Credit card processing refers to the transfer of your customer’s credit card information into a format that can be read and understood by your merchant account. When you swipe or manually enter a credit card, the magnetic stripe on the back of the credit card passes through an electronic reader which sends this information to a third-party payment processor; this is called “card not present” processing.
In a typical brick-and-mortar retail environment, the credit card swipe is sent through a PIN pad and then to your merchant account via a phone line or Internet connection.
Credit card processing also includes other payment methods. Automatic Clearing House (ACH), which takes place over the Automated Clearing House network, is a system used by banks to transfer money. ACH payment processing involves direct debits and credits as well as electronic disbursements such as those made for payroll or social security.
What Do You Need To Get Started With Credit Card Processing?
Some things you’ll need to get started with credit card processing include:
- A merchant account through a third party payment processor
- A credit card reader suitable for your business type and needs (swipe, keypad or wireless)
An Internet connection to send the data from your credit card reader to the merchant account. Most methods of credit card processing these days require an Internet connection as all communication is done online. Technology has made it possible for you to process credit cards without a phone line.
Additional hardware for your PC, such as additional memory or video card, is sometimes required. Depending on the type of business you run and the merchant account that you choose, you may need other hardware like cash registers, PIN pads, special software and more. Physical security also plays an essential role in credit card processing.
Choosing the right credit card equipment is important, especially if you run a business that will have customers with several different types of cards, such as rewards or corporate cards. You’ll need equipment that can read each one.
The cost to get started with credit card processing will depend on your business type, how much you plan on processing and the equipment you need. There are a lot of credit card processing companies out there. You can compare pricing online or use a merchant account comparison service to find the right solution for your business.
When Do You Need To Get Started With Credit Card Processing?
You don’t need to get started with credit card processing today, but you’ll want to apply for a merchant account and get your credit card equipment within three months of opening your business. If you wait longer, a lot can happen in a short amount of time. You might end up getting locked out from certain businesses or have to pay much higher processing fees because another company has already set the rates.
What Happens Next With Credit Card Processing?
Once you have a merchant account, are selling your product or service and have all the necessary equipment, what happens next? Your customers pay by credit card. All the information about their purchase is sent through your Internet connection to your merchant account. Your payment processor verifies that they indeed made the purchase, asks your customer for any additional information, such as address or phone number, and then processes the transaction. You’ll be able to receive your money within a week or two depending on the payout schedule that you have with your merchant account company.
Credit card processing can save your business from taking on too much risk. It also reduces overhead costs because you don’t have to pay employees full time to accept payments or hire someone to take money at your business. You don’t even need any extra equipment besides your PC and credit card reader. Just make sure you know the fees involved so that you can set prices accordingly, otherwise your customers might find a better deal elsewhere.