A Guide to Processing Credit Cards for Merchants
By Christine OKelly
Processing credit cards is not as complicated as you might expect. While there are five parties involved in the process, the interchange of information and money is handled by a card association. This means that for the merchant, the process appears seamless.
Parties Involved in Processing Credit Cards
a. The first party involved is the cardholder. This is your customer and the person the credit card is issued to.
b. The next party is the merchant. This is your company, and you accept the cardholder’’s credit card as payment for goods and services.
c. An issuer is an organization or financial institution that issues the credit card to the cardholder. For example, the cardholder’’s bank or a department store.
d. The acquirer is the organization or financial institution that provides merchant processing services.
e. A cardholder’’s card association is the network that provides authorization and funding between the issuer and acquirer. Card associations include VISA, MasterCard, Discover, and others.
The “Interchange” of Money
Processing credit cards involves the card associations managing the flow of money and information between the parties - known as the “interchange”. The interchange involves a few simple steps to turn a sales transaction into money in your bank!
a. The first step in processing credit cards is authorization. When the cardholder presents their card for payment, the merchant’’s acquirer checks with the issuer of the card to verify the card number and transaction amount. The acquirer then processes the transaction. As you know from being on the purchasing end of a transaction at a store, this step is done nearly instantaneously.
b. Once the card is authorized, the transaction is stored in a batch until the merchant sends the batch to their acquirer to receive payment. In most cases, this is done at the end of a business day.
c. The acquirer then sends the batches to the issuer to receive payment. This flow of information is done through the card associations that represent the various transactions in the batches. This process is known as clearing and settling, whereby the issuer credits the acquirer and debits the cardholder’’s account.
d. The final step is called funding. After the acquirer receives payment from the issuer, payment is sent to the merchant less the fees the acquirer charges the merchant for the processing services.
In general, the entire process from the sales transaction to receiving money in your bank typically takes about three business days. The benefits of your business accepting credit cards are numerous.
Now that you understand how easy processing credit cards can be and if you”re ready to grow your business by accepting credit cards, the next step is locating an expert in merchant processing services and opening a credit card processing account.
About The Author
Christine O”Kelly writes for the merchant processing services experts at BluePay. BluePay makes processing credit cards an easy and affordable solution for your business.
