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Bankcard Processors, LLC

(850) 228-5571

jphaire@bankcardprocessors.biz

Who’s Involved in Credit Card Processing?

Every transaction made requires an entire chain of participants, ensuring the process is seamless. Here’s every participant involved:

• Cardholder: A customer who uses a credit or debit card at checkout.
• Credit card: A card with payment credentials used to make a purchase. Each credit card has a unique EMV chip embedded on the card, adding additional transaction security and reducing fraudulent transactions.
• Merchant: A business (like yours) that accepts credit cards as a form of payment.
• POS: The point-of-sale system used by the merchant (your business) to accept credit card payments.
• Issuing bank: Provides the customer with their credit card and an accompanying line of credit. Examples include U.S. Bank and BMO*.
• Acquiring bank: This is your credit card processor's banking relationship, which will collect the card transaction information from your POS system and route the transaction through the card network and the card issuing bank for authorization, settlement and funding to your business's depository bank.
• Card network: This is the card brand “middleman” (like Visa, Mastercard, and Discover) that manages the network to authorize, settle and eventually direct your customer's payment request to your business. It goes from your credit card processor and the acquiring bank to your customer’s card issuing bank. Then, it returns with either an approval or a decline.
• Merchant services provider: The company that may provide your business the tools and services to accept payments. They put everything in motion, so each step in the transaction process connects properly between banks, card networks, and your POS system. 
• Payment gateways: Facilitate the transfer of payment information between a payment portal, such as a business website and the credit card processor and the acquiring bank.

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How Does Card Processing Work?

There are two stages to credit and debit card processing – authorization and settlement. If a debit card is used, both authorization and settlement happen in seconds with the money coming out of your checking account. If a credit card is used for payment, the account information is routed from the merchant bank by the payment processor to the issuing bank for approval. The issuing bank will either confirm or deny the transaction and the payment processor will deliver that back to the merchant bank and to the card reader.

Unlike the near instant settlement for a debit card, a credit card settlement can take 1-3 business days. This is the process of actually moving the funds from the issuing bank to the merchant bank. Typically, businesses send batches of transactions to their payment processor at a regularly scheduled time, like the close of a business day. The payment processor and the card networks (Visa, MasterCard, etc.) will work to ensure the funds are deposited into the correct account.

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How Long Credit Card Payments Take to Reach your Bank Account

Most small businesses receive credit card payments within one to five business days, depending on the processor’s funding schedule. Some providers offer faster deposit options for an additional fee. 

Here’s what affects merchant account funding times: 

• Processor cutoff times: If your business batches credit card transactions after your processor’s daily cutoff time, settlement may not begin until the next business day.
• Weekends and bank holidays: Transactions processed outside normal banking days often settle on the next business day.
• Funding speed options: Many payment processors offer next-day or same-day funding, shortening deposit times for an extra fee.
• Bank posting schedules: Even after settlement, your bank’s internal posting times can affect when money appears in your account.
• Merchant account risk reviews: New businesses or unusual transactions may trigger temporary holds while the processor verifies activity. 

Small business credit card processing fees and pricing 

Credit card processing fees are the costs small businesses pay to accept card payments. They include transactional, flat, and incidental fees. Payment processors may charge different rates for invoicing, QR codes, and recurring transactions. 

Per-transaction rates typically range from 1.5% to 3.5%. However, costs can reach 5%, and debit card payments may cost less than credit card transactions. 

Standard transaction fees and payment processing rates

Each credit card transaction incurs standard fees. The funds are dispersed to card networks, banks, and payment processors. The three types of credit card transaction processing fees are:

• 1.) Interchange fees: Card brand networks set interchange fees. A percentage of each transaction plus a fixed fee goes to the cardholder’s issuing bank.
• 2.) Assessment fees: Card associations charge a small percentage to cover infrastructure and operating costs. These fees go to the card network (Visa, Mastercard, etc.).
• 3.) Processor markup (merchant service fees): Credit card processors and merchant service providers charge percentage, per-transaction, or monthly fees for their role in payment processing.

In addition to standard credit card transaction fees, merchants may pay for verification services or payment card industry data security standard (PCI DSS) compliance. To see what fees you currently pay or compare card processing companies, request a sample merchant statement. 

