Your Guide To Credit Card Processing

Andrew Omalley

Nov 27 2023

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Big companies are continuing to provide consumers with new ways to pay for products and services. Mobile payment options are also growing. But despite all these exciting new options, credit cards remain the most popular payment method. It doesn’t matter if you run a brick-and-mortar or an eCommerce business. Credit cards will still be your customers’ go to choice. Because of their ubiquity, your business needs a great credit card processor in order to maximize your profits and ensure stability. Your credit card processor will determine how easily your customers can check out. But it will also determine how much of your bottom line is cut out by the processor. So, it pays to first gain an understanding of how credit card processing works.

How Does Credit Card Processing Work?

Credit card processors take your customer’s credit card information and process their payments for you. They enable these transactions in one of several ways.

If you run a brick-and-mortar business, customers swipe a magnetic stripe card or just tap a card reader. The credit card processor communicates with your customer’s bank via their card network (eg. Visa, MasterCard) in real time. Then, your customer’s bank either approves or denies the transaction.

The popularity of online card payments has created a new credit card process. Online customers provide their card’s payment information to a website through a payment gateway. Payment gateways take over the process of communicating between your merchant account, your customer, and their bank.

Phone Orders
Phone orders are managed through a virtual terminal processing with a personal computer.

The Process

Regardless of where the customer pays, credit card processing works the same way. Payment approval is sent back through your merchant account payment processor, then to your terminal or card reader. Approved transactions are typically batched for settlement at the end of every business day. Once you receive the payment, your customer’s account is charged. That’s when your merchant bank account receives the funds.

Growing Complexity

Competition in the credit card processing industry has only grown. This has led to a larger industry that provides a wider range of quality. The services that credit card processors provide are more fraught with hidden fees and limitations than ever before. Because of this, inexperienced business owners often find themselves losing more of their bottom line than they realize. Credit card processing is a multi-step process that is conducted fairly quickly. But it’s still a complicated process with multiple steps. Because of that level of complexity, different credit card processors end up providing widely varying levels of quality.

What You Need To Watch Out For

There are several areas where credit card processors vary in quality. It’s your responsibility to evaluate them and choose the one that works best for your business. When comparing credit card processors, keep an eye on these factors.


You won’t always have access to the internet. Outages are common, but that’s why you’ll want to choose a processor with strong offline capabilities. Normally, the payment process won’t be any different whether it’s on or offline. Credit card processors that fail offline are behind the competition.

Many credit card processors will suffer some downtime. That’s why you need to choose a processor with a great uptime record. Payment system outages are a disaster for businesses. Depending on your business, an outage can mean your business is as good as closed. What’s worse is that customers will view having their credit card turned down due to an outage as a sign of suspicion. You don’t want your business to be associated with that kind of failure.

The good news is you can find out about a credit card processor’s uptime history. They also often list out the steps they’ve taken to minimize interruptions to their service. Most of the better credit card processors have taken steps to ensure your business can still receive its payments during a network outage. They can also employ redundant servers to reduce the damage outages do to them.

Fair & Transparent Rates

How much does your credit card processor charge? Unfortunately, many business owners don’t know the real answer to this question. While credit card processing is a complex process, you should still expect them to be transparent about what they’re charging you. The total amount you pay your processor will depend on a few factors. The first is their interchange rate.

Interchange pricing will vary depending on both your processor and the type of business you’re running. Because some business types are riskier than others, credit card processors charge varying rates. But the interchange rate that your credit card processor pays is a flat rate set by the card brand. Credit card processers just pass the risk down to their customers (you).

High-Ticket vs Low-Ticket

On top of interchange rates, credit card processors charge other fees. They will normally charge a small flat fee per transaction, plus a small percentage of each transaction. Because of that flat rate, your processor’s rate transparency is especially important if more of your sales are low-ticket.

Some credit card processors cater to small-ticket businesses, however, If you run a convenience store, you will benefit more from a processor with lower flat per-transaction fees. High-volume, low-ticket businesses simply need different fee structures.

While much of this may seem strange, you need to remember that credit card processors are businesses too. They need to make some money after they pay the card brands their flat interchange fees. Then, they need to charge a little more to actually be profitable. But there is absolutely no excuse for a lack of transparency. If a credit card processor is withholding fee/rate information, do you want to trust them with every transaction?

Transaction Speed

Customers everywhere are becoming accustomed to very fast transaction times. Most large merchants ensure a consistently short wait time. Even a short delay will prove to be a serious annoyance for your customers. Ideally, your credit card processor can accurately, safely, and quickly handle large transaction volumes. The problem is that as the payments industry becomes even more competitive, the “acceptable” wait time grows shorter. The standard for credit card processors is already less than 2 seconds.


On the same note, customers care about security as much as they care about speed. Sometimes added security can mean more friction during transactions. That isn’t always a bad thing. But customers are becoming accustomed to having their cake and eating it too. You will want to provide both speed and security to keep customers satisfied.

Customer Support

Every once in a while, things will go wrong. That’s just a fact of nature. Credit card processing is a complex system with many moving parts. Sometimes, they need some maintenance. When something goes wrong with your credit card processing, you need to fix it fast, or sacrifice your bottom line and reputation. The way a credit card processor handles your technical difficulties will make or break a business day.

Professionalism, accessibility, and speed are important. Ideally, you will have fast access to payment processing experts, even at midnight during a holiday which happens to fall on a weekend. Not all credit card processors offer live 24/7 support. So, depending on the level of reliance you have on credit card payments, you will need to consider customer service. The credit card processor you use should offer the level of service your business demands.



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