Have you ever wondered just what the steps are with merchant credit card processing? It may be that many of our customers have grown up using credit cards rather than cash or checks, and it is simply one of those things that we all take for granted.
However, there are some very important things to consider with credit card processing as a retailer, online seller or even someone who uses a card reader on their smartphone to accept payments for homemade crafts at a local art show.
Understanding how merchant credit card processing works, and where security comes into play, is more important today than ever. At MBN we focus in on security, ease of use and reliability, and that allows us to offer low rate processing packages that work for our customers. To understand how this happens, and what goes on behind the scenes, let’s take a closer look.
The Parties Involved
There are actually four different groups or parties to any credit or debit card transaction. The first one is you, the merchant, and you are the person who will eventually receive the payment once the card is swiped or the information entered online.
The second person is the customer, or the person making the purchase. This will be the same if it is online or in-person. The customer has to have a valid credit card, which is checked by the third group in the transaction, or the acquiring bank. This is the entity that actually does the merchant credit card processing.
The fourth group involved is the bank that issued the credit or the debit card. This is called the issuing bank. Both the acquiring bank and the issuing bank will charge a small fee for this service to the merchant. However, the customer will have interest to pay to the issuing bank if it is a credit card transaction and it is not paid within the allowable time on the card to avoid interest.
The most common cards in use today, Visa and MasterCard, have an issuing bank that is different than the acquiring bank. This is why different banks you deal with either have MasterCard or Visa to offer.
American Express and Discover use a different model and are both the issuing and the acquiring bank in the credit card transaction. They also only charge one fee, but it is often higher than the combined fees of the other cards, which is why some merchants choose not to accept these cards but do take others.
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