Why Does Credit Card Transaction Processing Matter For Businesses?

Credit card transaction processing directly impacts a business’s ability to provide convenient and secure payment options for customers, which can affect sales, customer satisfaction, and overall growth. Finding the optimal credit card processing system offers several benefits in these areas, including:

Enhanced customer experience

By offering a simple, convenient credit card payment experience, businesses can meet the evolving needs of their customers, leading to increased customer satisfaction and loyalty. The benefits are even greater with a unified commerce model, where businesses integrate all sales channels, data, and backend systems into a single, seamless platform.

Increased sales and revenue

Credit card payments can boost sales for businesses by lowering the barriers that customers face when making a purchase. Generally, customers spend more when using credit cards compared to cash. Accepting credit cards also enables businesses to accept payments in different currencies without needing to deal with conversion, further expanding their market reach.

Improved cash flow

Credit card transactions are typically settled and deposited into the business’s bank account within 1–3 business days, resulting in faster access to funds compared to other payment methods such as checks.

Secure and compliant transactions

A strong credit card processing system helps protect both the business and its customers from fraud and data breaches by adhering to security standards such as PCI DSS. This compliance is important for safeguarding sensitive customer information and maintaining trust.

Competitive advantage

Accepting credit card payments and providing a simple payment experience can give businesses a competitive edge over competitors that do not offer these options, helping them attract more customers and increase their market share.

Cost optimization

By carefully selecting the right credit card processor and negotiating favorable rates and fees, businesses can streamline operations, minimize processing expenses, and maximize their cost margins.

Access to valuable data and insights

Credit card processors often provide detailed transaction data and reports, allowing businesses to track sales, identify trends, and make data-driven decisions that can optimize their operations and marketing strategies.

Reduced risk

By accepting credit cards, businesses can minimize the risks associated with handling large amounts of cash, such as theft, loss, or mismanagement.

Adaptability

A thoughtfully designed credit card processing system enables businesses to embrace flexibility and adapt to new payment technologies, such as contactless payments or digital wallets, helping them stay ahead of industry trends and cater to evolving customer preferences. Setting up a credit card processing system in a strategic way enables businesses to access these benefits and create a more robust, adaptable foundation for growth and stability.

Working with a strong payment processing provider will help ensure that your credit card transaction processing system is tailored to your needs while allowing you to provide a secure, efficient, and compliant customer experience. Source

Credit Card Processing Company Pricing Structures

The most common payment processing models for small businesses include flat-rate fees, interchange-plus fees and tiered rates. Understanding the pros and cons of each is key to finding the best service and processing rates for your particular needs.

Flat-Rate Pricing

Flat-rate pricing is the simplest fee structure and typically charges one low rate for all credit card transactions, regardless of the type of card used. Many flat-rate processing services also provide free sales tools such as POS software, free card readers and integrated online gateways for e-commerce sales.

With flat-rate pricing, businesses pay one low rate based on the type of sale, with fees typically ranging from 2.5% plus 10 cents to 3.5% plus 30 cents per transaction. With flat-rate structures, in-person sales where the card is present have lower fees than online sales, but fees don’t vary based on card brands or rewards programs, plus you don’t have add-on fees for PCI compliance or monthly statements.

Flat-rate pricing can be a good option for businesses with low average transaction amounts, especially when considering free perks such as POS systems, online gateways and card readers. However, higher-volume sellers can save on credit card processing costs with interchange-plus or tiered pricing.

Interchange-Plus Pricing

Interchange-plus pricing is growing in popularity, mainly thanks to the small business-friendly plans offered by Helcim, Payment Depot and Stax. These Interchange-plus payment providers add a minimal fee to the base interchange rates set by the card associations.

Some, such as Helcim, mark up the interchange rate with a small percentage and per-transaction fee but have no monthly fees. Markup fees can range from 0.10% plus 5 cents to 0.50% plus 25 cents per transaction, based on the sale type. Others, such as Payment Depot and Stax, don’t mark up the interchange rate. Instead, they pair a monthly subscription fee with a minimal per-transaction fee, ranging from 5 cents to 15 cents per charge.

When comparing providers, remember that markup rates are in addition to the base interchange rates, which vary based on transaction-specific factors. Even so, interchange-plus models are very transparent and often the most economical choice for businesses processing more than $5,000 in monthly card transactions.

