Credit Card Payment Processing: 101 Guide
If you run a business that accepts credit card payments, you’ll need to choose a payment processing solution that best suits your needs. This can be a daunting task, as there are many different options available on the market today. Credit card payment processing
To help you make the best decision for your business, we’ve put together this comprehensive guide to credit card payment processing. We’ll cover the different types of processors, the fees associated with each, and the pros and cons of each option.
We hope this guide will help you make the best choice for your business.
Types of Credit Card Processors
There are two main types of credit card processors: direct processors and indirect processors.
Direct processors are companies that have their own payment processing terminals. These are the machines that you typically see in businesses, either on a countertop or attached to your cash register.
When a customer swipes their card at one of these machines, the information is sent directly to the processor for authorization. The processor then sends the transaction details to your bank for settlement. This process is called “capture.”
Indirect processors are companies that don’t have their own terminals. Instead, they partner with banks and other financial institutions to provide payment processing services.
Like direct processors, when a customer swipes their card at an indirect processor’s terminal, the information is sent to the processor for authorization. But instead of sending the transaction details to your bank for settlement, the processor sends them to the partner bank. This process is called “acquiring.”
Choosing a Credit Card Processor
There are a few key things to keep in mind when choosing a credit card processor:
- The type of business you have: If you run a retail business, you’ll need a direct processor. If you run an online business, you can use either a direct or indirect processor.
- The volume of credit card sales you process: If you process a lot of credit card sales, you’ll want to choose a processor that offers lower transaction fees.
- The type of Credit Cards you accept: If you accept American Express, Discover, or other cards that are not processed by Visa and Mastercard, you’ll need to use an indirect processor.
- Your business location: If you have a physical storefront, you’ll need a processor that can provide you with terminals. If you’re an online business, you can use a processor that doesn’t offer terminals and instead uses virtual terminals and shopping carts.
Different Payment Processing Options Available
In the world of online payments, there are a variety of options available to suit the needs of different businesses. Here is a brief overview of some of the most popular payment processing methods:
- Credit and debit cards: This are by far the most common type of payment processing, as it allows customers to use their existing credit and debit cards to make purchases. While this may be the most convenient option for customers, it is also one of the most expensive payment processing methods due to the high fees that are charged by card companies such as Visa and Mastercard.
- Electronic checks: This type of payment processing allows businesses to accept payments from customers without requiring a credit or debit card. Customers simply provide their bank account information, and the funds are transferred directly from their account to the merchant’s. This is a much cheaper payment processing method than credit cards, but it can take a few days for the funds to be transferred.
- ACH payments: ACH stands for “Automated Clearing House,” and it is another way for customers to make payments without using a credit or debit card. However, in this case the payment processing method involves sending funds directly from one bank account to another. This can save merchants money on credit card fees, but many ACH transactions require that both parties be members of the same financial institution.
- PayPal: PayPal has become one of the most popular payment processing methods in recent years, with millions of businesses and consumers using the platform to make secure transactions. Customers simply log in to their account on the PayPal website and send payments directly to merchants. This is a low-cost option that offers users additional security features.
There are many different payment processing options available to businesses these days, so it is important to research your options carefully before choosing the best way to process payments for your company. Which one is right for you will depend on a number of factors, including your business type, location, and sales volume? Credit card payment processing
Understanding the above information is the first step in deciding the best credit card payment processing option that could work best for your business needs. There are payment processing consultants that can help you make the best choice for your business.