How Credit-Card Transactions Are Processed
The credit-card process in four stages:
- Authorization: After the card holder makes a purchase, the card is swiped (or the card number is entered using a pin pad) and the card/purchase information is sent to the 'acquirer' who sends the request to the card issuer for authorization. An authorization code is returned to the acquirer (if credit is available) or the transaction is declined (if credit is not available). The acquirer authorizes the transaction and the cardholder is given ownership of the item(s) purchased.
- Batching: The merchant (store) retains all authorizations in 'batch' until day's end then sends the authorizations to the acquirer to receive payment.
- Clearing: The batch of authorizations are transmitted through the credit-card network requesting payments from the different card issuers which deducts interchange fees and transfers the remaining amounts back to the credit-card network which in turn gives the amounts back to the acquirer.
- Funding: The acquirer pays the merchant (after deducting its fees) and the cardholder is billed for the purchase.
Merchant Account Offers to Avoid
A costly option is consignment software 'integrated with card processing' (which BCSS is not). Costly for these reasons:
- Consignment software integrated with card processing is expensive - big up-front outlays, endless (increasing) annual fees, new fees, add-on fees...
- You get locked in because you will not likely dump over-priced consignment software (much less take the time to learn a new software app) for better credit-card rates.
- Programs integrated with card processing also charge annual service fees and those fees have been raised frequently and aggressively in recent years.
- The consignment software vendor knows exactly how much he will be paid by the card provider he recommends but he can't tell you what your minimum, maximum and average rates are?
Advantages of Credit-Card Processing
- Accepting credit cards satisfies your customers' expectations. It's convenient, they don't have to carry cash and they can 'pay later'.
- Buyers have more purchasing power, effectively making more money available for shopping.
- Accepting cards can reduce the amount of cash needed at the store.
- Card purchases eliminate math errors in calculating change due.
- Card processing can help to eliminate employee theft.
- Credit-card processing adds professionalism to your store's image.
- Credit cards speed the checkout process.
- Your customers appreciate speedy service and share their experiences with others.