What is credit card processing?

Most businesses rely on credit card processors to handle the details of accepting credit and debit cards. Credit card processing is a critical service—it ensures that customers can simply and quickly checkout.

This quick overview will help you understand the basics of credit card processing.

How does credit card processing work?

First, a customer presents their credit card information for payment. In store, consumers swipe magnetic stripe cards, dip EMV chip cards, tap contactless cards, and use digital wallets like Apple Pay mobile payments solution with their smartphones. Online, consumers present credit and debit cards through websites and apps via payment gateways. For phone orders, a virtual terminal offers secure credit card processing with a personal computer.

The payment information is then sent to the processor, who communicates with the customer's bank via the appropriate card networks (such as Visa or Mastercard). The customer's bank approves or denies the transaction. Approval is dependent on detailed verification including card number validity, sufficient available funds, and other factors.

That approval is sent back through to your payment processor and then finally back to your terminal or credit card reader. Approved transactions are batched for settlement typically at the end of each business day. Your customers' accounts are charged for the transactions, with deposits then made into your merchant bank account.

How to evaluate credit card processors

Credit card processing is a complex service involving multiple moving parts, emerging technologies, payment networks, regulatory bodies and financial institutions. Like any service involving that level of complexity, credit card processors often vary in quality.

When evaluating potential credit card processors and merchant acquirers, ask questions about these four critical areas where the quality of payment processing matters most to your business:

• Transaction speed
• Strong uptime record
• Fair and transparent rate structure
• Access to helpful customer support

How is your transaction speed?

Customers appreciate the ability to pay with debit and credit cards and expect payment to be fast. Even short delays can cause big annoyances. You'll want to choose a processor that's proven to processes a large volume of transactions safely, accurately, and quickly.

What counts as “fast enough” is a bar that's always on the rise. Today, credit card processors commonly complete transactions in under two-seconds.

Speed is important, though it isn't everything. Some “friction” is good, like when it means keeping your business and your customers safe from fraud. Consumers are as concerned about security as they are about convenience. Your credit card processor should deliver both.

Look for proof of reliable uptime

Payment system outages are tough on businesses. A credit card processing outage means your business as good as shut down. It's not just the downtime itself that hurts. Customers turned away during an outage may view your business as untrustworthy and/or inconvenient. That's not the brand association business owners are looking for.

Credit card processing outages are rare, but all complicated interdependent systems are vulnerable to downtime. Ask about a credit card processor's uptime history and the steps they've taken to minimize service interruptions. Reliable processors have solutions to help merchants stay operational during a network outage, as well as redundant servers to reduce their own risk of going down.

Transparent rate structures

Credit card processing can be complex, but the cost of that service should be clear and straightforward. The rates and fees you'll pay depend on many factors, starting with the interchange category applicable to your business.

Interchange pricing varies based on the risk factors of different types of businesses. Though payment processors charge their own rates and fees on top of interchange, the cost of interchange is set by the card brands and is the same for all processors.

Rate structures are especially relevant if most of your transactions qualify as “small tickets” or “convenience purchases” according to the card brands. Quick service restaurants, convenience stores, and movie theaters are examples of businesses that may benefit from being placed on an interchange level that will charge a high-volume, low-ticket business differently.

When it comes to your money, transparency is essential. Ask for clear, concise and complete explanations of rates and fees from any credit card processor you may consider.

Customer support can make or break your day

As a business owner, you know that troubleshooting and maintenance is part of dealing with almost any complex system. Dealing with technology and managing complex systems is part of modern life. How essential service providers respond to those difficulties can make a big difference to you, and your bottom line.

When things go wrong you need to be able to count on support from real people who know how payments work, how they can go wrong and how to resolve them. You need to be able to speak to someone right away when you call—whether it's in the middle of the night, or even on a busy holiday.

Not all credit card processors offer 24/7 live customer support. If your point of sale is mission critical, make sure that any processing company you consider offers the level of service your business demands. Leading payment processors keep track of their call waiting times and resolution scores, so be sure to ask about those as well.

We can help connect your business to payment solutions that work for you. To learn more about credit card and other payment processing, connect with one of our payment experts. First, we'll take the time to learn about the way you do business. Then we'll customize a solution that enables every payment: anywhere, anytime and anyway your customers want to pay.