ISO, MSPs and direct processors can set you up with a merchant account and a merchant ID (MID). They then act as the liaison between your business and your customer’s credit card company or bank. They process payments and make sure the money is appropriately withdrawn from a credit card account. Once the money clears all of the processing protocols, it can be transferred to your company’s bank account.
Payment facilitators set you up as a submerchant under their merchant account. The pros of this arrangement are that it’s very easy to set up your account, the company takes care of PCI compliance, and there are usually no monthly or annual fees. The cons are that there are more restrictions on your account, the processor won’t work with certain business types and there are limits on how much you can process. If you process more than $100,000 a year, you’ll be required to get your own merchant account.
How does credit card processing work?
When your customer inserts a card into the credit card reader, the data on the card and a request for payment is securely transmitted between the processor, the credit card network and the bank that issued the card. The bank that issued the card authorizes or denies the payment request, and the information is transmitted back through the credit card network, the processor and the merchant bank. At the end of the day, the merchant batches its transactions and the data again travels through these channels to debit the customer’s credit card for the amount of the transaction, and deposits the funds into your business bank account.
What are the best ways to use credit card processing?
The best way to use credit card processing is to accept payments across every channel your customers want to use – whether that’s in person at your physical business location, using a mobile device if you’re working offsite, or taking payments online through your website or electronic invoices. Depending on how your business works with customers, you may need to utilize multiple acceptance methods.
What kind of cost should you expect for credit card processing?
No matter which type of processor you work with, you’ll pay transaction fees for every card payment you accept. If you work with a full-service processor, you’ll also pay a variety of other fees.