Do You Need A Credit Card Processing Service?
If you have a smart phone, then you already have a
credit card processing terminal. Watch the video here.
There are three environments in which your business can use a customer's credit card to get the money for a sale. In two of these environments, a secure credit card processing service ( aka - a merchant account gateway ) may be used as an intermediary between you and your merchant account provider ( your bank ).
The three environments for accepting credit cards
- Physical Business. In a retail business, the customer's credit card is swiped through a terminal, which then transmits information about the card and the sale directly to the bank. In this environment, the bank's clearinghouse takes care of approving the transaction and transferring the money - a merchant account gateway is not necessary.
- Mail Order / Telephone Business. If your business accepts credit cards through the mail or over the phone, then you must manually enter the transaction information into your computer. Software previously installed on your computer then transmits that information to your processing service.
- An ecommerce business. If you are accepting credit cards online, then your processing service acts as an intermediary between your website's shopping cart and your merchant bank account.
How your credit card processing service works
The credit card processing service, or gateway, receives the information about the transaction, and then processes it so that your customer's credit card is charged, thus enabling you to eventually get the money.Here are the steps involved:
- The information is sent, either manually as in (2) above, or by your shopping cart as in (3), to your processing service.
- Your processing service then checks with the bank that issued the credit card to verify that there are sufficient funds, and to try to determine that the card is being used legitimately.
- If verified, the bank that issued the card then debits the card, and sends back an authorization code to the processing service.
- Finally, your processing service notifies your bank to credit your merchant bank account with the money, less any applicable fees.
The entire procedure will usually take several days to complete.
The secure credit card processing gateway provides a valuable service to your business. It allows your credit card payments to be processed faster, so customers have faster access to the merchandise they purchased. And it provides security against fraudulent transactions, takes care of keeping the customer's credit card information secure, and provides a way for the customer to get his money refunded through the chargeback process.
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