There are several steps involved in credit card processing:
Your website shopping cart collects the following transaction information:
- Transaction amount
- Card number
- Customer verification value (CVV) number
This information is sent to the payment gateway which then encrypts the data for security and communicates this information to the card issuer.
The card data is screened for fraud and the transaction is either authorized or declined. The data is then returned to your merchant account. If the transaction is declined, the cardholder must find another way to pay.
If the transaction is authorized, it is processed and the funds are deposited into your account. Most of these steps are automated, especially in online transactions. A record is also kept for the purposes of accounting.
What are the Eligibility Criteria for Opening a Merchant Account?
Criteria varies among providers but there are some general requirements all reputable providers have in common:
- You must have registered your business and if it’s online, you will also need to provide a physical address.
- You may be required to display product information, prices, shipping methods etc. on your website to prove you are a bona fide business.
- You will need a secure shopping cart to protect customer details during transactions.
- You will probably be subject to credit (and other) checks to ensure your creditworthiness.
If you work in riskier businesses or have a bad credit history you may have to opt for a high risk merchant account. If you can't get one of those you may also to wish to look into 3rd Party Credit Card Processing.
How Long Will It Take to Set Up a Merchant Account?
The time frame for setting up a merchant account varies depending on the account provider and the kind of account you need.
You will need to make an application (usually online) and you will be required to supply information such as your social security number, your tax ID number, your driver's license number and your contact details.
You must also supply business location information, bank routing and the account number of the checking account of your business.
It will take some time for the provider to run all the necessary checks before your account can be authorized, so there will be a delay before your account is up and running.
A simple merchant account is likely to be set up within 5-7 business days, but others could take longer, especially if your business carries additional risk.
International merchant accounts can take as long as four weeks to become operational.
How Much will a Merchant Account Cost?
The cost of a merchant account depends on many factors, including the kind of account and size of your business. Costs may include an application fee, a transaction fee and a monthly fee for use of the account.
A discount rate is also charged - this amount is calculated as a percentage of the transaction amount.
There are many merchant account providers who may charge various rates, but the following should provide a rough guide to possible prices.
An alternative method of processing credit card payments is online through a payment gateway.
Payment gateways typically employ the services of third party organizations. However, they can operate through the merchant company itself.
Credit card processing through payment gateways occurs through one of two ways. The merchant may manually input the relevant card details via a virtual card terminal. Alternatively, the merchant will process details in real time using interactive features on the merchant's website (such as an interactive shopping cart).
Read more: Online processing