How to Switch Credit Card Processing Providers?

All About Credit Card Processing

More and more transactions are made each day via credit and debit cards. Credit cards bill the amount of the purchase to your account. Debit cards, are used to withdraw the money from your checking account.

For the merchant, the important aspects of credit card sales can involve the processing method and merchant accounts.

A business may want to accept credit cards, but has to understand how the cost of merchandise charged to Credit Card XYZ eventually ends up in the bank account and how quickly the payment will arrive.

The typical merchant has two ways of handling credit card processing and debit card transactions.

The two methods include:

1. Merchants can swipe the card through a terminal that is attached to a cash register.
2. The system can take payments through credit card processing software.

The decision regarding which method to use will be determined by the type of the business and how payments are already accepted.

The next step decision is based on whether the business is operating from a fixed location, such as a store in a shopping mall, or does most of its business over the Internet.

For a business or company that is already taking payments with a cash register or point-of-sale computer, it may be easier just to add a terminal that is dedicated to credit card processing and debit cards. Both can be swiped through the system. This will get the transaction to the right company for processing.

Adding point-of-sale software in this situation will necessitate the need for a separate computer terminal to take care of the credit transactions. This will be an extra expenditure, sometimes major, and is usually unnecessary. Additional steps will be involved throughout the transaction process that both the staff and customer will find irritating.

Now, if the business is completely based online, a virtual terminal is needed, which is software that provides the functions of a point-of-sale computer. This type of software can come with a shopping cart and checkout options that are easily integrated into the ordering process.

The only other options would be to accept orders by telephone or mail. These methods had merchant accounts. Both processes are subject to errors being made. Verifying credit card numbers and tracking shipments will become more difficult if not impossible.

With the merchant account system, customers only have to press a button to add their items to the virtual shopping cart. They then enter their shipping and credit card information. The transaction is processed in a matter of seconds.

The owner of merchant accounts then has to acquire the product from his warehouse or supplier and ship the order to the customer. The software will track the purchases, inventory, and the profits.

There are other variations for companies having online and physical store locations. For example, some store locations may offer big-ticket items, but do not have them on-site. In these cases, the store will act as a merchant account using point-of-sale software.

The store will probably have computer terminals connected to online distribution points that customers can use to place orders themselves or with the assistance of a store employee.

The most important thing to do is to make transaction as easy as possible and that all sales secured and properly handled.

What is a Partial Authorization?

Many times when a customer uses a debit card or credit card, there are not enough funds in the account to pay for the full amount of the purchase. When this occurs, several options can happen. The transaction can be denied immediately at the point of sale, but this benefits neither the customer nor the merchant. Instead, most businesses with merchant accounts provide what is known as a partial authorization. The card issuer then provides authorization for the amount available in the account, which lets the merchant obtain payment for the remaining balance without losing a potential sale.

Credit card processing has been made much easier for merchants who work with payment providers that offer this service. Most major credit card companies offer this service to business owners, banking on the fact that it is beneficial to them and their customers. Most providers make this process very easy for businesses, which makes it much more likely the service will be used with customers. The biggest drawback to partial authorizations are that merchants run the risk of losing money on sales if close attention is not paid to receipts that are returned during a point of sale transaction. If there is an oversight during this process, the remaining payment may not be collected and money will be lost on the sale.

Sometimes when partial authorizations are given, the cardholder may not have the money needed to pay the remaining balance. In these instances, a partial authorization reversal is performed. This allows the funds that were to be used to pay for the transaction to be freed up once again, essentially starting the transaction from scratch. Once this is accomplished, the customer can then be able to come back later with an alternative form of payment.

Businesses that want to have the capability to perform partial authorizations must be sure they have merchant accounts that will support this. Most vendors will provide newer model terminals as upgrades, or will offer newer models at discounts to help their customers make the necessary upgrades. Most also offer training to business owners and employees for free, allowing upgrades to be even easier.

While not having enough money for a purchase can be embarrassing to customers, businesses that can offer partial authorizations can make credit card processing easier for everyone. By having fewer declined transactions, both merchants and customers can find themselves in a win-win situation.

All About Authorization Fees

When working with a credit card processing company, one will want to know what is going on behind the scenes. Think about it, when accepting plastic, a person will want to know what he or she is getting and paying for. Otherwise, it’s not so easy to justify the expenses, and one will be lost. With this in mind, here is a short guide to all you need to know about authorization fees.


First and foremost, when getting an authorization fee, one will only get it once they contact the bank or call them for the transaction. Think about it, a person is not going to pay anything if they don’t have to run the card or talk to the bank. For this reason, one should not worry if they haven’t tried running the card. Simply put, when running the card or trying to, a person will pay an authorization fee, and this is just the beginning of the credit card processing transaction.


