If you’re running a business, there’s a good chance that you’ll need to accept credit card payments at some point. Credit card processing can be a complicated and expensive undertaking, but it doesn’t have to be. In this guide, we’ll explain everything you need to know about credit card processing, including the different types of processors, the fees involved, and how to choose the right processor for your business.
Accepting credit cards can be a great way to increase sales and grow your business. But before you start taking credit card payments, it’s important to understand the ins and outs of credit card processing. Read on to learn everything you need to know about this important aspect of running a business.
What is credit card processing?
Credit card processing is the process of authorizing and managing credit card payments for businesses. Credit card processors are businesses that provide the technology and infrastructure needed to accept and process credit card payments. When you use a credit card to make a purchase, the processor will work with the credit card issuer to ensure that the payment is processed and the funds are transferred to the merchant.
Types of credit card processors
There are three main types of credit card processors: banks, independent sales organizations (ISOs), and merchant service providers (MSPs). Banks are the most common type of processor, and they typically offer the best rates and terms. ISOs are businesses that act as middlemen between merchants and banks.
They typically have higher fees than banks, but they can offer more flexible terms and custom solutions. MSPs are businesses that provide credit card processing services to merchants on behalf of banks or ISOs. MSPs typically have the highest fees, but they can offer the most flexibility and customization.
How does credit card processing work?
Credit card processing typically works like this:
- A customer makes a purchase with a credit card.
- The merchant submits the transaction to the processor.
- The processor authorizes the transaction with the credit card issuer.
- The processor settles the transaction with the merchant.
- The merchant receives the funds from the sale.
What are the fees for credit card processing?
Credit card processors typically charge three types of fees: interchange fees, assessment fees, and processor fees. Interchange fees are set by the credit card issuers and are paid to the issuer for each transaction. Assessment fees are set by the card associations (Visa, Mastercard, etc.) and are paid to the card association for each transaction. Processor fees are charged by the processor for providing mobile credit card processing services. These fees can include monthly fees, per-transaction fees, statement fees, and more.
How to choose a credit card processor?
When choosing a credit card processor, there are a few things you should keep in mind. First, you’ll need to decide what type of processor is right for your business. If you’re looking for the lowest possible fees, a bank is likely your best bet. If you need more flexibility, an ISO or MSP might be a better option.
Second, you’ll need to compare the fees charged by different processors. Make sure to compare interchange fees, assessment fees, and processor fees. Finally, you should read the fine print of any processing agreement before signing up with a processor. This will help you avoid hidden fees and surprise charges.
The bottom line
Credit card processing is an essential part of doing business. By understanding the basics of how it works, you can make sure you’re getting the best deal for your business.