Whether you operate a small business or are running your own venture, credit card processing is an essential part of running a successful business. In today’s cash-based society, card payments have become the primary means through which consumers and businesses transact financial business. In other words, credit card processing has become the gateway for almost everyone to shop and pay for goods from any merchant that accepts cards as a form of payment. But why is this so important?
In the simplest terms, credit card processing allows businesses to accept credit card payments from customers. These transactions are processed by payment processors via their secure transaction software that keeps the information about individual cardholders private. Merchants who use a processor obtain credit card data directly from the issuing bank and can process up to 100 transactions per day on most cards. This article covers everything you need to know about credit Card Processing including its benefits, how it works and why you should get started as soon as possible.
What is Credit Card Processing?
Credit card processing is the electronic transfer of money between a merchant and a cardholder. It allows businesses to accept credit cards as a form of payment. These transactions are processed by payment processors via their secure transaction software that keeps the information about individual cardholders private.
Why is Credit Card Processing Important?
Merchants who accept credit cards have the opportunity to dramatically expand their customer base. Credit card transactions can be much more profitable than cash transactions, as the card network fees are typically between 2% and 4% of the sale amount. With cash, it’s usually less than 20% and maybe a mere 10% if you have a really high-traffic location. Credit card processors also offer several important business services, including assistance with fraud protection, payment verification and security, and the ability to accept multiple types of credit cards.
How Does Credit Card Processing Work?
Credit card processors determine whether your business meets the requirements for accepting cards. Then, the processor will issue your business a merchant ID number (MID). After that, customers simply enter their credit card information on your business’s website and submit payment. The customer’s credit card information is not stored by your business at this stage. The processor retains this information and issues a receipt.
Should You Get a Credit Card Processor For Your Business?
The benefits of accepting credit cards for your small business are undeniable. With the right credit card processing service, you can increase sales, expand your customer base, and increase your revenues. However, it’s important to verify that the service you select is suitable for your needs.
When choosing a credit card processor, make sure you consider factors such as
- The number of transactions you can process each day,
- The transaction amount limits, fraud protection measures,
- Whether the processor charges any service fees, and whether you have to share any customer information.
- Make sure you choose a processor that offers the right level of security, convenience, and service at the right price.
Advantages of Having a Card Processor
Increased sales: Credit card processing allows your business to accept multiple credit card types, which could increase sales by appealing to a wider base of customers.
Better cash flow: You don’t have to wait for customers to pay you before purchasing supplies and paying employees. You can just charge the credit card and then write a check to pay for the purchase.
Higher chances of getting approved: Consumers will be more likely to approve your request for a credit card if the transaction goes through the processor. It’s safer and more secure for your customers too.
Customer service: Since credit card processing offers multiple support options (such as toll-free phone numbers, online FAQs, text message alerts, and email alerts), it’s easier for you to receive assistance when you need it.
Higher level of security: Credit cards are more secure than cash transactions because they require a higher level of verification.
Higher level of customer retention: Credit card processing allows you to retain customers’ payments for up to 30 days. This means they may become more loyal to your business.
Disadvantages of the Card Processor
Expenses: Before you can start accepting credit cards, you must sign a credit card processing agreement with the processor. Typically, the processor charges 2% to 4% of the transaction amount.
Higher operating costs: When you accept credit cards, you will incur operational expenses such as compliance costs, fraud protection measures, and processing fees.
Debit card theft: Although the card processing is safer than cash transactions, it does not fully protect merchants from debit card theft.
Shared customer information: Some credit card processing services collect customer information and share it with marketing vendors. Be sure to choose the processor that does not do this.
Higher liability: If the merchant is held liable for fraudulent credit card transactions, the credit card processor is usually not held liable.
Higher level of risk: With credit card processing, there is a higher level of risk than with cash transactions.
Credit card processing is an essential part of running a successful business. By accepting credit cards, you can increase sales, expand your customer base, and increase your revenues. In today’s cash-based society, credit card has become the gateway for almost everyone to shop and pay for goods from any merchant that accepts cards as a form of payment. It allows businesses to accept credit cards as a form of payment. Payment processors process these transactions via their secure transaction software that keeps the information about individual cardholders private.