Processing credit cards through the internet is gaining popularity due to the ease with which it can be used, its speed, security and cost effectiveness. For individuals who have online stores, payment with credit cards provides customers the choice to buy goods from a site by just clicking the mouse at any time.
Credit Card Processing
In order to be able to process credit cards and start the authorization process, a business first has to apply for a merchant account with a credit card processor. A merchant account is a unique account opened with a bank that has a Visa and MasterCard association certification to provide customers with merchant services and all services associated with the account. The financial group that one opens an account with will then accept credit card transactions from one’s website, even if it did not issue the card.
Once a merchant account is set up, credit card authorization can start to take place.The whole process takes just a few seconds to complete. It all starts when the card is swiped or the authorization process is started by entering the information manually on a keypad or the website payment page. The information is passed on directly to the credit card processor. The processor passes the information to the issuing bank via a bankcard association, where the request is either approved or declined.
A card can be declined for one of several reasons. For example, it can be refused because it has expired or there are not enough funds available for the transaction. It can also be refused if the card was reported to be missing or if any suspicious activity was observed involving the card. For enhanced protection, banks now make credit card authorization mandatory on all paper based transactions. After the processor gets the information, the bankcard association transmits an electronic answer to the computer. The response is known as the “authorization code,” which is a cast-iron authorization to go ahead and capture the funds. Usually, this authorization is a number consisting of six digits.
The completed transaction is housed in a “batch”, along with other transactions of the day. At the end of the day, one last request is submitted to the processing network to “capture the funds” for which authorization was requested during the day. The system then matches the capture amounts in the request with those from the authorizations of the day and sends an “accepted” response. The final settlement report of the day can then be printed by the merchant. At the end of the month, the merchant account provider will send a monthly statement detailing the month-long activities and any charges and fees they have deducted.
Associated Fees & Charges
Previously, many people used third party credit card processors. While they are convenient to use, they charge a higher percentage for each transaction as a fee to cover their expenses. The other drawback of using them is the fact that one can run into trouble in case disputes in chargebacks arise.
All merchant account providers charge certain fees for accepting credit cards on behalf of the account holder. These are broken into three main categories:
- a discount rate
- a transaction fee
- monthly fee
A transaction fee is a flat amount charged for each transaction, typically ranging from 30 to 50 cents for each transaction. Monthly fees are charge for account-related services and the discount rate is the percentage the bank will deduct on the total transaction amount. It ranges from 2.5 percent to 5 percent.
Pingback: CheapestMerchantAccounts.com in the News