An Introduction to Processing

Maybe you’ve just opened shop. Or maybe you’ve been in business for years. Either way, if you’re about to accept credit cards from your customers you’re in good company.

Here’s why:

  • It’s easier for your customers to pay you.
  • Customers often spend more.
  • You can accept orders by telephone or the internet.
  • Your business enjoys enhanced credibility.

This article will help you get the most from credit card processing. It explains your responsibilities… and how to control the risks. (Yes, there are risks.)

Definitions of Credit Card Processing:

Every business has its vocabulary. This is ours, starting with the parties in transactions:

  • Your customer, the “Cardholder,” obtains his/her MasterCard or Visa credit card from an “Issuing Bank” (the bank that issued the card to the Cardholder).
  • You, the merchant, obtain your “Merchant Account” from a “Sponsoring Bank” or an “Acquiring Bank” (both referred to as “Merchant Banks”). Merchant banks “sponsor” you as a business qualified to accept credit cards. Alliance Bankcard LLC is a “Merchant Bank”
  • “Processors” are companies that process the credit card transactions through the bank system for you.
  • The “Net Settlement Amount” is the amount deposited into your account after a sale. It’s the transaction amount less the “Discount Amount.” The discount amount based on your “Discount Rate,” a small percentage of each credit card sale set by Alliance Bankcard LLC.
  • In general, credit cards are processed as “swiped” transactions or “non-swiped.” Swiped transactions are done through a POS terminal in a face-to-face or “card present” transaction. It is the safest and cheapest processing option. On the other hand, non-swiped transactions (aka “key-entered”) are those used in mail-order/telephone-order, Internet, or telephone processing, where cards aren’t present.