Payment Processing
(Merchant Solutions & Technology Integration)

Credit card processing also referred to as merchant processing is a highly competitive industry that uses multiple channels to allow businesses to accept credit and debit cards as a form of payment. These channels include the card issuers such as banks and credit unions, which issue cards such as Visa and MasterCard, the merchant processors who take on the risk, and the acquiring banks that transfer the funds.

Credit card processing is essentially a loan between the merchant and the processor. This is because the consumer will use his or her card for a purchase and the merchant will acquire the funds from that transaction generally within 48-72 hours even though the consumer may not pay the credit card bill for another month or longer. The merchant processors cover the non-payment risk of the consumer and in return charge a service fee typically group into tiered rates or as basis points. Visa and MasterCard create what is called the discount rate, which is the rate they charge per transaction for their service. The merchant processor then charges the merchant above and beyond that rate for holding the risk of the transaction.

Many merchants will qualify for relatively low rates especially if they are in the retail sector and are an established business. Some businesses especially start-ups, ecommerce (online) businesses, or businesses in certain industries fall into the category of high risk credit card processing. These high risk merchants will typically only be able to work with processing companies that specialize in supporting high risk merchants and high risk transactions. These merchants will pay fees that are somewhat higher than low risk merchants based upon the level of risk for each transaction.

Merchant processors also charge additional line item fees, some of which are listed below...

• Statement fees - Monthly charge for paper or online transaction and settlement (batch) records.

• Authorization Fees - A charge in addition to the percentage or discount rate fee for every transaction made. This is commonly the only fee for debit card transactions.

• Settlement (Batch) Fees - A fee that is charged every time the merchant "batches" or does a settlement on their terminal, which is usually performed at the end of each business day.

• PCI Compliance Fees - Fees charged by processors to make sure their merchants are in accordance with the Payment Card Industry (PCI) standards and regulations.

• Monthly Minimum Fees - Charges to the merchant if they do not hit a monthly processsing minimum.

How can I start processing?

In order to start to accepting credit cards as a form of payment, a merchant is required to fill out a merchant application with a processing company. There may also be other required documents including business financials, articles of incorporation, bank information, copy of a personal identification card and possibly other depending on the type of business.

For more information on payment processing visit Total Merchant Network

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