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Genuineness of credit card processing
According to buyerzone,consumers increasingly are turning to
plastic over paper when they open their wallets. Yet many small
businesses still don't accept credit cards. If you're one of the
laggards, the entire transaction may retain the impression of a
spiritual ritual swipe a card, input some numbers and money
magically appears in the bank. In reality, though, credit card
transactions involve coordination between multiple high-speed
computer networks.
How the Process Works: when a merchant makes a sale and swipes a
customer's credit card, the card number, the amount and the
merchant ID travel over the credit card processor's computer
network. The credit card processor can either be a bank or a
company that does nothing but provide credit card processing
services. From the processor's network the transaction goes to a
credit card computer network. If the customer is using Visa, for
example, the transaction will go to Visa's network. In turn, the
electronic transaction goes to the bank that actually issued the
card. The bank then checks the account and verifies the customer
has adequate credit to cover the purchase. The bank then sends
the merchant an authorization over the network. Now the sale is
complete, but the transaction is not no money has changed hands
yet. At the end of the business day, the merchant sends that
day's charges, in a batch, to the credit card network for
processing. The transactions travel via the merchant's credit
card processor. Individual transactions are then stripped out
and sent back to the individual cardholders' banks. Banks then
debit cardholders' accounts and make appropriate payments to the
merchant's credit card processor through the Federal Reserve
Bank's Automated Clearing House. The credit card processing then
includes credits the merchant's bank account for the transaction
amount, minus its fees for the transaction. Those fees also go
toward paying transaction fees to the issuing bank and the
credit card network. Despite the use of computers, it can take
two business days before the merchant's account is credited.
Opening a Merchant Account In order to accept credit cards, you
must open a merchant account with a bank. However, many banks
have gotten out of the credit card processing business, and
those that remain are often restless about servicing small
businesses, particularly ones with limited operating histories.
Many small businesses must therefore go through a specialized
credit card processor or an independent sales organization,
commonly referred to as an "ISO." Whether you use a bank or a
credit card processor, you need a merchant account to receive
credit card payments. Though businesses can contact credit card
processors directly, banks unable or unwilling to process credit
transactions often refer customers to an ISO to help them find a
credit card processor and get the necessary equipment and
training to begin accepting credit cards.
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