a Payment Processor.
The payment processor companies assign merchants along with payment terminals. It is the hardware that aids you to accept debit, credit, and digital payments. They are then known to play the role of middle person between the consumer, owner, card network, and the bank that issues the payment. The job of the payment processor is to make way for the transactions smoothly and then allow the money to be deposited in your account.
The most important feature of the payment processor companies is that they take up the responsibility of the transaction process. If there’s any fraud case or goes anything wrong, the companies take up the whole responsibility.
But all this does not come for free. In order to help you with the transaction process and helping with the secured payments, they charge you a fee for security reasons. The rates are usually charged between 1% to 4% for each transaction process.
The prime players of the Payment Processor are as follow.
- Merchants – Merchants are the business owners who accept the payments. For instance a restaurant owner, retailers, etc. Though, banks consider eCommerce merchant accounts as high risk.
- Payment Processor – They are the companies that help in the terminal of payment, clear and make way for the transaction of credit or debit cards and then the money is deposited in the account of the merchants.
- Card Brand Network – They are the companies of the debit or credit card that controls the card in the transaction process. They control as to where the card can move ahead with the payment between the users of credit cards and the merchants. For instance MasterCard, Visa, etc.
- Issuing Bank – They are the institutions of finance that issue debit and credit cards to the consumers. E.g., Bank of America, Chase, and TD Canada Trust, etc.
How the Payment Processors Decide on the Rates
There are many factors that need to be considered before finalizing the custom rate to the merchants. They will evaluate the industry, your history of credit and business, and the volume of established or projected sales in the process of the rate-selection part. The businesses that are lower in risk and higher in volume will have low rates compared to the businesses that are new in the market.
The payment processors are known to charge fees that are of three types. They are the,
- Flat Fees – It may include items like Batch fee, Annual fee, Network access fee, monthly fee, payment gateway fee, online reporting fee, terminal fee, and statement fee.
- Situational Fees – They are known to charge in case something particular happens like the cancellation fee, international fee, chargeback fee, monthly minimum fee, liquidated damage fee, set up fee, and NSF fee.
- Processing Fees –This is the bulk of the fees that you pay for the payment processor. They are changeable and are charged and calculated for each transaction.
What is involved in the Credit Card Transaction?
Let’s break down it in a simple form. For instance, when a person pays his dine/restaurant bill by debit or credit card, it will look like a plain and simple transaction between the diner and the restaurant owner. It is not a two-way payment. There are many people who work under this simple process to make the payment possibilities and they are also charged for each transaction. That is why the payment sails smoothly.
The first step involves the diner paying to the merchant through the credit card. The second step involves the authorizing of the credit or debit card. The details of the card are then sent to the payment processor. The next step involves the payment processor companies forwarding the details of the card to the brand network. Finally, the brand card network calls for payment authorization from the bank that issues the money.
Every single step in the processing involves a processing fee and is mostly charged with a percentage. The payment processor takes up the responsibility of distributing the money accordingly to the players. To cover up for all these costs, the payment processor usually charges the merchants a fee for overall processing. The fees are made up of three types and they are as follows.
- Interchange Fee – These are charged by the credit card companies like American Express, MasterCard, etc, and an interchange fee that is based on percentage and is charged every time a merchant uses their card.
- Card Brand Fee – No matter how big or small the transaction is made, it sure charges a fee.
- Payment Processor Markup – They are the flat or the percentage-based fee to do the routine money work from the card network to the merchant’s issuing bank.
