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The Ultimate Guide to Credit Card Processing

The ultimate guide to credit card processing includes essential information about a merchant’s options for credit card processing. You’ll learn about charges such as the Interchange fee, the Authorization hold, and the assessment fee. In addition, you’ll discover how to minimize the risk of chargebacks by carefully monitoring your monthly processing statement. With this information, you’ll feel like a pro with the help of Besides, the guide also helps you decide whether to switch to a different merchant account.

Interchange fee

Interchange fee has three types of pricing. These are interchange-plus, tiered, and fixed. Although interchange-plus pricing is less transparent to the merchant, it used to be the industry standard. This guide will help you understand the various types of credit card processing fees and how to negotiate the best price for your business.

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The issuing banks set interchange rates through their agreements with Visa and MasterCard. Processors do not set these rates – the payment networks collectively govern them. Therefore, the interchange rate is a non-negotiable component of credit card processing costs. The table below shows how much a $100 purchase costs in interchange fees. The interchange rate for debit card swipe fees was nearly double the current amount.

Assessment fee

The assessment fee is a fee that determines the total cost of processing credit cards. It is calculated against your monthly sales volume. MasterCard, Visa, and Discover have their flat percentage for assessment fees. These fees are paid to the card associations directly. They are a crucial source of operating income for credit card networks. The card associations review the fee schedule at least twice a year. Checking all fees before signing up for a credit card processing service.

In addition to the assessment fee, some processors also charge markup fees. These fees are charged to merchants per transaction and are linked to the interchange rate. They are paid to the processor to offset their profit. In addition, some processors charge monthly service fees for the platform or software they provide. Some require a minimum monthly processing volume. To avoid the assessment fee, make sure you understand how this fee works.

Chargeback fee

The chargeback fee is one of the essential fees a merchant must consider when accepting credit cards. The cardholder’s issuing bank initiates chargebacks. The cause may be fraud, processing or billing errors, or simply failure to deliver the customer’s order. When a chargeback is initiated, the issuing bank evaluates the customer’s complaint and sends the transaction back to the merchant’s acquiring bank. The payment processor or merchant’s acquiring bank then studies the chargeback and determines its validity.

The chargeback process has many steps, and primary participants include the cardholder, merchant, issuing bank, acquiring bank, and credit card network. There is also a chargeback fee based on the lack of due diligence in some cases. Understanding the process will help your business avoid making costly mistakes and successfully fight chargeback fraud. Chargeback fees can range from $25 to as much as $3,000, depending on the type of chargeback.

Authorization hold

When a customer swipes their card to purchase an item, the merchant sends an authorization request to the cardholder’s issuing bank. When a cardholder declines the transaction, the merchant will put the funds on hold. This hold makes the funds inaccessible until the transaction settles, is canceled, or expires. In some cases, the merchant may place an “estimated authorization hold,” which means the amount is unknown when the card is presented.

The business can release the hold without the cardholder even knowing. This gives the merchant time to verify the transaction and capture the funds. The cardholder will not know about the hold until they check their statement, often a few days after the transaction. A merchant can also use authorization holds to protect themselves from chargebacks. A rental car service may place an authorization hold to protect itself from a chargeback, and the customer might return the car without needing additional charges. Once the vehicle is returned, the cardholder can access the previously frozen funds.

Payment gateway

When your customers purchase products or services online, they make a transaction through a credit card processing network. The payment processor sends the information to the issuing bank, verifying the transaction and releasing the funds to the merchant account. The process takes about two business days to complete. Depending on your processor, it may take as little as one day or two weeks. Some processors allow same-day and next-day deposits, but there are situations in which a longer payout time is required.

This book is perfect for small and large businesses, as it contains comprehensive information on credit card processing. The data is presented in an easy-to-read format, and it is ideal for financial professionals, retailers, and others who want to learn more about credit card processing. 

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