Walk into any establishment today, and chances are you’ll notice that the staff accepts credit cards. Credit card processing is finding its way to the top steadily because of its convenience and simplicity.
Statistics show that there are 160+ million credit cardholders in the US. The reason for jumping into this processing bandwagon if you are not in it already is not just for the popularity. But, accepting credit cards can put you a step ahead of other establishments.
What is Credit Card Processing?
Credit card processing is a stress-free way to pay for goods and services. It gives a customer more flexibility in terms of payment and a merchant a chance to serve more clients within a short time.
Here is how it works: Information is transferred from the cardholder and passes through a merchant’s processing company and credit card systems to the cardholder’s bank.
When the bank denies or approves the payment, it flows back to the broker to notify them whether the payment was successful.
Credit Card Processing Steps
Credit card processing starts when a cardholder hands over their payment information to the merchant, or dips or swipes their card.
The merchant then accepts and takes the payment details. They can do this online for “card not present” transactions where a merchant uses an online gateway to collect payment from their client instead of a card reader.
They can also collect payment physically in “credit card-present” transactions at their store with a credit card reader.
A credit card processor then collects the payment details and works to facilitate communication between different parties and route the data to other parties. Their key role, however, is to send the payment details to the card network.
Customers’ cards are operated by major credit card networks, such as Mastercard and Visa. When these networks receive payment information from the processor, they deliver it to your customer’s bank.
Your customer’s bank gets the payment request and determines if the cardholder has sufficient credit or funds to purchase. In some cases, the bank runs through additional measures to confirm that the purchase is authorized and not fraudulent.
Finally, the approval or denial message flows back to the merchant through the channels it used to reach the cardholder’s bank.
In-person transactions usually correspond with a message on the card reader as “Declined” or “Approved.” If the transaction is a success, the merchant should provide the client with the services or goods promised in exchange for the payment.
Parties Involved in Credit Card Processing
Credit card processing is possible due to the coordination between four main players: The consumer bank (also referred to as the issuing bank), the merchant bank (also known as the acquiring bank), the card networks (also known as card associations), and the credit card processor.
Banks that issue cards also play a crucial role by providing clients with stable forms of plastic that abide by the most recent PCI-compliant data security guidelines.
Benefits of Accepting Credit Cards
Still looking for a valid reason to be part of the credit card revolution? Credit card processing is beneficial to you and your enterprise for the following reasons:
1) It Boosts Sales
Cash-only operations limit the potential of your organization. By moving a step forward to accepting debit and credit cards, your customer base widens significantly. More clients mean more sales.
2) Setting Up to Accept Credit Cards is Fast and Simple
Contrary to what most merchants believe, merchant account application processing takes a short time, usually between 24 to 48 hours, so your business will be part of the advanced organizations before you know it.
3) Accepting Credit Cards Minimizes the Possibility of Receiving a Bounced Check
A single bounced check can significantly bruise your business financially. It can take a massive chunk out of your profit for that day. When you include the wasted time spent tracking the client to make good on the sale, the damage doubles.
Thanks to legitimate credit card processing operations, credit card transactions are screened as they undergo processing to minimize any fraud risks.
4) Accepting Credit Cards Makes your Enterprise Legitimate
When you display the credit cards’ logos you accept at your website, register, or POS, you get a cardholder’s attention and cause them to trust your business.
5) Customers Prefer Credit Cards
Who wouldn’t want a cashless form of payment? Most clients choose credit cards over actual cash because credit cards are easier to carry around and minimize security complications. What’s more, many cards sweeten the deal by offering rewards, points, or mileage.