A Beginners Guide To Credit Card Processing

February 10, 2023
/ Jamie Walker
/ MERCHANT SERVICES,MOBILE PAYMENTS,CASH DISCOUNT

Credit card processing can be overwhelming for beginners, but it doesn't have to be. With this guide, you'll learn all the basics of credit card payments, from how to set up a payment system to how to keep transaction records secure.

How Does Credit Card Processing Work?

Credit card processing begins with a customer selecting a payment method (generally, their credit or debit card). After they enter the required information into your checkout portal or online store, the data is securely transmitted to the payment processor. The payment processor will check if adequate funds are in the customer's account and authorize the transaction. Finally, the funds are deposited into the merchant's bank account after the transaction is approved and settled.

The credit card processor is the middleman between the customer, the merchant, and the issuing bank. They act as a representative of all three parties to ensure each of their interests is protected.

For example, if you're a merchant, the processor will help verify that the customer's card is valid, the purchase amount is accurate, the customer's billing information is accurate, and sufficient funds are available to complete the purchase. On the other hand, if you're a customer, the processor helps verify that your purchase was completed safely and securely and that your credit card information is protected. At the end of the day, credit card processing companies play a critical role in protecting both customers and merchants when making secure payments.

What Do I Need To Start Accepting Credit Cards?

Before accepting credit cards, merchants need three important things: a merchant account, a payment gateway, and a compatible card reader. A merchant account will give merchants access to their collected funds after each sale. The payment gateway is a secure connection between the merchant and customer, which stores card information and transfers data securely over the internet when processing payments.

Depending on your type of business, you may need a credit card reader that can process chip-embedded cards (EMV). Most merchant account providers like us offer advice on choosing an appropriate reader to ensure they have the right one to best serve their particular business's needs. After selecting a compatible card reader, a merchant will be ready to accept credit and debit cards for payments in-store or on the go.

Lastly, security is paramount when processing credit cards, so keeping vigilant with updating software and protecting customer information is essential. Most merchant account providers offer guidance on PCI compliance (the Payment Card Industry Data Security Standard), which helps safeguard card information electronically stored by merchants. These standards and protocols maintain card information security for merchants and protect sensitive data from being hacked or compromised.

What Kinds Of Credit Card Processing Solutions Are There?

In the world of payment processing, there are many solutions to choose from. Businesses can opt for traditional brick-and-mortar solutions, like point-of-sale systems (POS) or credit card terminals, to process in-person transactions. Those looking to accept payments online can opt for eCommerce solutions such as virtual terminals and payment gateways. Additionally, businesses may explore mobile credit card processing with a separate mobile reader or app solution provided by their preferred processor.

If you operate an online business strictly, an eCommerce solution such as an online store or payment page will be more suitable than a POS system. The benefit of having an online store is that it is always open for business and allows you to reach a wider customer base beyond the walls of your physical location. However, if you have customers who transact with you both in-person and online, it may be worth looking into all-in-one solutions that allow multiple payment acceptance methods.

How Can You Save Money on Credit Card Processing Fees?

To reduce the cost of processing credit cards in addition to helping your business run more smoothly and efficiently, selecting a payment processor specializing in working with small businesses is important. They often provide beneficial services for lower fees, faster payments, and higher security for all transactions.

Small businesses can also use mobile card readers—which allow customers to pay by swiping or inserting their payment cards into a portable device—to help streamline the process and reduce paperwork. Your processing fees will always be lower on swiped credit card transactions because there is risk involved, and the card owner's information can be verified.

Also, consider choosing a payment processor that offers programs and cash discount-compatible point-of-sale systems. Offering a cash discount can help you reduce expenses associated with paying credit card processing fees. By giving customers an incentive to pay with cash, you can reduce the number of transactions processed through your merchant account—incurring fewer fees in the process. This money saved can then be rerouted towards marketing and operations, helping you improve bottom-line profits. Cash discounts are a great way to reward customers who pay in cash while simultaneously helping businesses save on payment processing costs.

Do You Need Help With Your Credit Card Processing?

We specialize in working with small businesses and have the expertise and products to ensure that you use the right payment solution for your business. Call (888) 847-7037 or fill out this contact form to schedule a consultation with one of our payment experts.

About NETSIMPLE

NETSIMPLE is a payments technology company that provides software solutions built around payment processing, website design, and marketing.

NETSIMPLE owns and commercializes” a proprietary, cloud-based Web Platform as a Service (PaaS) that is scalable, customizable, and that can be rapidly deployed across various organizations and industries.

In addition to providing payment processing and software solutions, we have also vetted hundreds of third-party vendors for thousands of our clients. This market research, and our own software development, have helped us to create a secure and powerful software ecosystem.

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