Tiered Pricing

Tiered pricing is a standard pricing structure used by traditional merchant services account providers and business banking services. To set tiered plan rates, providers first audit your business model and transaction history, so it takes more work to get this type of plan in place. Most tiered plans also require lengthy contracts and charge early termination fees if you want to change plans or providers.

Tiered plans break card processing rates into three groups, which are called qualified, mid-qualified and non-qualified tiers. Each tier’s rates are based on a merchant’s overall processing volume, industry and typical transaction types, such as online or in-person sales.

Each sale’s tier is determined based on the transaction type, credit card used and whether or not the cardholder’s billing address is verified. In most cases, qualified transactions have the lowest rates, while non-qualified transactions have the highest rates.

Tiered rates can be tricky to understand and the monthly statements can be very detailed. For most small businesses, flat-rate or interchange-plus plans are more economical and easier to manage. However, higher-volume businesses in certain industries, such as wholesalers and multi-store retail outlets, can save with a tiered card processing model. Source

Happy Holidays!

 

Happy Holidays! Hope everyone has a safe and healthy holiday season!

Bankcard Processors, LLC 

850-228-5571

jphaire@bankcardprocessors.biz

Payments' Digital Evolution

Technology has changed how, and how fast, consumers interact with the world around them. The expectation for immediate satisfaction extends from the delivery of information and service to the way purchases are made. We want it now, and we want it at our fingertips.

This is especially true for payments, which continue to evolve from checks to electronic formats. Switching to electronic payments is an easy win in the effort to streamline back-office processes and expense.

Electronic payments can reduce processing costs up to 60 percent and can be processed almost twice as fast as paper checks, according to some estimates. By leveraging online bill pay, you can make sure payments aren't delayed by meeting or travel schedules or by critical days in the mail.

Even better, electronic transactions are widely considered to have a lower risk profile. Banks are able to quickly run authentication procedures to approve or deny almost instantly, without sacrificing attention to risk management. Source

Understanding the Role of Credit Card Issuers in Payment Processing

In the payment processing ecosystem, numerous organizations make up a piece of the puzzle. Banks, credit unions, card issuers, card networks, payment processors, and payment processing software providers each play a role. Knowing who does what will help you better understand how credit card processing works, so you can ensure that you’re accepting payments in the most optimal and cost-effective manner.

What is a Credit Card Issuer?

If you possess a U.S. credit card, you have dealt with a credit card issuer. The banks, credit unions, etc., extend credit limits to cardholders based on their FICO credit score.Someone with bad credit will find it hard to get a credit card. Or they will be set a low credit limit until they can improve their rating. Someone with an excellent credit rating may be granted the best credit card offers from all the major credit card networks.

The card issuer is the financial institution supplying the consumer credit card. Banks, credit unions, fintech companies, and various other lending institutions can issue credit cards. Issuers can set unique rewards programs and perks to entice customers, such as extended warranty, cashback initiatives, and bonus points. That means that if you have a Visa card, your benefits could be different from other Visa cardholders’ benefits.

All card issuers have to adhere to government bureaus and agencies, such as the Consumer Financial Protection Bureau (CFPB), that ensure consumers are treated fairly by banks, lenders, and other financial companies.

What is Their Role in Credit Card Processing?

Whenever a customer makes a payment with their credit card, the process of transferring funds from the shopper’s bank account to the merchant account starts with the credit card issuer.

As the merchant, you receive money in your bank from the credit card issuer. They approve the credit to the consumer, so the money comes out of their account to pay whomever the consumer chooses to transact with.

In the payment processing puzzle, the card issuer has the money that merchants receive when their customer pays with a credit card.

Credit Card Issuers vs. Credit Card Networks

We now understand that the card issuer approves the cardholder’s credit. The funds come from the issuer account to pay the merchant when a cardholder makes a payment. It’s the card issuer’s responsibility to have that money to pay the merchant. However, most card issuers don’t process their own credit card transactions.

When a customer pays with their credit card, the card issuer seldom processes the transaction to move the money from their bank into the merchant’s bank. This is done by the card networks.

