Credit card processing is a global system that allows merchants to accept online payments by the use of electronic funds transfer. This system also enables businesses to process various transactions related to business’s commerce, whether personal or institutional. Without this facility, it would be hard for companies not just in our country but all over the world to get access to the World Wide Web and enjoy its benefits.
Basic processing procedure: The first thing a merchant does is to apply for a credit card processing account from a bank or institution that offers this kind of service. Once approved, the company will be assigned a merchant number which Afterward, when a customer makes a purchase from the business, his/her card is is used to identify them whenever they make transactions using their cards. swiped through the machine and the transaction is processed. The merchant then receives payment though electronic transfer.
Two types of processing systems: Nowadays, there are two main credit card processing systems that are used all over the world. These are authorization-only system and authorization and capture. The authorization-only system only authorizes the transaction and the merchant will not receive payment unless they also process a capture of it which occurs after the goods and services have been given to the customer.
This is usually done after one day from when the purchase was made. When customers want to make their payments through check or some other means, this transaction is called a pre-authorization. Authorization and capture on the other hand, sends payment to the merchant’s bank account immediately after it has been done. This also happens when cash customers make their payments through a bank teller or a check out counter.
Types of processing fees: There are different types of credit card processing fees, but the main one is a discount fee. This is charged to merchants for every transaction they make and can be either flat rate or percentage-based. Flat rate refers to a fixed amount that will be deducted from your total sales.
Percentage-based fees, on the other hand, are calculated based on the total amount of money made from selling products and services. Some companies also charge a membership fee and transaction fee for every transaction they do on their own credit card processing account.
Comparison between online stores and brick-and-mortar shops: A new trend that is getting popular nowadays is e-commerce or rather, internet shopping, where customers buy things from the comfort of their homes. With this, new forms of business have surfaced. For instance, there are now online shops for selling books and CDs, along with various other things that can be found on department stores.
Another similarity between the two types of businesses is that they both use credit card processing systems to facilitate their transactions. The main difference is that brick-and-mortar shops need to have a minimum of inventory, while online stores do not. This means that they are exempted from having to pay for storage costs unlike the regular commercial businesses.
How credit card processing can benefit your business: There are many reasons why you should use credit card processing as part of your business such as the convenience it offers and how it saves you time and money. It is also an easy way to track your sales and business expenses, as everything will be posted into your account online or through a statement that comes in the mail.
There are also other benefits for these transactions such as discounts and protection against fraud if you shop at reputable vendors and institutions. Furthermore, credit card processing can help you with your accounting work so that you can easily know when to pay your bills or when funds are available for use.
Growth in mobile payment processing: Nowadays, there is a growing number of people who prefer using their mobile phones than having to carry cash in their wallets. This is why the concept of mobile credit card processing is now becoming popular.
The main difference between this type of processing system and conventional ones is that cards are read using a magnetic stripe card reader which is connected to the mobile device through its audio jack. Some businesses also use other electronic devices such as tablets wherein they can swipe their customer’s cards while shopping, without having to let go off their handsets.