If you’re a business owner, there’s a good chance you’ve thought about accepting credit cards as a form of payment. After all, credit card payments are quick, convenient, and secure. Plus, they can help you boost sales and attract new customers.
But what exactly is credit card processing? And how does it work?
In this article, we’ll answer those questions and more. We’ll give you an overview of credit card processing services, including how they work and what you need to know to get started.
What is credit card processing?
Credit card processing is the process of accepting and verifying credit card payments from customers. This usually happens in two steps:
1. The customer’s credit card is swiped through a card reader, or the card number and other information is entered into a point-of-sale (POS) system.
2. The credit card processor verifies the customer’s information and approves the transaction. If approved, the customer’s account is charged and the funds are transferred to the merchant’s account.
Credit card processors can be banks, payment processors, or third-party providers. They work with businesses of all sizes, from small businesses to large enterprises.
Most credit card processors offer a suite of services, including credit and debit card processing, ACH processing, check processing, gift card processing, and more.
How does credit card processing work?
When a customer makes a purchase with a credit or debit card, the credit card processor will verify the customer’s information and approve the transaction. If approved, the customer’s account is charged and the funds are transferred to the merchant’s account.
The entire process usually takes a few seconds, and the funds are typically deposited into the merchant’s account within one to two business days.
What do I need to get started with credit card processing?
If you want to start accepting credit cards, you’ll need to sign up for a merchant account with a credit card processor. A merchant account is a special bank account that allows businesses to accept credit card payments.
To get started, you’ll need to provide the following information to your processor:
- Your business name, address, and contact information
- Your Social Security number or employer identification number (EIN)
- A voided check or bank statement
- A government-issued ID, such as a driver’s license or passport
- Your credit score
You may also need to provide additional information, depending on the processor.
Once you’ve signed up for a merchant account, you’ll need to choose a credit card processing service. There are three main types of services:
- Credit card terminals: Credit card terminals are physical devices that allow you to swipe or insert credit cards. They’re typically used by brick-and-mortar businesses, such as retail stores or restaurants.
- Virtual terminals: Virtual terminals are web-based software that allows you to process credit card payments online. They’re typically used by businesses that don’t have a physical storefront, such as home-based businesses or online stores.
- Mobile credit card processors: Mobile credit card processors are apps that allow you to process credit card payments on your mobile device. They’re typically used by businesses that accept payments on the go, such as delivery services or mobile businesses.
Once you’ve chosen a service, you’ll need to set up an account with the processor. To do this, you’ll need to provide the following information:
- Your business name, address, and contact information
- Your merchant account information
- Your credit card processing service information
- Your banking information
Once your account is set up, you’ll be able to start processing credit card payments.
What are the fees associated with credit card processing?
Credit card processors typically charge a per-transaction fee and a monthly fee. The per-transaction fee is a percentage of the total sale, and the monthly fee covers the cost of using the processor’s services.
In addition to these fees, you may also be charged a fee for using a credit card terminal or virtual terminal, and you may be required to pay a monthly minimum fee.