Some examples of the relationship between issuer and network are:

• Chase offers the Chase Sapphire Reserve® card. Chase is the issuer, but the card is a Visa card run through the Visa network.
• Chase also offers the Chase Freedom Flex℠ card. Chase is the issuer of this card, but Mastercard is the network. Transactions would be processed through the Mastercard network.
• Bank of America offers the Bank of America® Unlimited Cash Rewards credit card. The network for that card is Visa. Transactions are processed through Visa’s network.
• Discover and American Express are not in these examples as they operate differently. We discuss this in more detail below.

What Fees Do Credit Card Issuers Charge?

Credit card issuers take a slice of every transaction that uses the credit card they have issued. These fees range between 1% and 3%, depending on the type of card, the purchase volume, and the transaction details. In most cases, the issuers split this fee with the payment processing network. Where they really make their money, though, is through the consumers.

The fees to consumers are typically a variety of the following:

• Annual fees: Most credit card issuers will charge consumers an annual fee for the convenience of having that credit card. Those fees are often negligible compared to possible savings through rewards and other perks.
• Late payment fees: All card issuers make the majority of their money on late payment fees. Interest rates are set up and charged when a balance hasn’t been paid within the set timeframe applicable to that card.
• Balance transfer fees: Balance transfers may interest consumers who have accumulated debt on their credit cards. This is a way to combine those debts to pay off just that one card or account. Issuers will charge consumers to complete that balance transfer.
• Foreign transaction fees: When the issuer and network have to calculate currency conversions, foreign transaction fees will be added on top of the exchange fee. This is for the service of having to perform the foreign transaction. Source

What Is A Credit Card Data Breach?

How does a data breach work?

Credit card data breaches involve the exposure of confidential data, but they can happen in any number of different ways. In some cases, a data breach may be entirely accidental. A company's data protection measures could fail, exposing users' credit card information to the public (including potential criminals who want to take advantage of it).

Hackers and identity thieves use unscrupulous methods to access private information as well. In small-scale data breaches, they may get access to someone's physical credit card and use it to make purchases. Alternatively, they may use a credit card skimmer — a piece of technology that can record credit card information when people swipe their cards at a machine — to capture credit card details. 

Large-scale credit card breaches happen when criminals use nefarious tactics like phishing, SQL injections (installing malicious code on a web app), or fake web applications/text messages to obtain credit card information. These tactics give criminals access to their target's websites or applications, potentially allowing them to access a lot of information all at once.

What happens during a data breach?

Depending on the situation, the user may be the first to realize something is wrong after spotting unfamiliar purchases on their credit card statement, in which case they should immediately contact their credit card issuer.

Credit card companies also have a number of security measures in place to help monitor for suspicious activity and credit card theft. Fraud monitoring allows credit card companies to watch for suspicious transactions and may reach out to customers for verification. 

In large-scale credit card data breaches, companies are required to inform customers that their information was compromised. In such situations, they will typically provide further context around what caused the breach and what information was accessed, and they'll advise customers about what actions they should take. This may include reviewing statements for unauthorized purchases or changing compromised passwords.

Ways to prevent a credit card data breach

You can never be too careful with your credit card information. There are several actions you may consider taking to reduce the chances of having your information compromised in a breach — or used fraudulently in the event it is.

Secure and update passwords

One way criminals gain access to your credit card information is through a weak password. Using the same password for many different sites and services puts you at risk, as do simple passwords that are easy to guess, like “password123" or your pet's name.

Consider using unique and secure passwords for every site you use and updating your passwords frequently.

Use two-factor authentication logins

Many online companies allow you to set up two-factor authentication. For example, a company may send you a code via a text message when you are trying to log in or ask you to verify a security question alongside your password to gain access. This extra layer of protection may help prevent credit card breaches in the future.

Freezing your credit

If you lose a credit card at any point, the credit card issuer can freeze the account. This will help prevent anyone who may have stolen your card from using it to make unauthorized purchases.

Disposing of unused credit cards and personal information

If a credit card expires or you've stopped using it altogether, destroy the physical card before disposing of it. You can do this by cutting it up into small pieces and putting them in the waste bin. If you have a piece of mail or a printout with your Social Security number, credit card information, or any other identifying factors, a shredder may come in handy to help destroy any personal documents before anyone can find them and use them for future unauthorized purchases.

