All About Credit Card Processing

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.

How Does Batch Processing Work?

When it comes to credit card processing, it’s beneficial for a merchant and the banks they work with to offer a seamless transaction experience to the customer. Customers expect their credit cards to work instantly, and making them wait for processing is bad for business. Merchants can use real-time processing, but it’s expensive and impractical, so many of them choose to use batch processing for their credit card transactions.

How Does Batch Processing Work?

When a customer’s card is swiped, the credit card terminal, software or gateway stores the merchant’s authorization codes in a file; this file is usually purged at the end of the day when all the information can be sent and processed in one batch. Processing these transactions simultaneously is a lot easier and less resource intensive than processing every transaction as it occurs.

When the time comes for a vendor to settle their merchant accounts, they send their authorization codes to the credit card processing company; the processor takes this information and sends it to the proper banking institution. When the bank gets this information, they release the money to the processor, and the processor forwards this money to the vendor’s bank.

This process usually doesn’t take more than 48 hours, and when it is complete, the bank bills the customer who initiated the transaction with the vendor. When it comes to the customer’s perspective, they never know that their payment hung in limbo for a couple of hours; it looks like a seamless process that took place instantly.

Vendors can process their merchant accounts at various times throughout the day, but most choose to do it only once because credit card processors charge a fee for every time a batch is closed. From a financial perspective, batch processing saves vendors a lot of money; the vendors aren’t charged multiple fees for the same service throughout the day. The vendor can send one batch, and they avoid paying for every single transaction that they make.

Batch processing is convenient and inexpensive. When a vendor uses batch processing, they know that the payment will be authorized, and they don’t have to spend time on individual processing. When all the information is stored together, it allows merchants to see all of their credit card transactions in one place, and this allows them to segment their information into specific time periods. Batch processing is convenient, it saves money and it offers more security than processing transactions in real-time.

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