Explain How Credit Card Charges Are Processed? |
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It's a fact that businesses offering credit cards as a payment
option are more likely to have higher revenues than businesses
that don't. So, if you're a business owner and you are thinking
of jumping on this bandwagon to higher profits, understanding
the process before you make any decisions would be beneficial.
Knowing just how your customer's charges go from point A, your
store or business, to point B, your bank account can give you
tips as to what to look for in a processing company.
The Process
This process is basically a series of steps: initiating,
authorizing, completing the transaction, and lastly, receiving
your funds. Let's start at the beginning. |
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The process begins when you accept the card from the consumer.
The next step is to verify that the card is active and the
amount of the purchase is within the cardholder's available
credit limit. How that verification is done depends upon the
equipment that is available to you, and how you interact with
your customer.
If you own a business in which the customer can present you with
the actual card, like stores and restaurants, then you can
physically take the card and swipe it through your card
terminal. If you own a business that is online, your customer
enters their own information into your form. Mail order and call
center-based businesses usually have computer-based terminals
for entering charge card data.
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The second step is authorization. The key for reducing any
problems during the initial phase is to make sure you are using
technology that allows for real-time authorizations. This
software will immediately send the card number and amount to the
card processor and the processor immediately approves or denies
the sale. This is critical for cutting back on charge-backs and
card errors.
Third, you will need to complete the transaction. At the end of
the business day, any credit card charges will need to be
processed. This procedure is called batching and can be done
either by hand or on your credit card terminal. Once this is
done, the credit card processor will send each credit card
company represented in the batch the transaction that took
place. Once this is done, each credit card company will debit
the cardholder's account. This ends this part of the transaction
and all that is left is for the monies to be transferred into
your account. This usually takes place pretty quickly, often
within two to four business days.
Safety Issues
Since the process can take a few days to complete, knowing that
your money is safe and will actually be credited to your account
is a key concern. Many credit card processing companies have
protection policies in place that will absolve you of any
responsibility should you be a victim of credit card fraud as
long as you followed their authorization procedures 100%. Before
you decide on which processing company to go with, check out
their safety policies, particularly if you are an Internet
company. You will want as much protection as you can get.
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