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Credit Card Processing: What is it & How Does it Work?

by michael bedwell Digital Marketer

Credit card processing is the act of accepting credit cards as payment for goods or services. Credit card processors are responsible for handling transactions between merchants and banks. In order to process credit card payments, processors must have a merchant account with a bank.

When a customer pays with a credit card, the processor will submit the transaction to the bank for approval. If the transaction is approved, the bank will then issue a funds transfer to the merchant. The processor will also charge the merchant a fee for each transaction.

In order to process credit card payments, processors must have a merchant account with a bank. Merchant accounts are simply businesses accounts that allow merchants to accept credit card payments. In order to get a merchant account, businesses must apply and be approved by a bank.

Processors use something called an interchange rate when they submit transactions to the bank for approval. The interchange rate is the fee that the processor charges the merchant for each transaction. The interchange rate is set by the credit card companies, not the processors.

Visa and MasterCard are the two largest credit card companies in the world. Visa has an interchange rate of 1.51% + $0.10 per transaction, while MasterCard has an interchange rate of 2.05% + $0.10 per transaction.

When a customer pays with a credit card, the processor will submit the transaction to the bank for approval. If the transaction is approved, the bank will then issue a funds transfer to the merchant. The processor will also charge the merchant a fee for each transaction.

Processors use something called an interchange rate when they submit transactions to the bank for approval. The interchange rate is the fee that the processor charges the merchant for each transaction. The interchange rate is set by the credit card companies, not the processors.

Visa and MasterCard are the two largest credit card companies in the world. Visa has an interchange rate of 1.51% + $0.10 per transaction, while MasterCard has an interchange rate of 2.05% + $0.10 per transaction.

American Express and Discover are two other major credit card companies. American Express has an interchange rate of 2.3% + $0.30 per transaction, while Discover has an interchange rate of 1.6% + $0.10 per transaction.

While the interchange rate is set by the credit card companies, the processor will also charge the merchant a fee for each transaction. This fee is called the processor markup. The processor markup is the difference between the interchange rate and the fee that the merchant is charged.

For example, let's say that you run a small business and you process $10,000 in credit card sales per month. Your processor charges you a 2.9% + $0.30 per transaction fee, which is their markup. This means that your interchange rate is 1.51% + $0.10 and your processor markup is 1.39% + $0.20.

The processor markup can vary greatly from one processor to another. Some processors charge a flat fee per transaction, while others charge a percentage of the sale.

When you're shopping for a credit card processor, it's important to compare the interchange rates and the processor markup. This will help you make sure that you're getting the best deal possible.


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About michael bedwell Advanced   Digital Marketer

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Joined APSense since, January 30th, 2021, From Newark, United States.

Created on Apr 15th 2022 01:01. Viewed 61 times.

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