Credit Card Processing

Credit card processing is a procedure that involves a few steps. That’s why Merchant Chimp offers an extensive and helpful analysis to all customers.

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Nowadays, it is much easier to pay with all sorts of available cashless payment options than to carry cash. This trend calls for credit card processing as well as for many other merchant services. To understand what that means and how it affects your business, our experts in Merchant Chimp broke down the whole payment process and explained each step of the transaction.

From POS terminals to issuing banks, there are a lot of participants in credit card processing. But with the right credit card processing company, the whole thing will be a lot easier. Give Merchant Chimp a call, and with our excellent credit card processing services, your business will thrive.

What is Credit Card Processing?

Credit card processing (CCP) is the whole process from the moment someone pays using a cashless payment method until the transaction is completed. When a customer pays in-store or online, the transaction is in standby mode. Bluntly said, a customer presents you with his payment information which will wait for approval from the correspondent authority, whichever cashless payment method is used.

Processors are the first to send the information from your customer to the appropriate bank through card brands. The issuing bank, which holds the information about your customers’ bank account that is connected to the card, will determine if the customer is viable and has enough money for the transaction.

If the customer has money to pay, the information will be relayed through a payment gateway to the merchant, who will accept and complete the transaction. However, if the customer does not have sufficient funds in his account, the transaction will be denied. The whole thing usually lasts just a few seconds, and the relation between you and your customer ends on the spot.

Why Does Your Business Need Credit Card Processing?

There are around 1.06 billion credit cards in the US, and almost 70% of adults have at least one. If you want your business to thrive in this day and age, providing customers with an additional payment option is a way to go.

Furthermore, around 60% of Americans believe that the States will soon become a cashless society. So, why not prepare for it in advance? Take that important step and watch your business grow. All you have to do is contact Merchant Chimp, and our team will help you take the step into the future.

How to Find the Best Processor for Your Business?

There are a few possible mistakes you can make when negotiating the price for the processor services. For starters, never let a new processor know how much you paid the previous one. That opens a possibility for them to offer you a less favorable deal if your previous Processor had high processing fees.

The second mistake you can make is to ask for standard prices and no other options because, more often than not, they will offer you a bundled price model, which is more expensive and less transparent. If it is possible, always ask for the pass-through pricing model.

The pricing model merchant uses has a bigger impact on the cost of their services than the rates themselves. The pricing model will also make it possible for you to compare offers from different processes if it is transparent.

What to Focus On?

Focus on markup fees, not the assessment and interchange fees, since they are the same and non-negotiable. This is where the pass-through pricing model will allow you to compare the prices of services of different processors. You can calculate your markup by multiplying processors rate and transaction fee with your average monthly volume and number of transactions.

Also, don’t forget to review all the processing fees. You also have to count the types of fees that processors charge. Besides the transaction fee, there are also monthly and annual fees.

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What Differentiates Credit Card Processors?

Processing involves many parties, different technologies, and financial institutions for every transaction made. Since there are many parties involved, the route of the transaction is not always as fast and as secure for all of them.

There are typically five main things your Processor has to do good:

Transaction Processing Speed

Your CCP should be able to quickly, efficiently, and safely process a large volume of transactions. Your customers are expecting cashless payments to realize quickly, and any waiting can prove to be an annoyance for them. Reliable CCP will make payment possible in 2 seconds. However, transaction speed shouldn’t be on account of security. It is better to have a slower response than to be a victim of fraud.

Fast Uptime

During the outages of the network, your CCP should be able to provide a quick uptime response. That is something you can inquire into based on the previous customer experience. Some of the processors have systems to provide transactions even in the outages of the network. You wouldn’t want to deny your customer the possibility to pay because of the too often or too long network downtime.

Transparent Rate Options

You should be very careful with the hidden costs of the transactions. All the fees you pay for the transactions should be transparent. The one thing that can affect you the most is the interchange fee.

Reliable Customer Service Support

Good customer service is essential from the very beginning. Well-educated and responsive customer service can guide you through all the steps when you are signing the contract with the CCP. A lot of big companies tend to outsource customer service, which leads to a staff that is not well informed and to many misconceptions along the way.

