Brick and mortar retail businesses like restaurants, salons, spas, etc. heavily rely on credit card and debit card payments which most consumers prefer for ease and convenience. From the business perspective, it might not be attractive because of the processing fees that businesses must bear for each transaction. Every time someone swipes a credit card or debit card businesses must bear transactions fees approximately between 1.5% and 2.9% for credit cards belonging to the major credit card networks like Master Card, Visa, American Express, and Discover. For debit card transactions the transactions fees are much lower about 0.05% together with 21 cents and if applicable another 1 cent towards fraud-prevention adjustment.The transaction fees can considerably eat into the profits which is why businesses would have been better off not paying it at all.
The high popularity of credit and debit cards are compelling businesses to accept such transactions which make them think about ways of reducing the load of processing fees or eliminating it by using the services of Nadapayments, a credit card processing company. The processing fees can vary between credit card processors, and if you want to reduce it, you must understand the inner workings of the bankcard system with a focus on how credit card processing works. Knowing the processing method should help to understand the fees incurred at various stages of the transaction so that it is possible to identify the high charging elements.
Read on to know more about themethod of credit card processingand what goes behind the scenes.
The modality of processing credit cards
Customers have various options for presenting their credit cards for payment. Magnetic strip credit cards need swiping in a store while dipping EMV chip cards and NFC enable cards is the way to initiate payment. When making online payments, payment gateways are used, and payment through the virtual terminal and mobile point of sale are also possible.
The payment information then reaches the processor who gets in touch with the bank and communicates with them via the card network as applicable like Visa, Mastercard, etc. In the next step, the customer’s bank approves or declines the transaction after verifying all card details like card number and its validity, balance available on the card and other factors. The information about approving or declining payment then travels back to the payment processor and finally to the credit card reader or terminal.
Businesses will then send approved transactions for settlement in batches preferably at the end of the business day. At this point, the transaction amount will be deposited to the business bank account after charging customers’ accounts. And this happens after deducting the fees including processing fees, interchange fees, and other fees.
What to look for in a credit card processing company
Businesses must choose the credit card processing company after evaluating the quality of service that depends on various factors like reliability and transaction speed, strong uptime record, transparent and fair rate structure and extent of customer support.
Reliability and transaction speed
Customers prefer credit and debit card payments because of its speed, and any delay can upset them as it goes against their expectations of payments happening instantly. Therefore, you must choose a credit card payment processor capable of handling large volumes of transactions fast, accurately and safely. As per the current trend, 2 seconds is the average credit card processing time that customers are used to. Although EMV chip cards take a longer time for processing as it stays dipped in the device until obtaining approval for payment but as customers are aware that it is a safer practice, they do not mind it. EMV chip cards ensure better identity and fraud protection. However, efforts are on to reduce the processing time.
The credit card processor must also be ready to accept mobile transactions on mobile devices that accept payment on contact only without the need for swiping or dipping. Similarly, they must handle online payments made with credit cards or debit cards.
Uptime record
Credit card processing services must be up and running always with zero outages because any interruption no matter how short it might be is bad for business. If there is any suspension of service in credit card processing, it frustrates customers, and they start looking up at the business entity with suspicion and lack of trust that can be disastrous for any business. Although outages in credit card processing services are quite rare, the vulnerability remains. However, processors do not have control on outages that happen at bank networks and card brands, but they must provide solutions to help merchants maintain continuity of business even if it is not always within their control.
Transparent rate structure
Although the interchange category applicable to your business is the primary consideration for determining the fees, there are many other factors too. Over and above the interchange fees, payment processors charge their own fees; the interchange fees are not the same and vary according to the risk factors associated with different types of businesses. Card brands have their own interchange models. Fees for transactions that qualify as convenience purchases will differ from small ticket purchases. The way the credit card processing company categorizes your business determines the interchange fees. However, the fee structure must be fair and transparent so that you know exactly what you must pay without any surprises later.
Customer support makes the difference
For uninterrupted services in credit card processing a lot depends on the kind of customer support you receive when facing any difficulty. The fate of your business depends to a large extent on the way the service provider stands by your side all the time to ensure that customers receive top quality service without any question.
The real test is when things go wrong, and you must have the support of people who know how payments work; know the vulnerability of your POS or terminal systems and know what the solution could be.
Getting the kind of service you expect should give the most satisfaction of working with a credit card processing company.