Credit card processing is the electronic transfer of funds from a customer’s credit card to a merchant’s bank account. This process allows customers to make purchases with their credit cards by authorizing the credit card company to transfer funds from the customer’s account to the merchant’s account. The credit card processing system is made up of three main players: the customer, the merchant, and the credit card company.
The customer’s role in the process is to provide their credit card information to the merchant and authorize the transaction. The merchant’s role is to process the customer’s credit card payment and send the information to the credit card company. The credit card company’s role is to transfer funds from the customer’s account to the merchant’s account and to handle disputes if they arise.
Let’s focus on the input side of credit card processing: how a merchant obtains a customer’s credit card number and input it into their system for processing. There are two ways that a credit card can be processed: offline or online. Offline processing is when a customer’s credit card information is manually entered into the merchant’s system. This process is typically used for small businesses that do not have a credit card processing terminal. Online processing is when a customer’s credit card information is sent electronically to the merchant’s system. This process is used for businesses that have a credit card processing terminal.
The most common way for a customer’s credit card information to be transmitted to the merchant is through the use of a credit card processing terminal. The terminal is a device that is connected to the merchant’s computer and allows them to process transactions electronically. When a customer makes a purchase, they are asked to swipe their credit card through the terminal. This sends their credit card information to the merchant’s computer, where it is processed and the funds are transferred to the merchant’s bank account.
There are a number of different types of credit card processing terminals, but the most common are the countertop and mobile terminals. The countertop terminal is a traditional, stationary terminal that is typically used by larger businesses. The mobile terminal is a portable device that allows merchants to process transactions anywhere, even if they don’t have a computer or internet connection.
Credit card processing terminals are not the only way for a customer’s credit card information to be transmitted to the merchant. Another common method is through the use of a payment gateway. A payment gateway is a secure online system that allows merchants to accept credit card payments from customers. When a customer makes a purchase, their credit card information is sent to the payment gateway, where it is processed and the funds are transferred to the merchant’s bank account.
There are a number of different payment gateways available, but the most popular are PayPal and Stripe. PayPal allows merchants to accept credit card payments by themselves website or through a third-party site. Stripe also allows merchants to accept credit card information through their own website, but it can also be used by third-party sites.
Credit Card Processing Fees Explained
When it comes time for the merchant to pay their processing fees, they have three different options: per-transaction, monthly, and annual. The per-transaction fee is a fixed amount that is charged each time a credit card is processed. The monthly fee is a fixed amount that is charged each month, regardless of how many transactions are processed. And the annual fee is a fixed amount that is charged once per year.
The processing fees for a merchant’s credit card terminal are typically based on the following three factors:
1) the type of merchant,
2) their monthly volume and 3) whether or not they accept American Express.
The type of merchant is important because different types charge different rates. Common categories include retail stores, restaurants, hotels, and online stores.
The monthly volume is the total amount of sales that the merchant processes each month. This amount is usually based on the average of the last three months. And finally, American Express charges a higher rate than other credit cards. This is because it has a higher risk for merchants since there is a greater chance that a customer will not be able to pay their bill.
