Best Merchant Credit Card Processing – Ironically: Accepting payments costs money. If you want to pay for your services, you must accept various payment methods, such as traditional credit cards, digital wallets, or cryptocurrency. And most of the time, you’re not moving money between bank accounts as a trader. So where are your finances?
Each transaction involves multiple players, including banks and credit card networks, validating data and passing responses to each other. The merchant only sees two points: the cardholder sending money and the funds appearing in your merchant account. Everything that happens in between is called
Best Merchant Credit Card Processing
Here we discuss how payment processing works and who handles transactions. Specifically, we will look at credit card processing and credit card networks from the perspective of a merchant payment service provider.
What Is A Merchant Account
Each type of sale involves transferring money from the buyer’s bank account to the merchant’s bank account. It’s easy though – just a money transfer between two banks, right? However, since we deal with sensitive data (card ID, transaction amount), several companies are involved to validate the information. Second, we also need to notify each participant of the transaction.
The entire cycle of these actions, validations, exchanges and actual money transfers is what we call payment processing. Now, from the merchant’s point of view, processing is a service of several entities. And each of them pays their own fee based on the transaction parameters. To understand what the process looks like from the inside, we will divide each stage of the cycle according to the main participants:
As far as the merchant is concerned, payment processing is a service that is managed by different companies, each taking on their own part of the process. In addition, each participant takes his own share.
Exchange Fee Typically, the interchange fee is what the customer’s issuing bank charges for a transaction. The credit card networks set the amount of these fees. Exchange is generally the amount of money calculated from all transactions between processing participants. The exchange fee covers the costs of data transmission and money transfer and can be shared among the processing participants.
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Assessment fee. Assessment fees go to the credit card networks. the amount depends on the type of card (credit or debit), the location of the transaction (international or domestic) and other factors.
Any markup included in the transaction may be considered an additional fee. However, the flag is always hidden because it is inconsistent and is called whenever there are transaction cancellations, chargebacks, or additional processing fees. This is the amount of money shared between all the participants in the payment processing to cover the expenses. Since the brand fees are inconsistent, we won’t cover them in detail here.
Since we mostly deal with credit cards, our primary payment method, we should know where the credit card networks process them.
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In processing terms, credit card networks are the regulators that define rates and standards. Whenever a Capital One or Crédit Agricole (bank) issued Visa or MasterCard (network) card is involved in a payment, the network would process and validate some part of the transaction and charge a fee.
It can be a technology or financial company that offers its payment services to merchants. While there are independent payment gateways and processing providers like Stripe or PayPal, credit card networks can also cover these functions.
Accepting different payment methods (credit card, electronic check, PayPal, GPay, Apple Pay, etc.) online should work with different processors. Each has its own method of charging transaction processing fees. For example, PayPal offers three pricing plans for processing transactions. The flat fee used by most merchants is quoted as 2.9 percent + $0.30 per transaction. Other processors may differ.
The main purpose of working with a payment processor is to securely transfer your funds between banks. In addition, payment processors and banks offer their own gateway services, which do not require special compliance to work with payments. So what is the difference between a network card processor and a third-party processor?
Credit Card Processing & Payment Processor Provider For 2023
If you are a business owner, you basically have two options to consider. 1) You go to one of the third-party gateway and processing providers we described in a previous article 2) or you go directly to the credit card networks for gateway and processing services.
Transaction processing cost is what differentiates processors because it is their core service. So now let’s compare rates between actual processor providers. In the following comparison, we’ll look at each network’s pricing, and look at some third-party payment processors to see the difference. We’ll also highlight some of the distinctions about working with each network provider.
Visa is a credit card network in the United States. It operates as an open network, so banks can freely partner with Visa to become its issuing or acquiring bank. Here you can apply for a merchant Visa and start working with acquiring banks.
To access banks, Visa provides an API that connects to the VisaNet interface over the public Internet. The API enables a full range of transactions for online payments (authorization, settlement, funding) using cards or tokens.
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Exchange Rates: Visa publishes its exchange rates publicly each year. This can be found in the fee table which describes all possible payment scenarios. Consider the online card payment for merchants, which is 0.65 percent + $0.15 for debit cards, and 0.05 percent + $0.21 for credit per transaction.
Assessment Fees: Visa’s primary assessment fee is 0.13 percent of the transaction amount for debit cards and 0.14 percent for credit cards in the United States. These assessment fees apply to all debit/credit transactions using Visa cards. Buyer authorization fees are $0.0195 and $0.0155 for debit cards and credit cards, respectively. This fee applies once per permit.
MasterCard is also the most popular open credit card network in Europe. MasterCard promotes itself as a payment gateway rather than a payment processor. However, it works similarly to Visa. To start accepting MasterCard credit or debit cards, you can contact any of its acquiring banks to obtain a merchant account.
Interchange Fees: MasterCard also publishes its interchange fees publicly. You can explore them using the link. MasterCard charges 0.19 + 0.53 percent per transaction for online card payments.
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Assessment Fees: For all transactions equal to or less than $1000, MasterCard charges a fee of 0.13 percent. Transactions over $1,000 incur fees of 0.13 percent and 0.14 percent for debit and credit cards, respectively.
Discover is an American credit card network. The main difference between the previous two and Discover is that it is a closed credit card network. Closed networks act as acquiring banks. So, on the one hand, it allows less flexibility. But on the other hand, the transaction fees of the acquiring bank are exclusive to the closed network.
American Express also known as Amex operates as a closed credit card network. And here is the link to create a merchant account on the Amex website. There you can easily apply for their online payment processing, which charges the following fees:
Flagship Payment Solutions offers merchant processing as well as merchant account creation. The exchange fee offered by this processor is 0.30 percent + 0.10 USD per transaction.
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Stripe is one of the largest payment gateway/processor service providers. It also offers a merchant account for users and charges 2.9 percent + $0.30 per transaction.
Please note that transactions will be subject to the network’s assessment fee per card brand.
When choosing to process payments with a third-party provider or card network, there is one thing you need to be clear about. The card network is always in the process of processing transactions because the cards are validated by them. But choosing a network as your processor service comes with several advantages.
Disadvantages depend strictly on network or payment processor fees. But, in most cases it would be these
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If you’re choosing a payment processor, it’s a good idea to stick with a popular choice. First, credit card networks are international organizations with hundreds of partner banks. This ensures that your payments will be made in a well-established and secure ecosystem. This also ensures a wide range of options within a single ecosystem. So keeping a credit card network as your full payment service provider can be a good idea. The payment processing industry is big business. The amount people spend using credit cards in North America exceeds $3 trillion annually and is growing at about 8% per year. Payment processing fees are about $85 billion a year. It’s easy to understand why the payments industry is so competitive. Traditionally, payment processing has been dominated by a few very large banks. However, recently smaller
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