Merchant Bank Credit Card Processing – Credit card processing is the act of accepting credit cards as a form of payment for goods or services. Credit card processors usually work with merchants to set up a merchant account, which allows the business to accept credit card payments.
To process credit cards, businesses must first obtain a merchant account from a bank or other financial institution. Once a merchant account is obtained, the merchant can then begin accepting credit card payments.
Merchant Bank Credit Card Processing
To accept credit cards, businesses must have a credit card processor. There are many types of credit card processors, but the two most common are point-of-sale (POS) terminals and payment gateways.
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POS terminals are physical devices used to process credit card payments. Payment gateways are software applications that allow businesses to accept online credit card payments.
Credit card processors usually charge a fee for their services. Fees charged by credit card processors vary, but generally range from 1% to 3% of the total transaction amount.
When a customer makes a purchase with a credit card, the credit card processor charges a fee for the transaction. The fee is then split between the credit card issuer and the merchant account provider.
A credit card issuer is the financial institution that issued the credit card to the customer. A merchant account provider is a financial institution that arranges a merchant account for a business.
What Is Credit Card Processing And How It Works
After a credit card is used for a purchase, the credit card processor sends the funds to the merchant’s account provider. The merchant account provider then deposits the funds into the merchant’s bank account.
It usually takes 2-3 days for the funds to be deposited into the merchant’s bank account. Once the funds are deposited, the business can then use the funds to pay expenses or withdraw money as cash.
Credit card processing allows businesses to accept credit cards as a form of payment. This can be beneficial for businesses as it allows them to increase their sales.
Credit card processing allows businesses to offer more payment options to their customers. This can be beneficial for businesses as it can make shopping easier for customers.
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Credit card processing can be expensive for businesses. Fees charged by credit card processors can range from 1% to 3% of the total transaction amount.
Credit card processing also takes time for businesses. It may take 2-3 days for the money to be transferred to the merchant’s bank account.
There are a few things to consider before signing up for credit card processing. Businesses should compare the fees charged by different credit card processors and choose the best one for their business. They should also consider whether they want to use a POS terminal or a payment gateway.
POS terminals can be expensive, but they provide businesses with a physical device that can be used to process credit card payments. Payment gateways are less expensive, but do not offer a physical device.
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Businesses should also consider whether they want to use a merchant account or a payment gateway. Merchant accounts can be expensive, but they offer businesses the ability to accept credit card payments. Payment gateways do not offer businesses the ability to accept credit card payments.
In general, credit card processing can be beneficial for businesses. This can allow businesses to increase their sales and offer more payment options to their customers. However, businesses should compare the fees charged by different credit card processors before signing up for credit card processing. They should also consider whether they want to use a POS terminal, payment gateway, or merchant account. Keeping track of all the moving parts associated with credit card processing can be challenging. There are many different parties involved in any transaction, and each must be paid.
For those of you who want to learn more about getting bank fees and where they come from, you’ve come to the right place. I will explain everything you need to know about this topic below.
Let’s start with the basics. Before we get into the fees associated with an acquiring bank, it’s important to define exactly what an acquiring bank is.
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The receiving bank is your bank. It is commonly called an “acquiring” or “merchant bank”. Acquiring banks process credit and debit card transactions on behalf of merchants.
Acquiring banks are licensed members of credit card networks, such as Visa and MasterCard. An acquirer helps approve sales when a merchant processes a credit or debit card transaction based on cardholder data.
Cardholder data is provided by the card network and the issuing bank (the bank that issues the card to the consumer) at the time of sale.
You can see that the acquiring bank is only one of many different players involved in credit card processing.
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Let’s say a customer pays for your goods or services using a MasterCard. The cardholder’s bank provides the card data to the recipient.
Once the acquiring bank confirms that everything is in order and the funds are sufficient, it approves the purchase and deposits the sale amount into your account.
In some cases, payment processors can double as receiving banks. They may have direct contracts with businesses to provide merchant payment processing services. That said, not every payment processor is an acquiring bank.
To better understand where the payee bank fees come from, you need to understand the role the payee plays in processing payments.
Merchant Acquirer Fees Explained
Acquiring banks allow credit and debit cards. They also interact with the issuing banks on behalf of the merchant. So whether you’re processing debit card transactions or credit card payments, you need a merchant acquirer.
In short, the acquiring bank can be considered an intermediary between the cardholder financial institution and the merchant. It is the customer’s responsibility to ensure that the funds have been transferred.
The acquiring bank assumes some financial risk for its role in the process, which is where bank fees are charged.
Let’s look at a simple five-step process to give you a better understanding of what the receiving bank does for each credit card transaction:
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Again, the terms “acquiring bank” and “payment processor” are not always used interchangeably. While some receivers are also payment processors, this is not always the case.
Why do receiving banks charge fees? As you saw in the previous sections, the receiving bank plays a central role in the transaction. Without the receiving bank, the merchant will not be able to receive the money.
It is also important to understand that the receiving bank must handle sensitive cardholder information. This means they must follow strict security standards and practices to process payments.
With all this in mind, the acquiring bank charges the traders a fee to cover the risks and other investments during the process.
Credit Card Processing Infographic Template
When the issuing bank sends funds to the receiving bank, card network fees are already deducted. So the merchant pays for the interchange fee with the processor or by getting a bank markup.
The payment service provider is also required to be compensated for its role. So the fees per transaction are actually made up of exchange fees, valuation fees and more.
But believe it or not, the fees and rates charged by the credit card processor and the receiving bank can be negotiated. Many merchants don’t understand this and end up paying extra for credit card processing.
Every acquiring bank is different. Sometimes you pay a flat fee, but usually the fee depends on the type of transaction, the volume of the transaction, and the card used.
How Does Credit Card Payment Processing Work [diagram]
For example, you pay a different rate for Visa cards than for Amex cards. A PIN debit transaction may not incur an assessment fee or network fee like an e-commerce credit transaction that goes through a payment gateway.
The best way to reduce your receiving bank fees is to consult with professionals who can negotiate these rates on your behalf. If you try to do it yourself, you probably won’t get the results you’re looking for.
Here at Merchant Cost Consulting, we can help lower your credit card processing fees. We will contact your receiving bank on your behalf to negotiate lower rates.
Depending on your processing volume, this could save you tens of thousands of dollars a year. Contact us today for a risk-free audit and assessment.
A Complete Guide To Credit Card Processing For Businesses
Keep checking back to our blog as well. We are constantly updating these resources with information on bank fees, credit card fees, card networks, and many other useful information related to credit card processing.
Prior to founding Merchant Cost Consulting, Colin worked in the payments industry for 3 years and gained extensive knowledge of the ins and outs of the industry. During that time Colin realized how deceptive the industry could be and wanted to do something about it. Prior to joining the payments industry in 2014, Colin played professional baseball for the Los Angeles Angels of Anaheim. Colin is from Waterford, CT and received his BA in Business from Virginia Tech where he was a member of the varsity baseball team.
Merchant Cost Consulting is a cost reduction company that helps businesses reduce credit card processing fees in merchant services without disrupting their day-to-day operations. On the surface, credit card processing
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