By : Ronnie Lewis
In business, it is important to ensure that you stay relevant and competitive by keeping abreast of the latest industry trends. In order to stay ahead of competition, most retail businesses nowadays adopt credit card processing. Relevant as it is today, most people use credit and debit cards to pay for all sorts of products and services. Having the capacity to accept card payments is crucial for the success of any direct sales business.
Here are some key considerations that you need to know regarding credit card processing :
How Does Credit Card Processing Work?
There are 4 parties to every credit card transaction namely :
- The merchant
- The acquiring bank (this is the bank that you use for the processing of your payments)
- The issuing bank (this is the bank that issued the card to the customer)
- The customer
The flow of the transaction begins with the issuing bank that lends the transaction amount to the customer. The customer can either pay off this money within a stipulated period of time (usually 30-50 days) or have it added to the outstanding balance to be paid off later, which, however, charges interest. This is type of short-term loan given to the card holder. In addition, the issuing bank and the acquiring bank also levy some charges. The issuing bank charges the interchange fee while the acquiring bank deducts a discount rate, both of which are expressed as a percentage of the transaction.
There are instances when a bank can act both as an issuing and acquiring bank. Such instances happen when the bank issues out debit cards such as VISA, Discover, and MasterCard. When it comes to American Express, things are a bit different as it acts as an issuing and acquiring bank while charging only a single fee. The facility is then programmed to allow merchants to conduct transactions on the acquiring bank end to ensure that they use the same terminal as all their other transactions.
What Affects The Interchange Rate?
The interchange rate schedules are available online and you can view the MasterCard and VISA information online. However, the interchange rates can also be affected by the type of business you represent. Some businesses are classified as being high risk concerns for the purposes of credit card processing. If you belong to this category, then you will need a special kind of service intended for high risk entities.
There is also the issue of charge-backs which you must be aware of. A charge- back occurs when a customer disputes a payment they have made to you successfully. This may be due to a customer’s dissatisfaction with a product or service received from you, for example. Charge-back fees will also be deducted from your account by the acquiring bank.
These days, some of the leading providers of credit card payment processing services offer unified solutions that enable you to accept and manage payments from multiple touch points. This process is ideal for any business that leverages multiple sales channels such as phone, internet, email, physical store, etc. Therefore, employing such a solution is an ideal option for retail businesses.
Ronnie Lewis is a professional writer who works with Charge.com, a trusted online credit card processing company which has been providing online payment processing services for more than 19 years.