There are a few crucial benefits to accepting credit card payments. For one, doing so puts your business on a level playing field with competitors. The process is relatively inexpensive and can improve your business cash flow as the proceeds are deposited in your bank account within a matter of days. And you’ll benefit from an increase in customers.

Credit card processing allows customers and merchants to automate payment transactions. As such, it’s easier for businesses to accept and manage credit card payments, but what happens behind the scenes?

What is Credit Card Processing?

A credit card transaction takes a few seconds to approve or decline. Two main things happen in those seconds: authorization and settlement. It’s a process that involves a few parties:

  • Merchant: The individual business accepting payment, and they’re typically responsible for paying processing fees.
  • Cardholder: The customer who owns the credit card being used for purchase.
  • Acquiring Bank: The merchant bank that receives payment transaction information and relays it to the card network for processing. They accept funds from the sale once the card is authorized.
  • Card Network: VISA, Mastercard, American Express, or Discover. These are the associations that act as a liaison between acquiring and issuing banks.
  • Issuing Bank: This is the party that verifies the card details and authorizes the transaction.

As a small business owner, you must partner with a credit card processing company in order to receive payments from credit card transactions. Therefore, choosing the proper payment process is a challenge of critical importance. 

Data privacy and security are the main concerns in processing credit card payments. As a merchant, you must assure your customers that their card details are safe and that the transactions are processed in a secure environment. The best way to do this is by partnering with a PCI-compliant payment processor that can support multiple payment types.

There’s also the issue of opening a merchant account. Unless you run a large enterprise, there’s little reason to go through the process yourself. It’s a lengthy process that will cost you time and money and cause quite a bit of stress. You’ll find it much easier to partner with a payment processor that offers a merchant account. 

How to Lower Credit Card Processing Fees

Credit card processing will incur fees for your business, ranging from 1.5 percent to 3.5 percent per transaction. The fees could vary based on several factors, including the type of credit card accepted and the volume of card transactions. As a small business owner, it’s in the best interests of your bottom line to negotiate these payment processing fees. 

Another way to manage your credit card processing fees is to reduce the risk of credit card fraud. The percentage processors charge you also depends on your risk profile as a merchant. It’s your responsibility to safeguard customer data. You can do this by leveraging additional security methods such as:

  • Using an address verification service (AVS) to verify the cardholder’s billing address with the card issuer. 
  • Two-factor authentication that requires customers and employees to provide an additional security code or identifying piece of information before logging into their account.
  • Requiring Card Verification Value (CVV) codes for payment processing.

You’ll also want to establish a clear refund policy. Making returns and refunds difficult for your customers could set you up for chargebacks, which could increase your credit card processing fees if they increase in volume.

Contact Goode Bookkeeping & Consulting 

Accepting credit cards is one of the best things you can do for your business despite the charges. Get in touch with one of our bookkeeping experts to learn more about the credit card processing setup. We’re happy to answer your questions and walk you through how credit card transactions can impact your bottom line. Contact us to find out how we can tailor our services to best suit your needs. You can reach us at (860) 659 6543 or complete our Contact Form to schedule your free consultation.