Last Updated on May 8, 2022 by rabiamuzaffar
Credit card processing involves the technical process of allowing a business to accept credit card payments from their customers. A credit card machine or processor facilitates this process by creating and transmitting an authorization request message to generate an approval code. This is usually done through either a dial-up modem, DSL connection, broadband network or cell phone connection.
The credit card processing company will either approve or decline the transaction based on the information within this authorization request. Once approved, they take a percentage of each transaction as their fee for using their service.
How Much Does It Cost?
The cost to process a credit card can vary greatly depending on how many transactions are made. If the credit card processing company charges a fixed fee per transaction, then this cost can remain relatively stable. However, if they charge a percentage of each transaction (called interchange fees), then the cost will steadily increase as more transactions are made. It is possible to find rates that offer both fixed and percentage based fees, which can lead to savings in the long run.
How Long Does It Take?
The time it takes for a credit card transaction to process, or post, will vary depending on several factors. These include how far away the merchant is from the processor’s host computer, what type of equipment is being used and what day of the week is it. Most credit card transactions will take up to 24 hours for completion. However, if the transaction is sent through the ACH Network (see: ACH Direct Deposit), then it can be done in less than 3 seconds.
How Is It Different From Credit Card Authorization?
Credit card authorization happens when a customer uses his/her credit card to make a purchase. The credit card issuer sends an approval request message to the merchant’s bank. If approved, they will hold the funds for up to 30 days while you wait for the transaction to process through your bank account. The difference between authorization and processing is that when you have authorization, no transactions are actually made against your account/s.
Is It Secure?
Credit card processing is one of the most secure ways to accept payments from customers. Credit card information is never stored on your business’s devices, nor is it sent over unsecured networks. The process also requires a unique token for each transaction in order to prevent fraud and chargebacks.
What Are The Different Types Of Credit Card Processing?
There are two basic types of credit card processing: offline and online. Offline processing uses a stand-alone credit card machine or terminal, while online processing is done through an internet browser. Other forms include mobile credit card processing which can be done with a cell phone or other wireless internet capable device.
Why Is It Important For My Business?
It is important to accept credit cards for two reasons. The first reason is that you can do more business in a shorter amount of time. The second reason is that it allows your customers to use their credit card of choice when making a purchase from your business. If you fail to accept their preferred method of payment, then your customers will likely choose another company that can accommodate them.