Usually, when dealing with merchant accounts, one will not pay a huge fee to have the card run. No, in reality, the fee is usually small, and a person will pay only about 25 cents to do the transaction. Since merchant accounts vary, one should check out on their own and figure out what works for their situation. So, remember, when looking to run the card, one will pay a small fee to do so, and this is hard to avoid. Remember, while this fee is small, it can add up, and it’s wise for a person to think of their long-term wants and needs. If not, it’s easy to overpay and watch as their costs add up.

One of many:

Think about it, when running a credit card with a merchant account, one will pay a lot of fees. While the only fee one sees every time is the authorization fee. But, as mentioned, this is only a small part of the process as a person will have to pay to rent the machine and pay a host of other costs. In the end, when looking at the authorization fees, a person should run the numbers and see what they are getting into.

When looking at authorization fees, one can see that they can up. However, when thinking about it, one should remember that there are other costs, and it’s easy to forget this fact if a person only looks at one cost.

Deciding to Take On Debt or Investors For Your Business

When businesses expand, they must increase liabilities or investments. The company’s financial position and the amount needed are determining factors. Current ratios provide an indication of a company’s ability to pay its debts, and the ratio of liabilities to equity indicates the better choice of adding debts or seeking investors.

Current Ratio

The current ratio is calculated by dividing the current assets by current liabilities.

Current asset accounts are cash, receivables and marketable securities that mature within one year.

Current liabilities are accounts payable and notes payable due within one year.

A current ratio of 2:1 indicates the entity has $2.00 in assets for each dollar it owes.

Credit Lines

Every business develops credit lines to finance daily transactions and capital improvements. These credit lines include financial institutions, suppliers and credit cards. Businesses may also use short-term credit for buying equipment. These are liabilities.

Merchant accounts, however, have an additional credit line provided by credit card processing companies. These companies buy credit card receivables at a discount and collect the payments when paid by the card user. Under normal circumstances, businesses use the cash and forget cash advances.

Cash Flow

Planning cash flow allows businesses to optimize investments and purchasing power. With proper planning, businesses borrow less and pay less interest. Using the current ratio as a guide, cash flow planners can more readily recognize surpluses for investment or points at which loans will be required.

Despite the best planning, owners have emergencies that require unexpected expenditures. In these situations, the owner should check credit lines for possible financing. These unexpected expenses are ideal for merchant accounts and credit card processing companies.

Why Add Investors?

Assets are divided between creditors and owners. The ratio is calculated by dividing total assets by equity. The ratio should be less that 1:1.

When incurring new debt, planners should add one-year’s payments to the current liabilities. Calculating the current ratio reveals the affordability of the debt. If the ratio is less than 1:1, the business should consider new investment.

By adding the new debt to total liabilities and dividing by equity, planners can determine the new ratio. A ratio of more than 1:1 indicates new investment may be required.

Planners should do additional cash flow and credit analysis before making a decision.

Why Visa and MasterCard Are So Popular

Credit card processing has changed dramatically over the years due to technology and increasing bank regulations. However, the principle remains the same in terms of customer loyalty and business-friendly merchant services. Visa and Mastercard are the most popular cards in the market due to their versatility and flexible banking options.

Universal Cards

Visa and Mastercard have been around for a long time. Most merchants are familiar with how cards under this sign will process. Visa and Mastercard are also widely offered with most banks that are both local and national. More importantly, credit card processing can function on both a banking and debit form as well. Most ATM networks are adapted to Visa and Mastercard for debit transactions. Customers may have a bank debit card that they use for both everyday ATM banking and purchases. Mastercard uses the large Cirrus ATM processing network and Visa uses the Plus network. When including Mastercard, most merchant accounts like to see a solid banking reputation first.

Reduced Chargeback Authorization and Merchant Red Tape

Some credit cards companies allow for consumers to initiate a chargeback or possibly accept returned merchandise if the store will not return it. Visa and MasterCard will usually provide more leniency towards the merchant accounts. Both cards function as an intermediary. This means that Visa and MasterCard do not issue cards directly. They are issued by the various banks and each bank will have different rules regarding merchant account regulations. This diversity allows businesses to pick and choose banks that work well for their services. American Express and Discover have a more direct role in regulation and customer satisfaction.

Lower Merchant Cost

One of the biggest reasons Visa and Mastercard remain dominant in the credit card processing market is a play in numbers. Visa and Mastercard simply charge less to merchants to process. American Express can charge 2.5-3% in merchant costs per transaction. Multiple transactions can add up quickly to lost sales. The increase in price is a result of batch sales and authorization that go directly to American Express and Discover. Visa and Mastercard send this information to the respective banks they are associated with. Most businesses also find lowered costs by linking services from their business savings or checking to the Visa or Mastercard merchant accounts associated with them.

When to Charge Sales Tax to Online Customers

As a merchant, it is important that you charge all applicable taxes and send them to the government throughout the year. When it comes to sales tax, how do you charge your customers correctly? How do you know if you even have to charge sales tax?