Reliable Point Of Sale

POS stands for points of sale, which can stand for both hardware and software for cashless transactions. Different POS are recommended for different businesses. A good processor will know to recommend you the right one for your company.

How Does The Complete System of Credit Card Processing Work?

To understand the CCP, we have to go through the whole transaction process. What are the parties involved, who does what, and how much do you pay for their services? The principal players involved in this operation are:

Credit card associations or brands are owners of all the cards on the market. There are a few prominent companies you surely all heard about like Visa, Mastercard, American Express, etc. They charge their fees for data storage and usage.

Issuing banks are the banks that the customers hold an account with and have the authority to issue credit cards from the associations. They charge their interchange fee.

Acquiring banks are holding and maintaining merchant accounts for businesses.

Credit card processors deal with the whole process of communication from a merchant to the other parties involved. In most cases, they also provide POS terminals.

What Are Processing Pricing Models?

The models have a greater actual impact on the total processing costs of the processing fees than their rates. These are the two most common pricing models:

The pass-through pricing model

has transparent and separated three components of costs, which means that interchange and assessment fees are “passed-through” to a business and are visibly separated. What is left is a markup fee with a single flat rate and a single transaction fee. This model leaves you with visible and separated transaction expenses, which can help you control the costs of transactions.

Bundled pricing

combines all the components, which can result in additional and hidden surcharges and markup. The Processor decides on its own which transactions are qualified, mid-qualified, or non-qualified.

Which of the Two Options is Best for You?

As a business owner, you want what’s financially best for your enterprise, so with that in mind, you should choose between these two options. If the volume of your transactions is less than $5,000 a month with average transactions under $10, bundled pricing may be a cheaper solution.

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How to Negotiate Better Conditions and Small Payments for Processing?

What you should do when you are inquiring about the services of a new processor for merchant services – you should dictate the terms in the possible range. You shouldn’t ask for the prices and the conditions. You should tell what are you expecting from a CCP, reasonably, of course. Ask for the pass-through markup models and interchange plans because that is what will cost you the most.

We, at Merchant Chimp, are always open to hearing what you need, and we will be more than happy to provide you with the best possible services at the most reasonable price. Give us a call for more information.


What Are The Fees?

When processing cashless transactions, businesses pay fees to 3 separate entities:

  • Interchange fees to issuing banks – Every time someone pays with a credit card on the POS, your issuing bank charges interchange fees. These fees are charged per transaction. They vary depending on the card type, category, and processing method. Those fees are not set by issuing banks independently. All the banks agree on a rate through car brands, so all of them have the same interchange rates.
  • Assessment fees to brands – Since brands do the assessment every time a card is swiped, they charge assessment fees based on percentage, flat charge, and brand fees.
  • Markup or merchant fees to processors, sales agents, gateway providers, merchant account holders, etc. – What you should be looking for is a processor that will add the greatest value with the lowest markup fee because it is negotiable and varies.

Two of these, the interchange and assessment fees, are fixed and non-negotiable, but markup fees vary among different credit card processing companies. As you can notice, the best solution for your company is the one with the lowest markup fees over the sum of interchange and assessment fees.

That’s why you should give Merchant Chimp a call, and our agents will gladly make you an offer that will be great for your budget.

How to Optimize Interchange Fees?

Although Interchange fees are not negotiable, you can optimize them by. There are different categories of interchange rates, and the rates can range from anywhere of less than 1% to 2.95%. This happens because each interchange category has certain conditions that a transaction has to meet. If it doesn’t meet them, the transaction gets downgraded, and you pay a rate in the higher category.

How to Monitor Processors Fees so That They Stay Fair and Square?

If you exclude the interchange and the assessment fee, which you can’t influence much, you are left with markup. It should be separated in a pass-through model, and you will know precisely what are the rates per transaction and how much you pay monthly to your Processor.

What can vary a lot are yearly and monthly fees, also per transaction rate. When you have it all broken down, you can see which Processor works for you the best. Always pay special attention to the fees that are not so obvious. They will make or break the deal for you.

Even with the higher transaction processing rate, that may seem like the obvious deal-breaker at first. Since this is a competitive market, you can always make a “sweet deal” for your business. You just have to know where you can save money and what you can’t change.


It never hurts to know how much you can save.

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