There are many distinct advantages if your business accepts credit card payments. The key benefit being, of course, that you allow your customers the flexibility to pay by smartphone, tablet, in-shop (if you have a bricks and mortar type business), and online. And in turn, this level of flexibility enhances the buying experience.
But to get the most from accepting credit cards, you should take some minutes to learn further about who it is you should work with in order to process card payments, how to set things up in the best way, how you can avoid problems, and more.
Organizations involved in credit card transactions
Each time your business accepts a credit card payment, there are several organizations that work together so as to complete the transaction. The main organizations that are involved include:
- The merchant bank: The merchant bank provides the merchant account. They will deal with all the credit card transactions in your bank account and also charge your business a fee which is referred to as a discount rate.
- The processors: Processors are third parties that a merchant bank has the opportunity to partner with and share responsibilities. Processors can set up merchant accounts, they can quote a discount rate to you, and they can also route credit card transactions through to the correct networks. They also manage the relationships that occur between you as the business owner and the other players. And the benefits to you? Better customer service in addition to integrated business solutions, besides merely accepting credit cards. A processor is paid per transaction, and that payment is included within your discount rate.
- Issuer or issuing bank: The issuing bank or issuer represents the financial institution which is responsible for the provision of the credit card to the user.
- Brand of card payment: This includes the various associations like MasterCard, Visa, and American Express. These associations charge your business what is known as an interchange fee, and they share this fee with the issuing bank. There are brands like American Express and also Discover that issue cards in a direct manner to the consumer devoid of a banking intermediary.
Getting started with credit card services
Here’s how your business can get started with credit card serviceswhen accepting credit cards:
- Select a payment processing provider.There are numerous payment processors conducting business in the market, so do shop carefully given that some of those or perhaps one alone is likely going to be more appropriate to your business’ needs.
- Next, the processor will ask you to set up a merchant account which is based on the business type that you are involved with.
- Make a decision how you wish to accept credit card payments: Would it be beneficial to choose smartphone, at point of sale, via tablet, or perhaps all of them?
- When a customer’s credit card is swiped, the information taken will then be forwarded to your chosen processor. You have the option to choose whether the card is swiped or the information from the card is typed into the payment processing system. The former method is far more common these days.
- The processor then submits your request to the appropriate brand of card payment – MasterCard, Visa, American Express, et cetera.
- This card payment brand then forwards your request to the customer’s bank.
- The issuer either approves or declines the transaction. The response, irrespective of what it is, is then sent to the payment brand.
- Next, the payment brand forwards the response on to the processor.
- The response is forwarded to your business from the processor through the chosen payment processing system, which could be a website, a mobile, point of sale, or other form of online processing system.
- The card is approved, declined, or it can be referred for purchase. Nevertheless, although there are many aspects to card processing, it merely takes a matter of seconds to complete.
- Should the card transaction be approved, you can then deliver the product/s or the service/sthat the customer has purchased from your business. Meanwhile, the money is sent from the issuing bank through the credit card network over to your bank, which is a process that takes two to four business days. Irrespective that you use a credit card machine, or a card reader that is mobile, all credit card transactions follow these very same basic steps as outlined above.
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