Four Things You Need to Know About Credit Card Processing Companies
The credit card industry is multi-billion dollar web of banks, merchants, customers, and credit card processing companies. One of these entities, the card processing company, is a somewhat powerful force to be reckoned with. Processing companies are a necessary middle man between the merchant and the banks. Without them, credit card transactions may not run as smoothly as a swipe of a card. On the other hand, the swipe of a card and purchase of a product could cost less. Below are four things a person should know about a credit card processing company.
1. As stated, the credit card processing company is the middle man between a merchant and a bank. Every transaction made by the swipe of a card the processor makes sure the merchant gets their money and the bank adjusts the customer’s credit card balance. Per each swipe, the processing company gets a small cut of each transaction.
2. As with any agreement a business owner enter into a contract must be agreed upon and signed by the merchant and processing company.
3. A credit card processing company typically charges a flat rate, and a percentage rate, per each transaction. A flat rate may be in the neighborhood of $0.30 per transaction. A percentage rate, on average, is around 2.00% per transaction. So, if you spend $100 at a store, not including tax, the merchant has to pay $2.30 to the processing company. If the business is web based, and accepts credit cards, the processing company charges around 2.5% per each transaction. You could imagine how these transactions add up for a processing company pretty quickly.
4. There are multiple processing companies which compete for merchants business. Some companies may offer lower rates while some may offer lower penalty rates or other fees. Yes, penalties can be imposed by credit processing companies. For instance, if a merchant does not meet their agreed upon monthly revenue total the processing company may add it on as a fee or penalty to make up the remainder.
When dealing with credit card payments there is a lot that goes into ensuring all parties are paid and happy. As more and more people use credit cards, more and more credit card processing companies are sure to arise. Knowing a little be about them may help you understand why that roll of paper towels costs $5.00.