Know the signs of a scam

Criminals attempt to steal your information in a variety of ways, so knowing the warning signs is a good way to protect yourself. Never click on a link sent to you via email or text message unless you know who sent it, and you know the person or company that sent it did so intentionally. Remember, if someone else has fallen victim to identity theft, criminals may use their identity to gain your trust and get your information as well. So, if someone you know sends you a random message on social media or via text asking you to click a link, you may want to refrain from clicking until you've verified that the person sending you the link is who you think it is.

Ask your credit card provider about security measures

Your credit card company most likely has methods in place to protect your information, but there may be additional security measures they offer that you may not be using. You can find out more by visiting their website or calling their customer service line and asking about what you can do to further protect your credit card information.

Take it seriously

If you have been informed that your credit card information has been compromised, you may want to review your credit card statements for unfamiliar purchases. You may also want to change the passwords on any accounts associated with the breach (even if you don't see anything strange on your statements).

Source

Card Payment Fraud

As the digital economy grows, so does the menace of card payment fraud, posing significant risks to both businesses and consumers. However, by implementing effective strategies such as enhanced security protocols, fraud detection algorithms, and educating customers on safe payment practices, it is possible to stay one step ahead of these deceptive tactics and significantly minimize the risk of fraud.

Selling online has revolutionized commerce, opening and expanding doors for countless businesses around the world. Yet e-commerce also opens doors to fraud. It’s important to understand the risks accepting online payments and the security measures that can help keep your business safe.

E-commerce continues to grow. Worldpay’s 2022 Global Payments Report projects U.K. online sales surpassing U.S. $356 billion by 2025, with nearly half ($150 billion) of that total coming from mobile commerce. Yet e-commerce also involves risk from the criminal activities of increasingly sophisticated fraudsters. Those risks and costs include direct financial losses, fines and fees, increased operational costs and reputational risks to your business. These risks mean security should always be the priority when selling online — especially when it comes to payment systems and your customers’ personal data.

Setting Up A Secure Online Payment System

Retailers need to be more vigilant than ever about security and their operations. When establishing an online store for your business, consider these four leading measures when setting up a secure online payment system.

1. Take time to understand suspicious purchasing activity

Fraudsters are sophisticated criminals that cause real harm to businesses and consumers alike. But fraudsters are far from perfect — everyone leaves a trace. Those traces can add up to patterns of suspicious activity that raise the red flag of fraud.

Multiple orders from a single IP address using multiple credit cards can represent a red flag. This pattern suggests a single fraudster is using multiple credit cards, either stolen directly in data breaches or purchased from the dark web. Remarkably large orders — especially when the purchaser requests next-day shipping — could also raise a red flag for fraud. That’s why it’s important to learn how to identify suspicious transactions.

In its 2022 Cyber Security Breaches Survey, the U.K. Government noted that of the 39% of businesses who identified cyber-attacks, 89% of those attacks were phishing attempts. This is when employees are encouraged by seemingly reputable email addresses to reveal sensitive information in order to commit fraud. Follow the National Cyber Security Centre advice to defend your organization from phishing attacks. 21% of attacks were reported as denial of service, malware, or ransomware attacks.

Single points of suspicious activity aren’t sufficient to definitively identify a transaction as fraud. For strong payment security, we recommend using multiple data points to help model both “good” and “bad” transactions. Taking the time to understand the range of suspicious activity you’re likely to face when selling online will help you make more informed decisions. Leading e-commerce platform providers and payment partners can help you dial in the right mix of security and convenience.

2. Enable address verification system (AVS)

An important tool to help reduce fraud is the address verification system (AVS). This system verifies the billing address against the cardholder’s data from the issuing bank. Systems which verify the user’s identity before existing information can be changed is a key way to combat business email compromise.

AVS helps prevent fraud, since the criminal often doesn’t have access to the billing address of the legitimate cardholder. AVS systems are often used in conjunction with CVV2 verification, the three- or four-digit code on the consumers’ physical cards. Requiring both CVV2 and AVS at checkout can help protect against fraudulent transactions.

A failed AVS may not necessarily mean the transaction is fraud. Similarly, a verified AVS doesn’t necessarily mean the transaction is legitimate — the address could have been connected to the card by other means. AVS represents an important data point that can help reduce e-commerce fraud.

