Credit card processing can be a confusing process for anyone looking from the outside, that’s why asking how credit card processing works is important to ask. Learning how credit card processing works will be very beneficial to you in your search for the best how credit card processing works company. In knowing how the system works you’ll be at an advantage, and have better negotiation power.
It isn’t as hard to understand once you get started, however the process can be very daunting from the outside. Don’t worry if you take the time to read this article you’ll have a better understanding of how credit card processing works by the end.
In this article my goal is to explain to you what goes on in each credit card transaction. I’ll break down the different parties involved, the relationship between credit cards and how credit card processing works companies, and the behind the scenes look at all of the fees.
Who is involved in each credit card transaction?
The first step of understanding how credit card processing works is understanding each party. There are several parties involved in each credit card transaction. There are a total of four parties. They are the merchant and the acquiring bank, the customer and the issuing bank. Basically, you have an individual on each side and a bank standing behind them, while there stands a credit card processor in the middle, which can be affiliated with one of the banks as well.
How are credit cards related to credit card processors?
The second step of understanding how credit card processing works is understanding each party. If you’re a merchant that needs to accept a credit card then you’ll be directly interfacing with the acquiring bank. The acquiring bank is usually split between the processing company and the merchant/ credit card processing company. So, the merchant service company is usually an arm of bank, or in some cases can be a separate smaller company.
What’s the reason behind all of the credit card fees?
The third step to understanding how credit card processing works is understanding credit card fees. Overall, most of the fees exist so the banks and credit card processing companies can make up for any damages if a product or service has to be returned. So, they charge service fees on each side of the transaction to cover their expenses in case a return is issued. That’s the reason companies charge higher fees to riskier companies.
If you’ve read through this article then you have a good idea about how credit card processing works. This knowledge will come in handy as you’ll be better able to find a company that suits your needs, while finding the best deal for you and your company. Remember, in this case the more information you have the better.