Credit Card Processing
A credit card processing system is transaction processing system that functions as payment service using a secure transaction service on the Internet. With a merchant account, merchants can use that system to submit, authorize, and settle credit card or eCheck transactions without the need for a separate transaction terminal or processing software.
Generally there are three methods of processing transactions:
- Virtual Terminal is completely hosted on transactions servers, where merchants can login using their internet browser and perform live transactions using their accounts.
- Web Link: To process credit card payments from customers in real time with complete automations, merchants can link their web site to the credit card processing system with a simple Web Link.
- Automated Direct Connect: the third method is Automated Direct Connect, that provides a simple and straight forward mechanism to link more complex web sites with transaction gateway server, including support custom programming.
A credit card transaction is considered to be more secure than most other forms of payment, because the issuing bank is responsible to pay the merchant the moment a transaction is authorized, regardless if the buyer defaults on his or her credit card payment. Sometimes credit cards can be even more secure than cash, because they discourage theft by merchant's employees and reduce the amount of cash on premises.
Banks assumes the credit risk, by evaluating each customer's credit history before extending credit. Much of merchants' marketing is based on extra turnover, which is generated by the fact that the customer can purchase services or products immediately and less concerned by the amount of cash in his pocket or bank account.
First step in accepting credit card is opening a merchant account with a merchant account provider (typically a bank or a specializing company).
Merchant account provider charges the merchant a commission (discount fee) for each purchase. The commission is often a percentage of the transaction amount plus a fixed fee (interchange rate). There are several factors that can influence the discount rate, for example the length of time you have been in business, the percentage of your sales that are made over the phone or over the internet, the type of business, merchant's personal credit history or even the average dollar amount of each sales transaction.
The Application Process
To verify the fact that the merchant is at the location he says he is, some companies will want to send representative to the place of business, some will accept the photo of the place or office. Depending on credit card processing service provider the following documents will be required: copy of business license or certificate of business name (DBA), profit and loss statements, copies or previous years' tax returns, etc. The two-way access to merchant's bank account will be required, thus allowing both deposits of collected monies and withdrawals in cases of charge backs.
High-Risk Merchant Account Providers
Merchant accounts are typically divided into low-risk and high-risk accounts. Depending on the industry type, international location of the merchant and other factors, you will be categorized into "low-risk" or "high-risk" category. There are special providers who specialize in high-risk merchants, for example merchants located abroad who will be using foreign bank accounts to withdraw funds from the merchant account.
The terms of high-risk merchant account by definition are harsher than those of low-risk account. A high-risk merchant should expect to see higher discount fees, longer fund holding periods and other terms needed to offset the added risk. It is possible to reduce the risk over time by maintianing record clear of chargebacks and disputes. Our company works with a number of high risk merchant account providers, and you can order a free consultation with all of those providers when placing an order for company registration.
Alternative #4: 2Checkout, Stripe & Skrill (ex-MoneyBookers)
If the only reason why you need a U.S. bank account is to be able to collect payments from your U.S. clients you should consider using 2Checkout, Stripe, or Skrill for credit card processing. 2Checkout, Stripe and Skrill allow merchants based in a number of countries covering wide range of industries to collect online payments from buyers across the globe.