What is Credit Card Processing?

What is Credit Card Processing?

Credit card processing is a procedure in which a third party is hired by the business owner to take care of the transactions from different channels like debit and credit cards for the cash advance acquiring banks.

Credit card processors are of two types:

  • Processors of front-end: Front-end processors are connected to some supply authorizations, card associations, and services of settlement.
  • Processors of back-end: These processors agree to make arrangements from the processors of front-end through the federal bank. For instance, it moves the finance to the merchant bank from the bank that issues it.

Players involved in credit card processing

  • Merchant: It is the company that sells the goods and services and receives the payment of credit card. The issuer, acquirer, and the merchant should belong to the same association of interchange.
  • Cardholder: The person who owns the card and is responsible for making the payment. The cardholder is the person who makes use of the card to pay for goods and services.
  • Acquirer: The acquirer is the bank where the business merchant has his or her account. When the transaction gets settled the acquirer transmits the number of funds to the business merchant’s account. The money received by the acquirer is the difference between the interchange and cash discount given to the issuer.
  • Interchange association: It is an association that enables the customer belonging to the acquirer bank to receive a credit card from the customer of issuer bank. The most prominent interchange associations of the world are MasterCard and Visa.
  • Processor: A network of processing, which accepts electronic transactions of a credit card from the business owners and then performs its processing for the acquirer bank. A processor is responsible for transferring the purchases to the associations of the interchange.
  • Gateway: It is an organization of the third party, which accepts digital transactions and then sends it for processing to the processor. Some gateway companies make use of third parties, and some create their software.
  • The developers of applications: These are the people that are responsible for the integration of payments in applications of businesses both in the products of vertical marketing as well as custom systems. A lot of people have noticed that the protocols of the credit card processing transactions are rapidly changing, inconsistent, and complicated amongst various networks of processing.

Frequently asked questions

The procedure of credit card processing is fast, affordable and straightforward. Acceptance of credit cards requires terminals of a point of sale.

Certain companies support various types of credit cards. A merchant can accept credit cards from American Express, MasterCard, and Visa.

Whenever you buy something, you swipe your card in the terminal, which transfers the information to the credit card processing company that completes your transactions. If you are making payment at the store, then the total amount that you bought will be transferred to the company and then to your bank. The bank will either say yes or no to the transaction and gives its response to the processing company.

A billing cycle is a period mentioned in the bill. For instance, your billing cycle will begin from the 7th day of a particular month and will continue until the 6th day of the next month. The statements are given seven days after the completion of the billing cycle, and the payment becomes due after two weeks.

When you swipe your card, the business merchant is going to authorize it. When the merchant approves the transaction amount, then the information on your card is held by their credit card processing company till the merchant is processing the batch. Batches are handled on a frequent basis in a day.  In case of small enterprises, batches are processed only one time during the entire day.

Swipe fast is a company that offers the processing of credit cards without charging any fee. Some utility firms make payments online by using credit cards or through phones, and they are not required to pay any processing fee.

There are a certain number of credit cards that charge a fee on a monthly or annual basis. This amount is charged by the issuer bank to recover the cost incurred by it. This price includes the payment made to operators of call centers, reimbursements of ATM charges, lower APR, system upgrades, and cards of EMV. Therefore, the companies that issue these credit cards need to recover that amount from one source or another. Issuer companies earn money whenever a person uses the card.

It’s worth is dependent on the usage of the card. Moreover, it depends on the features that you use and the number of times you use them. If you pay annual charges of 100,000 dollars in a year, then you should earn a reward of some type every single time whereas if you are spending 200 dollars in a month, then it may not be worth it.

One thing that a person needs to ensure is that they should have an account of the merchant that is compatible with the processor he or she chooses. You can also verify the processors from the issuer bank where your merchant account is.

A credit card terminal is also known as a terminal of a point of sale. It is a device, used for making a digital transmission of funds.