Accept Credit Card Transactions the Right Way

When merchants accept credit card transactions at the point of sale (POS) the right way, they become an important part of the payment processing system. That is the reason it is incredibly important that the merchants begin with a right picture of the bank card transaction process and answer the following questions:

• What the process is.
• How it functions.
• Who is involved in it.

This basic understanding will give merchants the important basics for the policies and procedures concerning the processing of credit card payments. It will also be helpful to realize what role the major participants in the card processing play and how they relate to the way merchants do business.

Who Participates In the Card Process

Other than the merchant and its customers, several other participants are involved every time retailers accept credit card transactions. Following is a summary of what each party does in the process:

• Cardholder is the authorized user of a Visa, MasterCard, Discover, American Express or a payment card of another brand.
• Card acceptor is any merchant that is authorized to accept credit card transactions of any of the payment brands for the purchase of merchandise and services.
• Processing bank is a financial organization that contracts with card acceptors to accept payment cards for the purchase of merchandise and services. A processing bank may also use with third-party organizations to provide these and many other services.
• Card issuer is a financial organization that maintains a relationship with the cardholder (the authorized user of the payment card). It issues bank cards and contracts with its customers for the billing and payment of amounts used.
• Visa and MasterCard (The Associations) are membership-based companies, comprised of financial organizations that issue bank cards and also have relationships with card acceptors to accept their cards for payment of merchandise and services. The Associations offer payment card products, market their brands, and set up the rules and regulations regulating the participation of their members in their programs. They also happen to operate the biggest global payment processing platforms to make possible the flow of payments between banks. Crucially, and very much the flash point of the current dispute between retailer organizations and bank lobbies, the Associations also get to set the so-called interchange rates, which determine the amount of the fees issuers charge merchants for each transactions involving one of their cards. Under a proposal from the Federal Reserve, interchange fees for debit cards will be limited to 12 cents per transactions, beginning in July.