What is credit card processing?
Credit card processing is the method by which businesses accept and process payments made by credit cards. It involves a series of steps that allow merchants to securely transmit customer payment information to the appropriate financial institutions for authorization and settlement.
How does credit card processing work?
Credit card processing involves several steps:
- A customer presents their credit card for payment at a merchant's point of sale (POS) system or online checkout page.
- The merchant's payment gateway securely transmits the customer's payment information to the appropriate financial institution for authorization.
- The financial institution checks the customer's account to ensure they have sufficient funds to cover the transaction and approves or declines the payment.
- If the payment is approved, the financial institution sends a confirmation back to the merchant's payment gateway.
- The merchant's payment gateway then settles the transaction, transferring the funds from the customer's account to the merchant's account.
What are the fees associated with credit card processing?
Credit card processing fees typically include a percentage of the transaction amount (known as the discount rate) as well as a per-transaction fee. These fees vary depending on the merchant's industry, transaction volume, and other factors. Additionally, some payment processors may charge additional fees for services such as chargebacks, refunds, or PCI compliance.
How can merchants ensure secure credit card processing?
Merchants can ensure secure credit card processing by using a payment gateway that is PCI compliant and encrypts customer payment information during transmission. Additionally, merchants should follow best practices such as regularly monitoring their accounts for suspicious activity and using strong passwords and two-factor authentication.
Nick Simpson
Founder @ WorkMade
I started working for myself at 9. My first tax bill showed up at 14. I didn’t understand it, and nobody around me could really explain it. If you’ve been there, you get it. Twenty years later, after creative directing for brands in New York and buying and selling a few companies, I kept seeing the same thing: smart, talented people losing money to a system that wasn’t built for how they work. That’s why I built WorkMade. Not to make taxes “easier to understand” but to make them disappear into the background, so you can get on with your life.