3. Achieve compliance with industry standards like PCI DSS

Data breaches can be devastating to businesses of all sizes. IBM/Ponemon Institute’s Cost of a Data Breach Report 2022 found that the average cost of a data breach in the U.K. is £4.56 million, or £148 for every lost or stolen record of sensitive information.

The importance of keeping data safe led to the development of the Payment Card Industry Data Security Standard (PCI DSS). PCI DSS is an important set of guidelines and best practices that apply to any entity that receives, transmits or stores sensitive card data.

Achieving and maintaining PCI DSS compliance takes an experienced partner that understands payments security. Leading credit card processors offer comprehensive support on meeting and maintaining PCI DSS compliance through system vulnerability checks, training programs and customer support.

4. Partner with a processor who knows online payments

Choosing the right payments processor is the first step to safely and securely accepting credit cards online. When you work with a reputable payments processor that prioritizes security, you can breathe easier knowing that your data is secure.

Staying vigilant with the security of your online payments systems and e-commerce store is a process. A great place to start is to consult with a payments expert. A reputable and experienced payments partner will take the time to understand your business and craft online payment security measures that fit the way you do business.

Source

Risky Habits When Using Credit

Here are a few examples of bad habits that can lead to debt and credit problems:

• Relying on credit cards for daily purchases because you don’t have enough money in your budget.
• Using your cards without considering if you can pay the debt back.
• Making purchases that you know are outside of your budget because you really want those items now.
• Buying on impulse without thinking about it because your credit card is handy.
• Using credit cards to emergencies because you don’t have any savings.
• Only paying the minimum amounts due on your bills.

Source

What Is Credit Card Processing?

Credit card merchant account processing refers to the series of operations required to complete payments made with a credit card in person, online, over the phone, or by mail.

Who is involved in credit card processing?

The following entities are central to how credit card processing works to securely capture payments at the point of sale (POS);

• Consumer. The cardholder, or the person making the purchase.
• Merchant. The person or business selling the product or service the consumer is purchasing.

Payment gateway. The technology that connects a merchant to a payment processor. Typically, a gateway integrates with card-present (e.g., in-store purchases) as well as card-not-present (e.g., online or eCommerce) payment environments, captures payment details for customer transactions and routes them to a payment processor or the merchant bank, and sends an “approved” or “declined” message to the merchant.

Credit card processor. Also known more generally as a “payment processor.” The entity that facilitates communication between the merchant, the credit card network, and the cardholder’s bank. Processors, along with merchants, are responsible for maintaining compliance with the Payment Card Industry Data Security Standards (PCI DSS). Some payment processors provide their own payment gateways, while others, typically the larger processors, have reseller agreements with payment gateways.

Card network. Also referred to as the “credit card network” or “credit card brand.” This is the brand of the customer’s credit card, such as American Express, Visa, Mastercard, or Discover. The credit card networks are responsible for setting interchange and assessment fees, as well as the standards for PCI DSS.

Issuing bank. Also referred to as the “cardholder’s bank” or “consumer bank.” This is the bank that provides the customer with their credit card. One of the primary functions the issuing bank serves in the credit card processing cycle is to determine whether the cardholder’s account holds the funds to complete a transaction, and to release those funds for settlement.

Acquiring bank. Also referred to as the “merchant bank.” This is the bank used by the merchant to hold their business funds and receive money from transactions. It can provide the merchant with card readers and equipment to accept card payments. The acquiring bank can also serve as a credit card processor. Source

Debunking The Myths: 7 Facts About Credit Cards

1.) Fact: A new card affects your credit even if you don’t use it.

You might have heard that it’s only after you use a new credit card that the account affects your credit score. However, applying for new credit comprises 10 percent of your credit score. It doesn’t matter if you’re approved for the card or if you use it; it’s the inquiry that counts. Frequently applying for new credit can hurt your credit score, so make sure you really need that new card before you apply for it.

2.) Fact: Paying less than the minimum is still a missed payment.

