Have you ever wondered what's involved in credit card processing? Every credit card transaction involves four parties: The customer making the purchase, the merchant receiving payment for the purchase, the bank the merchant processor uses for credit card processing services (acquiring bank), and the bank that issued the customer's credit card (issuing bank).
Acquiring banks (also called merchant banks) contract with merchants to operate accounts that allow the merchants to accept credit card payments. Acquiring banks deposit funds for credit card purchases into merchants' accounts. They also provide merchants with:
Any merchant who wishes to accept credit card payments must have a merchant processor account. A merchant account is an unsecured line of credit that pays a merchant for customer purchases. The payment is actually a loan to the merchant's account from that merchant's acquiring bank. In other words, the acquiring bank loans money to the merchant to cover the cost of customers' credit card transactions.
After a credit card transaction is complete, the merchant will have less money than the original transaction amount because both the issuing bank and the acquiring bank will charge the merchant fees for their services. These fees include a percentage of each transaction, and the higher the transaction amount, the higher the fee. The merchant may also be charged fixed fees for each transaction by the issuing bank and the acquiring bank.
If you want to set up a merchant account for credit card processing, you probably wonder about the credit card fees you will be charged. The most important determinant of how high your fees will be is the type of business you are in. Certain businesses are more likely than others to suffer payment disputes and chargebacks, so their transactions are considered riskier by issuing and acquiring banks. Businesses with these riskier transactions are therefore charged higher fees to offset the risk of chargebacks.
Chargebacks are what happens when a customer successfully disputes a credit card fees transaction with your business. The safest transactions, as far as the issuing and acquiring banks are concerned, take place when the cardholder swipes his or her own card in the credit card reader and signs the receipt to pay for goods that are inexpensive and not likely to generate complaints. Restaurants, gas stations, and car rental agencies all fall into this category. Plus, since their chargeback risk is low, they pay less in fees for credit card processing transactions.
The risk of a chargeback is highest when transactions are completed via the Internet or by phone. The risk is even higher if the transactions are expensive, involve shipping, and the business is one that is subject to complaints. The bottom line is that when a merchant applies for credit card processing services, the business the merchant is engaged in figures significantly into the fees that the merchant will be charged.
Any merchant, whether doing business in a physical location like a retail store, a virtual location like an online website, or by phone or mail order needs credit card processing services if they wish to serve all potential customers and remain competitive.
Although you, as a merchant, will pay a certain price for credit card processing services, the bottom line is that you can't really be successful in your business without it. However, due to the variability in pricing for credit card processing services, you can shop around for the best deal. Just be sure that any quotes you receive include all the rates and fees you will be charged.
Payment Depot is a cost- and user-friendly merchant service with comprehensive equipment solutions and features to help you run your business. It uses a monthly subscription membership model and charges wholesale rates to keep your expenses low. Moreover, it saves you money by not marking up the interchange rates or taking a cut from your sales. There’s a custom option for processing annual transactions of $500,000.
All business types and sizes can use Payment Depot, which is highly rated in online reviews. It’s scalable and has several options for customer support. There are no cancellation fees, and its satisfaction guarantee means you can be eligible for a partial refund after 90 days.
Stax by Fattmerchant offers payment processing for small businesses. It offers a monthly subscription and eliminates percentage-based transaction fees. So it can be a good option for businesses with high monthly transaction volumes.
Stax also has a software dashboard called Stax Pay that includes built-in analytics, an API, and support for e-commerce payments. All Stax customers receive 24/7 customer support by email, and the service doesn’t charge early termination fees.
CardX is a merchant services provider that specializes in credit card surcharging. Businesses don’t pay any fees when a customer pays for a purchase with a credit card. Instead, the customer pays a 3.5% surcharge to cover the cost of transaction processing. Debit card purchases are fee-free for customers, while merchants pay a 1% + $0.25 processing fee.
Why we chose CardX: CardX makes it simple to implement credit card surcharging thanks to its automated compliance processes. Your business can accept payments from any major card in person, in office, or online without worrying about running afoul of credit card rules.
Our experience: I was impressed by CardX’s 24/7 customer support and speedy response times. I also appreciate that the company boasts 99.99% uptime, so businesses never have to worry about losing sales to an offline payment system.
