Online Credit Card Processing A Complete Guide
For most merchants, understanding how the credit card processing system works might be tricky. Because there are many steps to perform. So we have created a guide on credit card processing to make things simple.
What do you mean by credit card processing?
Online credit card processing performs when a business accepts payments from customers. And by credit cards in their online business.
And it also includes the credit card payment processor and a payment gateway. To transfer the information on the website to confirm that the merchant receives the payment.
And nowadays, a credit card processing system become essential for online businesses. And there is a smart rise in the popularity of digital payments and the recurring bill model.
Who involves in Credit Card Processing System?
First, let us know that who involves in the credit card payment system. When the customer presses the Pay button on your website or application. Till the merchant receives the payment. So, these are the players that are involved in the payment processing.
- Cardholder. The customer makes the online transaction by using their credit or debit card.
- Merchant. A business owner who sells products or services. And accepts payments for the sale by a credit card payment gateway.
- Credit Card Networks. It is an association of many card brands like Visa, RuPay, or Mastercard. And the fees, security guidelines. And assistance in dispute resolution depends on this association.
- The Acquiring Bank. The merchant will receive the funds in this account after settlement.
- The Issuing Bank. The customer’s bank account is known as an issuing bank. And the transaction amount deducts from this account.
- Payment Gateway. eMerchantPro credit card payment gateway verifies the customer card details. Moreover, it manages the settlement process. And act as a mediator between the website and the acquirer. It stores sensitive data such as credit card information.
7. Payment Processor. The payment processor helps to transfer the payment details from the credit card company to the banks.
A credit card payment gateway ensures the security of the customer’s sensitive card information. And that forwards from the customer to the acquiring bank, by the merchant.
Important factors that affect credit card processing system USA
For an amazing card payment processing usa. The essential factors that play an important role are.
- Transaction Speed. Most customers want to pay by using debit and credit cards. And it is the faster mode of transacting with your business. They always want the process to be secure and fast. So, you will choose a credit card processing system. And that can manage a large number of transactions. Friction-less credit card processing can complete a transaction in less than two seconds.
- Strong Updated record. Credit card system cancellation can prove a loss to your business. As an outcome, customers can assume your brand is inconvenient. And may also move to a different online merchant. Along with reliable card processors will have the perfect updated history and backup. And that measures to cut down service interruptions.
- Fair Rate Structure. Your credit card processing service provider should have transparency in the rates. A payment processing fee may consist of components like interchange pricing. And a concise rate structure will help you in analyzing all the information.
- Great Customer Service. As you know, troubleshooting and management of your credit card payment gateway is an essential part of an online business. So you will have to ensure your credit card processor provides 24/7 customer support.
The steps that are performed in the credit card processing system are as follows.
Authorization process. In the credit card processing system. The first step is the authorization process.
And there are four steps in the authorization process of a credit card processing system.
- Cardholders or customers provide their card details at checkout. And the merchant’s payment gateway tokenizes and encrypts the information. Then transmit it to acquiring bank.
- And the encrypted data is sent to the payment processor. Then the processor uses the card association’s network to forward the data to the customer’s bank (Issuing Bank).
- The bank then verifies the identity of the customer. And to process the payment.
- After that, according to the verification report. The bank will allow or decline the payment. And this is immediately viewed in the merchant’s payment gateway. And after allowing or declining from the bank. The customer will process the transaction or redirect to a new payment page.
2. Settlement Process. The second step in the credit card processing system is the settlement process. And it takes place after the approval of the transaction. When the bank authorizes a transaction, the merchant can perform a sale. Also, the merchant receives the funds only after the settlement.
And there are four steps in the settlement process of a credit card processing system.
- When the merchant receives the authorization. The payment gateway will send the approval to reconcile the payment to the payment processor.
- Successful reconciliation. The payment processor deducts the application fees from the transaction amount. And it deposits the amount in the acquiring bank of the merchant. So this process is called settlement and can take one or two business days. And this is known as the settlement period. Funds do not settle in real-time. Rather than, the transactions store for a day before completing the settlement process. And it helps in reducing the total processing costs when a merchant performs many sales in a day.
- From the issuing bank, the card network deducts the transaction amount. And then it sends the amount to the payment processor to submit in acquiring the bank account of the merchant.
- The customer’s issuing bank deducts the transaction amount from the customer’s account. And the bank sends an invoice or account statement to the cardholder. That is known as the credit card statement. And the customer requires to settle the credit card performance. According to the statement under the fixed date according to the billing cycle. And if the customer fails to do so, interest charges are applied by the bank.
Transaction Fees in Credit Card Processing System
The partners involved in a credit card payment processing system apply a fee for their services.
Third-party payment processors can also apply fees on a daily or monthly basis. And receive credit card fees from your transaction amount. And the processing fee deduction happens on a daily or monthly basis. But the processors settle the funds daily in monthly discounting. And the fees for the whole month are deducted at the end of the month.
And these deductions consist of the following types of fees.
- Startup Fee.
- Monthly statement fee.
- Discount rate.
- Transaction fee.
- Minimum monthly fee.
- Chargeback fee.
Let’s get a payment gateway for credit card processing
Keep your keen eye when choosing a merchant credit card processing system and payment gateway. Because the safety of your customer’s credit card information and your reputation is at risk. So credit card payment gateways are integral for your business.
But, payment gateways provided by eMerchantPro make it easier. They usually work with banks, credit card networks and enable brands to process payments securely.