Everything you should know about Credit Card Processing Merchant Accounts
When anyone does payment online via credit card there are many parties involved. Though it takes seconds to process the transaction it involves a complex process.
Let us see which parties are involved in this process and how they are important.
Credit card associations
Credit card associations are credit card companies like Visa, Master Card and American Express. They perform many functions like transaction processing, authorization, interchange settlement and fee processing.
Credit card issuing bank
Credit card issuing bank is the financial institution that offers credit cards. Typically, they are commercial banks. On behalf of credit card association, they issue the card to the customer. They offer functions like card maintenance, credit card renewal, card limit setting, activation, and blocking.
Credit card processors
Credit card processors are also known for acquiring the bank. Acquiring bank can be a bank or any financial institution. It acts as a middleman between merchant and credit card association. They are basically a member of a card network like Visa or Master Card. It is the credit card processor who approves or decline the payment based on the information of the customer. Acquirer bank takes the risk of the transaction processes.
On behalf of a merchant, they process credit card and debit card transactions. It allows the merchant to accept credit card payments from issuing bank! It supports the merchant to complete the business transaction successfully.
Merchant account providers
Merchant account providers are the companies who manage the credit card processing with the help of acquirer bank. A merchant account is a kind of bank account which can accept multiple payments. Like the credit card, debit cards, wallets, online payments etc. merchant account is formed on the basis of agreement between an acceptor and merchant acquiring bank for the payment processing.
Payment gateways are virtual portals that route an acquirer with merchant account and credit card processor. It authorizes payment for e-commerce business. It encrypts customer credit card information securely. It facilitates the transfer of information between payment portal and acquiring the bank.
When customer places order online and submit his/her credit card details. The customer web browser encrypts the information through SSL (Secure socket layer). The information forwarded to the payment gateway. Further payment gateway forwards the information to the payment processor used by merchant’s acquiring bank. In the last it is forwarded to the credit card association than the whole transaction is completed.
Fees associated with merchant account
Transaction fees are fees deducted by the payment gateway and card issuing bank to authorize the credit card transaction. It is one of the biggest costs of operating the merchant account. In addition to the transaction fees flat fee is also charged. When any chargeback occurs than incidental fees is charged.
For credit card processing, all the above party plays a vital role. Any business who wants to accept the credit card and debit card payment needs to have a payment gateway and a merchant account. So, it’s all about Credit Card Processing Services for Merchant Accounts.