Credit Card Processing
If you’ve started a business, or you’re thinking about starting a business, you will likely need to accept credit cards.
There are very few businesses in 2019 that can operate in 2019 without accepting credit cards.
Most businesses these days accept payments online, so you know they accept credit cards.
If they don’t accept credit cards, they are losing out on a lot of business, and a lot of money.
These days, nearly 77% of consumers prefer using their credit or debit card over cold hard cash.
So, if you’re about to open a restaurant, gas station, retail store, hair salon, or an online business especially, there’s a good chance you’re going to need to process credit card payments.
We all use them, but how exactly does it work?
We swipe a card in the store, the card reader reads it, and then the money leaves our bank, and somehow gets to the store’s bank account.
We don’t question it; that’s just how it is.
However, if you’re opening a business, it’s in your best interest to understand the basics of how credit card processing works.
That’s what we’ll discuss in this article. Read on to learn more.
The Key Players In The Process
To start, let’s talk about the key players in the process.
These are the business and individuals responsible for getting your money from your bank to the business you’re supporting.
Credit Card Processor
The processor is the messenger that facilitates communication between the businesses bank and the customer’s bank.
They secure the payment data and make sure all transactions adhere to the rules made by the Payment Card Industry Data Security Standard.
The processors collect a fee from the businesses for providing their services.
The fee is either fixed, or it’s a percentage markup on top of the interchange fees they pass on to the merchant at cost.
The Merchant Bank or Acquiring Bank
This is the bank that handles the money of the business you are supporting.
The merchant bank can also act as a card processor, although recent trends have shown that more and more businesses are switching to third parties.
The merchant banks provide the businesses with all the equipment needed to accept cards, and they deposit the funds into the merchant account once the sale processes.
Again, however, the role of the merchant bank continues to decline.
Companies like PayPal, Stripe, and Square are taking over a lot of the roles traditionally held by Merchant Banks.

Card Network and Card Associations
The card network’s job is to work with the processors to transport data between the issuing bank and the merchant.
They are also responsible for setting interchange and assessment fees by the networks.
Although the networks set the fees, they don’t collect all of them.
These fees, which are the largest cost involved in credit card processing, are passed on to the issuing bank.
The networks collect the assessment fees that are just a fraction of what the interchange fees are.
Consumer Bank or Issuing Bank
This is the customer’s bank, that issued the credit or debit card they chose to use at your store.
The primary role the consumer bank plays is determining if the customer has adequate funds to complete the transaction, and then releasing the funds to complete the purchase.
The type of card the customer has will determine the interchange fees.
Typically, the more rewards a card gives the customer, the more expensive its interchange fees will be.
The Step By Step Process
Now we’ll take a look at the overall process the pulls all the key players together to complete the transaction from start to finish.
It’s a six-step process that on average takes about 15 seconds to complete.
1. Consumer
The first step of the process depends on the consumer.
Without a customer wanting to buy something, the process never starts.
The card processing starts when the consumer hands over their credit card information to the business by swiping, inserting the chip, or giving it to the cashier.
2. Merchant
Next up is the merchant accepting and collecting the payment information.
This happens one of two ways.
The payment is accepted physically in ” card present” transactions.
This happens at a storefront with a card reader.
Or, the process happens online.
Instead of a card reader, the merchant uses an online gateway to collect payment from their customers.
3. Processor
The processor takes over from here.
The credit card processor collects the information and routes it across the other stages, facilitating communications between various parties.
The first and most important step is to send the payment information to the card network.
4. Card Network
Your customer’s card operates on one of the major credit card networks.
We all know these by heart; Visa, MasterCard, Discover, and American Express are the most common.
Once one of the networks receives the payment information from the processor, they pass it along to your customer’s bank.
5. Consumer Bank
That’s where we are at step five.
The consumer’s bank receives the payment request and then verify whether or not the consumer has enough money to complete the purchase.
Sometimes the bank will run additional security measures to verify if the purchase is legitimate.
Once the purchase is deemed legitimate, and the customer has enough money, the consumer bank allows the transaction to go through.
The most common reasons the consumer bank would reject the transaction is insufficient funds, the credit limit has been reached, or the bank thinks it’s fraudulent.
6. Merchant
And now we’ve come full circle back to the merchant.
The message of whether or not the transaction has been allowed flows back through the system and makes it to the merchant.
If the customer used his card in a storefront, this comes through as an “Approved” or “Declined” message.
If it’s approved, the merchant hands over the product and the purchase is complete.
All in about 15 seconds.
Even though the transaction is complete between the business and customer, no funds have been released yet.
That’s an entirely separate process that could take several days to complete involving the same players we talked about above.
Now You Know
You don’t need an extensive working knowledge of how the system works, but it’s good to have an idea.
The steps listed above give you a good idea of how it works and should help you if anything were to go wrong during the process.
If you’re looking for a credit card processor, EMS Corporate is one of the best options on the market today.
They are not only reliable and trusted by countless businesses, but they save them a lot of money as well.
If you need a credit card processor, click to speak with someone at www.EMS-NewYork.com

Steven Miller
866.367.1818
smiller@ems-newyork.com