What is Credit Card Processing?

Credit card processing is the involvement of various factors that results in a successful credit card transaction. Throughout the process of the credit card transactions, various parties and charges are involved in facilitating the processing of the transactions. Trying to understand the credit card processing could be an overwhelming task. With many jargons, multiple parties, charges, tax, etc. credit card processing becomes a complex subject for anyone, however, by learning the basics of the credit card processing, you can identify any hidden or wrong charges, etc. If you notice any incorrect charges, you can file a dispute to claim for a refund.

The credit card processing requires multiple parties to facilitate a transaction. Typically, the following key players are involved in authorizing and settling a credit card transaction:

• The Cardholder – The cardholder is the owner of the debit or credit card who uses the card for making payments to the merchants. The cardholders can use any valid debit or credit card to make bill payments to the merchants.
• The Merchant – The merchant is an individual or a business who accepts credit cards for receiving payments for the product and services given to the cardholder or consumer. When you make a payment at a supermarket, hospital, store, etc. You are the customer who is making a payment to the merchant. Most merchants keep a
• The Merchant Bank (acquiring bank) – The merchant bank plays a significant role in the credit card processing system. Typically, the merchant bank or the acquiring bank will be a registered member of the card association (Visa and MasterCard). The merchant bank is responsible for managing and maintaining the merchant’s account for accepting payments through a debit or a credit card. After the consolidation of payments received from debit and credit cards through the Point of Sale (POS) terminal, the merchant bank will deposit the total amount to the merchant’s account. The merchant bank also facilitates the POS terminal and software to the merchant to accept payment by a debit or a credit card.
• Cardholder Bank (issuing bank) – The cardholder bank is the cardholder’s credit or debit card issuing bank. The cardholder bank is also a member of the card association that pays the merchant bank when their cardholder makes payment to the merchant.
• Visa and MasterCard (card associations) – The card associations (Visa and MasterCard) are not banks. Their primary responsibility is to regulate their members who are banks. Whether it is an acquiring bank or issuing bank, the card associations act as a bridge between the merchant bank and cardholder bank to ensure smooth transactions. Visa and MasterCard are both card associations, their primary motive is to govern the fees, qualification, and other factors related to their own card brands.

How credit card processing Works

• The cardholder makes a payment at the Merchant POS. The POS sends the transaction information to the Merchant bank’s Payment Gateway. The Payment Gateway collects the transaction information and connects with the card’s issuing bank to validate the information. Once the Payment Gateway confirms the transaction information to be valid, it approves the transaction that results in the merchant bank receiving the value of the transaction. Simultaneously, the cardholder bank debited for the value of the transaction.

Online Credit Card Processing

There are many firms who offer online credit card processing service. The online credit card processing services allow you to accept payment anytime and anywhere. These firms provide ready-to-use automated billing software that adds to the convenience of the merchants. Additionally, the merchants can manage their accounts online from anywhere.

Credit Card Processing Companies

The credit card processing companies offer a wide array of services to merchants and various other businesses. The merchants need a credit card processing company to handle their accounts and to manage the payments. The credit card processing companies monitor the payments received from the consumers when they make payments through their debit or credit card. The consolidated total payments are deposited to the merchant’s account by the processing company. The merchants pay a certain amount of money to the processing companies for their services.

The following list has names of the few popular credit card processing companies:

• Citrus Pay
• CCAvenue
• InstaMojo
• PayU India
• EBS Payment Gateway
• PayPal Payment Gateway
• PayZippy

The benefits, charges, and services provided by these credit card companies will vary from one to another. Depending on the requirement, the value of the transactions, and other factors, a merchant can choose to prefer one credit card processing company over the other.

Credit Card Processing Fees

For credit card processing, the following types of fees are applicable:

• The Discount Rate
• Interchange Rate
• Assessment Fees
• Merchant Service Provider Markup Fees
• Foreign Transaction Fee, etc.

Credit Card Processing Services

Most credit card processing companies offer an extensive range of services for the merchants. The following list mentions few of the common services:

• Bulk ticket processing
• Batch credit card processing
• Electronic billing
• Omni-channel and multi-channel processing
• Reconciliation and Reporting
• Virtual terminals
• E-commerce payment gateways
• POS systems
• Mobile credit card processing, etc.