Credit Card Processing: How to Accept Payments & Get Paid

What Is Credit Card Processing?

Credit card processing is the system that allows businesses to accept payment by card. When a customer pays with a credit or debit card, the payment goes through several steps before it reaches your business bank account. Specifically, these steps involve the customer, your business, the payment processor, the card network (Visa, Mastercard, etc.), and the customer’s bank. Each of these players is essential in ensuring smooth transactions.

Understanding how credit card processing works is essential for choosing the right provider and avoiding unnecessary fees. Hidden costs are a common issue for many businesses, so having a clear grasp of processing fees can help you steer clear of unexpected charges. Selecting the wrong payment partner can be costly – make sure you know the 5 red flags to watch when assessing your payment processor.

If you’re just getting started, the first step is setting up a merchant account. Following the essential steps for merchant account approval will help ensure a smooth and efficient setup. A merchant account is a specialised type of bank account that temporarily holds funds from card transactions before they’re transferred to your business account. xxx

How Does Credit Card Processing Work?

Here’s a more detailed breakdown of how a credit card transaction happens:

1. The customer pays – First, a customer either swipes, taps, or inserts their card at a terminal in-store, or enters their card details when making an online purchase.
2. The payment processor sends a request – Next, your payment processor receives the transaction details and securely transmits them to the customer’s bank for approval.
3. The bank approves or declines – At this stage, the bank checks the customer’s account for available funds or credit. If everything is in order, the bank sends an approval message; if not, it gets declined.
4. Funds are transferred – Finally, the customer’s bank sends the funds to the business’s merchant account, minus processing fees. After that, the money is deposited into your business bank account, typically within 1-3 business days.

This all happens in seconds, making it easy to receive credit card payments online or in person without any hassle. However, different industries have different transaction classifications. So your business type and transaction processing flow is assessed to assign your Merchant Category Code (MCC), which helps payment networks classify your transactions. MCC codes not only determine the processing rates but also assess potential risk factors associated with your business.

Why Accept Credit Card Payments?

Many customers prefer to pay by card, and businesses that fail to offer this option risk losing potential sales. Here’s why accepting card payments is essential:

• Increases sales – Studies show that businesses earn about 20% more when they accept credit cards because customers find it easier to pay.
• Reduces abandoned carts – On average, around 70% of online shoppers leave without buying. By offering seamless credit card payments, businesses can help customers complete their purchases.
• Improves cash flow – Unlike checks, which take time to clear, credit card payments are processed quickly, helping you maintain a steady cash flow and reduce the waiting period for funds.
• Enhances security – Unfortunately, cash transactions come with risks like theft and counterfeiting. On the other hand, credit card payments reduce the risk of handling large sums of cash and provide security mechanisms to prevent fraud.
• Expands your market – By accepting credit cards online, you can reach more customers, even beyond your local area. In fact, businesses can sell to customers worldwide and take advantage of global eCommerce opportunities.
• Boosts customer experience – Today’s modern consumers expect businesses to accept multiple payment methods. Providing a seamless and efficient card payment process not only enhances the overall shopping experience but also improves customer satisfaction and loyalty.
• Reduces risk of fraud – Unlike cash transactions, digital payments offer fraud detection and chargeback protection mechanisms which add an extra layer of security for businesses. Here’s how to prevent fraudulent chargebacks and minimise revenue loss.

How Can You Accept Credit Card Payments?

To accept card payments, you need a merchant account and a payment processor. Here’s how to get started:

1. Choose a Payment Processor

A payment processor acts as the intermediary between your business, the customer’s bank, and the card network. It ensures that transactions are authorized and completed securely. Some processors even offer all-in-one solutions that include a merchant account and payment gateway.

Choosing the right processor depends on your business type and transaction volume. For instance, some providers specialize in online payments, while others focus on in-store sales. For businesses seeking third-party partnerships to streamline credit card processing, working with an Independent Sales Organization (ISO) may be beneficial.

2. Set Up a Merchant Account

A merchant account is crucial for processing card transactions. Essentially, it temporarily holds funds before they are deposited into your business bank account. While some payment processors bundle this service, others require businesses to open an account separately. Therefore, be sure to compare transaction fees and payout times when selecting an account provider.

Having a merchant account enables you to receive credit card payments online and in-store without delays. Additionally, some financial institutions offer additional benefits, such as lower transaction fees, better chargeback protection, and improved fraud detection.

However, getting approved for a high-risk merchant account can often be a challenge, especially for high-risk businesses. To learn more about the approval process and how to increase your chances of approval, check out our Merchant Account Approval Guide.

CardCorp helps businesses open the right merchant accounts by matching them with acquirers that align with their needs.

3. Accept Credit Card Payments Online and In-Store

• For online businesses – You’ll need a payment gateway that connects your website to your processor. This allows you to receive credit card payments online securely. Make sure that your payment gateway supports multiple card networks, digital wallets, and alternative payment methods. Businesses using several gateways or acquirers can benefit from payment orchestration, which streamlines processing across platforms.
• For physical stores – A card reader or POS (point-of-sale) system is required to accept payment by card in person. Many modern POS systems offer contactless payment options, chip readers, and mobile payment solutions to better cater to customer preferences.
• For mobile businesses – If you operate a mobile business, consider using mobile payment solutions such as card readers that connect to smartphones or tablets. These solutions provide flexibility and convenience for service-based businesses or pop-up shops.

How to Accept Credit Card Payments Online Securely

Security is crucial when accepting credit card payments online, as even a single breach can result in financial losses and reputational harm. Therefore, all payment processors must comply with PCI standards to safeguard sensitive cardholder data.

To protect your business, consider these best practices:

• Enable fraud protection – Many payment processors offer advanced fraud detection tools, such as machine learning algorithms that identify suspicious transactions in real time.
• Use SSL encryption – Ensure your website has HTTPS encryption to enhance transaction security and protect customer data.
• Verify customer information – For extra protection, require CVV codes, address verification, and two-factor authentication to prevent fraudulent transactions.
• Monitor transactions – Be proactive and check for unusual activity. If you notice anything suspicious, report it immediately.
• Educate your staff – To strengthen security, ensure that employees handling transactions understand security measures, phishing threats, and fraud prevention strategies.

Ultimately, staying PCI compliant is a crucial step toward protecting your business and customers from fraud.

Conclusion

If you want to grow your business, then you need to accept credit card payments. Whether you receive card payments in-store, online, or on the go, having the right payment processor ensures seamless transactions. So, be sure to compare options, ensure security, and choose a system that fits your business needs.

By understanding how credit card processing works, you can get paid by credit card with confidence and offer a smooth experience for your customers. Ultimately, investing in a reliable payment processing system will not only help your business thrive but also increase sales and improve customer satisfaction in today’s fast-moving digital economy.