While it may not be on the top of your mind to understand how a credit card works, it may help you understand the costs that you incur on credit card usage. Credit card processing is the process involving operations require to conduct a payment. It includes processes conducted through a credit card online, in person, or via email.
Whether running a startup or any business, you rely heavily on credit cards for business profits. For this, you need to use a merchant card from a reliable company. Merchant credit card companies process the payments conducted through a credit card. The businesses may also need a point-of-sale device to accept credit card payments and cash received.
You would need to explore or even hire an expert consultant to find the best credit card processor and merchant. If you hesitate due to financial concerns, check easy loans in the UK from reliable finance experts. You can leverage it to get expert guidance and pick the best payment methods by choosing a relevant credit card processing partner.
Apart from choosing a partner, you should know how to reduce processing costs. The blog lists the best ways to do so.
What does credit card processing imply?
Credit card processing is every process a credit card holder or customer conducts the moment he tap, swipes, or inserts a credit card to pay for the seller’s services. The process involves an active contribution of the consumer, credit card holder, and the bank that manages the business’s account. A credit card processing company does not charge a fee for the service but a small percentage of the transaction.
As the data travels over the internet while conducting a credit card payment, credit card processors use encryption to safeguard the customer’s data. The company manages all the paperwork on the business’s behalf as a part of accepting the payment from the customer. These services include fraud protection and customer management.
What are the 3-steps of credit card processing?
Credit card processing for different ways like- online and in-person purchases stays the same. Here are 4 primary steps involved:
- Customer submits credit card information by inserting a credit card and filling out a form on the merchant’s POS (Point of sale)
- The merchant requests the authorisation from credit card processor and issuing bank. The bank share th right to accept or decline the purchase.
- The merchant/business receives the authorisation mail. After authorisation, the funds get deposited in the business’s bank.
What fees does a business pay to credit processing companies?
A business incurs multiple fees while receiving payments. Here are some primary ones:
- Interchange fees- business and customer banks collect the payment to work together.
- Assessment Fees- It is the convenience fee or the facility that a credit card company provides
- Merchant service provider or markup fees- The merchant charge the fees to collect payment from the credit card company
- PCI compliance- Fees to comply with credit card security standards.
If the business misses any of these payments, the bank may halt the transaction or grant the business time to clear the payments before continuing the services.
Tips and tricks to keep credit card processing fees low
To avoid the bank from restricting the payments, ensure responsible credit management. It would not only help you receive payments timely but maintain your business reputation as well. Here are some tested tips to keep credit card processing fees low:
1) Charge a convenience fee for your service
You can cut your assessment fee by including it in the customer cost. Try to be upfront about the cost before the customers, and help you generate a trust factor for your services. This way, you would not hide the costs, and presenting it as a “user fee” would not sound like something extra.
2) Raise your product/ service prices a bit
If you do not like the initial idea of charging a user fee, you can do better and raise the price of the popular or the selling products.
It will help cover the costs of credit card users. It is especially beneficial if you have a limited or single payment channel. However, ensure that customers do not pay more than they should use a different payment channel (if you have one). He may quickly switch in that case.
3) Reduce the risk of fraud with the credit card company
The processing fees depend on the risk the credit card company share regarding your business. Businesses can reduce or limit credit card risks by:
- Encourage swiping credit cards than manually adding the card number to proceed.
- Enter the security information
Famous card brands charge a higher percentage on transactions that one processes after entering the card details because of the high propensity for fraud.
4) Use the address verification process
The better and safer your credit card processing terms are, the lower will be the fees. The credit card company will be able to verify the address. In case of discrepancy, they may reject the transaction.
Every credit card company conducts AVS (Address Verification Service) check to authentical the transaction being made.
5) Consult a credit card processing expert
If you are new to the business and confused about the whole credit card processing structure, you can seek expert advice. It will have you walk past the credit processing myths and enhance your knowledge on reducing costs for your business.
Different card-processing processors can price their services equally for all business industries.
You do not need to switch providers to benefit from the offering. Businesses cannot benefit from negotiating with different vendors.
How long does a credit card default stay on a credit report? Does the bank accept customer payments?
A credit card default stays for 6 years from the date of default on the credit report.
It is for those who often ask themselves- How long does the default stay on a credit report?
But if you can negotiate with the credit card provider to pay the credit card dues, you may be free from this.
Usually, a credit card provider closes the account if you fail to pay the debt within 180 days. The provider here assumes that you are never going to pay the dues. He closes the account by writing it off as bad credit and informs the credit agencies. They may also sell the account to credit collection agencies. And that’s worse.
No, banks do not accept payments as the account closes.
As a business owner, you must be familiar with credit card expenses and ensure the best solution for your business financials. Moreover, keep customers at the centre of your decisions while choosing a credit card company to partner with and ensure safe and encrypted policies.
John Keats is a professional content author, specialising in writing blogs and articles covering a range of topics related to the finance and loan industry of the UK. He has been working in the UK finance marketplace since 2009. John has written hundreds of blogs and articles on diverse financial topics. John has experience in several finance areas but mainly belongs to the lending market. He has worked with many reputed financial companies and lending firms. Currently, he is the Senior Content Writer at GetLoansNow, a new-age direct loan provider offering various kinds of online loans. John also contributes to the company by preparing borrower-friendly loan deals and guiding them via his research-based blogs. John Keats has a PhD in Business and Finance from the prominent UK University and a post-graduate MBA in Finance.