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Types of Card and Payment Processing Systems

Businesses have several options for processing credit card payments, including:    

Point of sale (POS) systems: Ideal for brick-and-mortar businesses such as retail stores, restaurants and cafes, POS systems—including advanced payment devices—offer a comprehensive solution that integrates sales, inventory management and customer relationship management. They deliver a seamless checkout experience and are particularly suited to businesses that require detailed sales reporting and analytics.

Mobile credit card readers and tap to pay devices: Suitable for businesses that operate on the go and service providers who visit clients at home, these easy-to-use portable devices allow businesses to accept card payments anywhere with a smartphone or tablet. They are cost-effective and provide flexibility for businesses that do not have a fixed location.

Online payment gateways: Essential for any business that sells products or services online, online gateways are highly secure, enable businesses to accept payments from customers worldwide and often support multiple payment methods.

Virtual terminals: Useful for businesses that need to process card payments by phone, virtual terminals allow businesses to manually enter card details to process payments without the need for a physical card reader.

Merchant services: Suitable for businesses of all sizes that need a comprehensive payment processing solution, these comprehensive sets of payment processing resources benefit businesses seeking a one-stop solution to manage all aspects of payment processing.

Choosing a payment processor

Selecting the right payment processor involves considering factors like fees, contract terms, customer support, data and insights, security, and integration capabilities. Your payment processor should also have a deep understanding of network rules and regulations, as well as foresight to help you manage the ever-evolving payments landscape.

Payment processing fees

Low transaction rates may seem attractive, but don’t be blinded by them. Instead, familiarize yourself with the different types of fees, including transaction fees, monthly fees, chargeback fees and any additional service fees. Determine the effective rate by dividing the total fees by the total sales volume. (This will give you a clearer picture of the overall cost.) Pay particular attention to hidden fees such as setup fees and early termination fees. Choose a pricing model that aligns with your transaction volume and average ticket size.

International and cross-border payments

You should also consider your business’s needs when choosing a processor. If your business does international or cross-border transactions—or you plan to soon—you need to carefully consider the abilities of you processor. Major considerations when choosing an international payments processor include:

• Ability to handle and process multiple currencies
• Foreign transaction fees and exchange rates
• Robust security with international standards, as international transactions can be more susceptible to fraud
• A range of accepted payment methods that are popular in your target markets, as well as local payment options

Data, insights, platform and customer support

A payment processing partner should assist businesses in continuously monitoring, benchmarking and optimizing revenue, cost and risk associated with payments. The payment platform should enable quick detection of issues related to payment methods, approval rates, payment costs and dispute resolution. The payment processor’s support team should be able to advise businesses  on how to measure and compare their payment performance against industry standards. 

This platform support allows businesses to take action to improve their payment processes. The platform and customer support teams should offer measurable long-term results through proprietary data insights, provide proactive consultation with payment advisors and data scientists, and share industry innovations, ensuring that technology solutions are aligned with business needs.

Security and compliance

Different payment processors offer varying levels of security support and Payment Card Industry Data Security Standard (PCI DSS) compliance assistance. The PCI DSS requires all organizations handling cardholder data to maintain specific security protocols—from encryption standards to employee training. 

A processor’s approach to security affects both implementation costs and ongoing operations, particularly in how they handle fraud monitoring, chargeback management and compliance documentation. Some processors include these security features in base fees, while others treat them as premium features.

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How Does Debit Card Processing Work?

When a customer swipes their debit card for payment, it seemingly instantaneously draws money out of their bank account to pay for whatever it is they’ve purchased. And though this is true, that debit card payment processing time is fast and efficient, there are many steps taking place just out of sight. Those steps look something like this:

• The customer uses their debit card to make a payment.
• The point-of-sale system used by the merchant takes the debit card information and sends it to one of the debit card processing companies (Visa, Mastercard, etc.) the merchant is using.
• The processing company ensures all of the debit card information is valid and eliminates any possibility of fraud.
• The processing company then takes the validated data and sends it along to the bank that issued the customer’s credit card.
• The customer’s bank checks to make sure that the customer has enough money to actually make whatever payment they’re attempting to make, and then makes a decision to accept or reject the payment.

If approved, the merchant will finish their transaction with the customer and then whichever one of the debit card processing companies being used will then be responsible for the authorization, clearance and settlement of the transaction. Meaning, the debit card company will have to verify the amount of funds owed and then deposit that money into the merchant account. Source