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How Does Credit Card Processing Work?

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Credit card processing is a system that allows you to accept credit cards for payment. When a customer wants to purchase an item on your website, the cardholder provides her card information and the merchant enters it in through a script or web form. This process was originally handled by phone but has since been largely automated thanks to technology advancements. The merchant requests an authorization for the sale amount and requests a capture after the transaction has been fulfilled.

What are credit card processing fees?

A credit card processor takes a percentage of each transaction as its fee, plus additional fees per transaction. The percentage varies depending on how quickly you want to be paid after each transaction. For example, it is common to pay a 2.5% transaction fee with a one-day payment delay, and 1.8% plus 0.15¢ for same-day payment. Other fees include:

  • Monthly Fee – This is a monthly fee that covers the cost of the entire system and the processing equipment necessary to run your business and process credit cards.

This is a monthly fee that covers the cost of the entire system and the processing equipment necessary to run your business and process credit cards.

  • PCI Compliance Fee – The Payment Card Industry Data Security Standard (PCI DSS) sets out guidelines for any merchant who handles, processes, or stores credit card information. For these merchants, there’s a cost associated with PCI compliance.

The Payment Card Industry Data Security Standard (PCI DSS) sets out guidelines for any merchant who handles, processes, or stores credit card information. For these merchants, there’s a cost associated with PCI compliance. Chargeback Fee – When you authorize a charge but the buyer requests to cancel it, you’ll likely incur a “chargeback” fee.

When you authorize a charge but the buyer requests to cancel it, you’ll likely incur a “chargeback” fee. Voice Authorization Fee – This fee is charged when following up on cardholder authorizations by phone. It covers the cost of using an operator to enter information and follow up with the cardholder’s issuing bank.

This fee is charged when following up on cardholder authorizations by phone. It covers the cost of using an operator to enter information and follow up with the cardholder’s issuing bank.

  • Email Capture Fee – Some processors charge a fee for each failed attempt at online authorization. A common solution is to capture the transaction online and email a receipt to the customer. If you enable this service, you’ll likely have an email capture fee associated with it.

Some processors charge a fee for each failed attempt at online authorization. A common solution is to capture the transaction online and email a receipt to the customer. If you enable this service, you’ll likely have an email capture fee associated with it.

  • Stop Payment Fee – If the customer wants to stop a transaction after it has been authorized, there is typically a fee for processing the refund.

How much do credit card processing fees cost?

The costs of accepting credit cards are established in your merchant account agreement with your credit card processor. Based on the rates in this agreement, you can plan for your credit card processing fees.

When is a chargeback fee applied?

A chargeback fee is typically charged when a customer disputes a purchase with their issuing bank. The merchant account provider will research the situation and determine whether or not to accept the chargeback. If it is accepted, the customer will be refunded and a chargeback fee will be applied to your account.