If you don’t pay the total minimum payment on your credit card bill, your credit card company may report it as a missed payment. This can bring down your credit score and make it more difficult to qualify for credit in the future. Check your statement for the minimum amount due, and be sure to pay it on time to keep your account current. And remember: Paying more than the minimum amount due is a great way to pay down your debt—and until you pay it off, interest will continue to be charged each month.

3.) Fact: Your balance has more than one interest rate.

Your account may include balances with different interest rates (such as one rate for a balance transfer and another for a cash advance). And that points to another good reason to pay more than the minimum due: When you do, your card issuer has to apply any amount above the minimum to the balance with the highest rate—which can help you reduce that higher-rate debt more quickly, saving you money, according to Experian.

4.) Fact: Your card isn’t paid off if you pay only your balance.

You might accrue interest even after you’ve reduced your balance to zero. This is called residual interest, and it’s due to the gap between the date on which you’re billed and the date you make your payment. To avoid residual interest, call your credit card issuer and request a calculation of the exact amount owed on the date you expect your check to arrive or your online payment to process, and pay that amount.

5.) Fact: A high credit card limit is a good thing.

If you manage your credit cards wisely, a high credit limit can be an advantage. Thirty percent of your credit score is based on your debt-to-credit ratio (the amount you owe in proportion to your total credit limit). If you have a high credit limit and you keep your balances low, your debt-to-credit ratio is also low, which can help your credit score.

6.) Fact: You don’t have to carry a balance to build credit history.

Credit cards are great tools for building your credit history, and you don’t need to carry an unpaid balance to do so. Your best strategy is to use your credit cards and pay off the bill in full each month, so you keep your overall debt-to-credit limit ratio low.

7.) Fact: Having more credit cards isn’t always a good thing.

Having more credit cards isn’t necessarily better. Ten percent of your credit score is determined by the type of credit you have. For example, you may have student loans, a mortgage and credit cards. Credit agencies look for a good mix. If all you have is credit cards, you may not help your score.

Now that you have a good handle on the basic facts about credit cards—as well as the most common misconceptions—you have the tools to better manage your credit and build a strong credit history. Source

5 Ways To Improve Your Credit Score

You probably know a higher credit score can make it easier for you to get a loan or borrow at more favorable rates. But how can you improve your credit score? Here are five credit-boosting tips;

1.) Pay your bills on time

Your payment history makes up the largest part—35 percent—of your credit score. Even small slip-ups can lower your score by a lot. Late or missed payments stay on your credit report—and can affect your credit score—for up to seven years.

How to boost your score

Always make at least the minimum payment by the due date. You can set up payment reminders and automatic payments within your accounts so you never accidentally miss a due date. Just make sure you have enough money in your accounts to cover your bills

2.) Keep your balances low

The second most important factor in determining your credit score is how much of your available credit you’re using. That’s called the credit utilization rate. If the rate is high—meaning, you’re close to hitting your credit limits—lenders may view you as more likely to default.

How to boost your score

Having credit cards and using them isn’t a bad thing, but it’s important to keep your debt manageable. The best practice is to pay your credit card bills in full every month. If you can’t, pay as much as possible. Try to keep your credit utilization rate below 30 percent. That means if you have a credit card with a $10,000 limit, the balance should be less than $3,000. Also, make sure you understand how credit limits work.

3.) Don’t close old accounts

Your score considers the length of your credit history, along with the ages of your different accounts. In general, a longer credit history means a higher score. If you close old cards, you are lowering the average age of your accounts. When you last used your cards is another factor in your score. Even if you intend to keep an old account, your credit card issuer may close it if it hasn’t been used for a long time.

4.) Have a mix of loans

Lenders like to see that you can manage multiple loans at the same time. In general, it’s good to have a mix of credit cards and installment loans—such as a mortgage, an auto loan and student loans—that you pay on time.

How to boost your score

This is a relatively small part of a credit score, so it probably isn’t effective to open new accounts just to try to pump up your score. But know what types of loans you have and consider improving the mix the next time you need to borrow money.

5.) Think before taking on new credit

Getting a new credit card can both help and hurt your credit score, so it’s important to be strategic. Research shows that people who open several credit accounts in a short period may be higher credit risks than those who don’t, according to FICO, the leading credit score provider. When you apply for a new credit card, your credit score could fall initially because the lender looks at your credit report (known as a hard credit check) and the average age of your accounts is lower. Source