Some Merchant Accounts Calculate Taxes Automatically

In some cases, the service that you use for credit card processing may automatically calculate the sales tax and remit to the government. In other cases, the credit card processing service that you use will calculate the tax and tell you how much you are supposed to send to the government. This makes it a lot easier to keep track of the taxes that you need to withhold and send in. If you do not remit sales taxes in a timely fashion, your business could be fined a lot of money.

Most Software Programs Add Sales Taxes to the Price

If you use eCommerce software or add your own widget or plugin to your site to process payment through your merchant accounts, it will more than likely calculate the sales tax that you need to charge depending on what state that you are in. When you add the widget or plugin to your site, it can be configured ahead of time to make calculations only when sales taxes need to be charged and how much the tax rate is.

When Are You Obligated to Charge Sales Tax?

You are only obligated to pay sales tax if you have nexus in a state that charges a sales tax for the product that you are selling. Nexus means that you have some tangible association within the state. For example, you may sell digital downloads from your computer in California or have a factory in the state of New York. This means that you play by the sales tax rules of that state. If you are not obligated to pay sales tax on an item but your customer is, it is on the customer to send the tax money to the government.

Whether or not to charge sales tax is an issue that you should ask an accountant or tax attorney about before selling a product. Remember, you do not have to pay the sales tax yourself. Instead, the customer will pay that on top of the price being paid for a product or service.

When a Business Idea is Worth Pursuing

When coming up with ideas, one can change the world or lose his or her shirt. While it is difficult to separate the useful ideas from the bad ones, an entrepreneur can weigh the benefits and downside. Then, he or she can invest in the idea or let it die. Here are three things to consider when determining if a business idea is worth pursuing.

Run the number:

Above all else, if an entrepreneur wants to start a company and enjoy solid profits, he or she must ensure the idea is profitable. To get started, a perspective entrepreneur can come up with a business plan and estimate his or her expenses and income. If the numbers add up, one can proceed further with their idea. Remember, when looking at costs, consider everything including credit card processing fees and merchant account fees as expenses add up quickly.


There is no point in trying to start a company if one will face stiff competition from day one. While possible to unseat the leader, an entrepreneur can lose plenty of cash if he or she attempts to take on a well-established and popular organization in the area. However, if one comes up with a popular idea, they can consider tweaking it and coming up with a better idea.

Long-term passion:

All-too-often, a new entrepreneur will enjoy profits but hate his or her job. When starting a new company, one can stay with the new idea for years, or decades. When a company owner hates his or her day-to-day work life, they will not enjoy life. To avoid boredom or burnout, one needs to think of the long-term. Simply put, a new entrepreneur must ask him or herself if they want run this business for years.

Legal and easy to start:

To start a business, one will jump through plenty of red tape when dealing with local and state governments. Before starting a new business, one needs to research local laws. If the local governments force people to jump through hoops, an entrepreneur must consider another idea.

When trying to come up with a money-making idea, one needs to consider all the costs like credit card processing and merchant accounts. When doing so and looking at the idea closely, one can avoid wasting time and money.

What a Merchant Should Expect When Processing Credit Cards

A credit card is one of the most important financial instruments used by customers across the globe. If you are a merchant selling a product via bricks and mortar or online stores, you will need to allow customers to make purchases using a credit card. There are not many resources available to the merchants to understand what to expect when processing credit card transactions.

Parties involved in a credit card processing transaction

It is important to understand the different parties involved in a credit card processing transaction. As a merchant, you may not be interacting with all of these parties. However, knowing the players involved in the process will help you in the long run.

Merchant: The merchant sells some product to its customers. The merchant may be an intermediary that sells someone else’s products. A typical merchant will accept dozens of transactions from multiple customers.

Acquirer: An acquirer is a fancy term used to describe the merchant’s bank. This is the financial institution that allows the merchant to setup and process credit card payments.

Association: An association is an authority such as Visa or MasterCard. These organizations usually allow the issuers to co-brand the credit card using their trademarks. They get a fixed percentage of every transaction made by a cardholder. They also act as an arbitrator to settle disputes among cardholders, issuers, merchants and acquirers. These institutions also offer the network to authorize and accept the transactions.

Cardholder: A cardholder is the customer who swipes his or her credit card to purchase products or services from a merchant.

Issuer: This is another fancy term used to describe the customer’s bank. This is the bank that issued the credit card to the customer.

What to Expect if you are a Merchant

If you are a merchant, then you will need to understand the following steps:

• Setup a merchant account with a bank (Acquirer), which is a member of an association such as Visa or Mastercard.
• Decide the credit card brands that you will allow your customers to make purchases.
• Decide the payment channels, such as point of sales, web sites, or mobile.
• Review and agree to the transaction fees charged by the Acquirer.
• Complete the merchant account setup with the Acquirer and start accepting credit card payments.



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