Credit Card Fees and rates explained

The key to being a better business owner is not becoming an expert in every process in your company, but knowing just enough about each one to ensure efficient flow. An important part of every modern business is knowing how your payment system works. Accepting credit cards provides another avenue for you to get paid. Credit card processors are important to have beyond its main purpose of processing payments, making it an integral business decision. You don’t need to become an expert, but you’ll be able to make critical financial decisions better if you know how credit card processing works. If you want to know about credit card processing, but without all the details, then this guide is for you. In this guide, you’ll learn everything you need to know about credit card processing —and how to select the best option for your business.


Four Frequently Asked Questions About Credit Card Processing


1. What is a credit card processing company?

A credit card processing company has software that helps businesses accept credit and debit card transactions.

2. Who is involved with credit card processing?

Credit card processing works through several parties. These include issuing banks, acquiring banks, and the merchant services provider.

3. How much are credit card processing fees?

iCheckout 360 Merchant Processing pricing is straightforward and simple— 1.5% for Liquid Cash processing and credit cards as low as 1.5% for magstripe card transactions, chip card transactions, and contactless (NFC) payments. The fee for manually entered transactions varies based on industry. 

4. How can I accept credit card payments?

To accept credit card payments, you need a credit card reader. iCheckout 360 is available in Business 360 plans starting as low as $29 that provide POS Machines that accept EMV chip cards and NFC payments.


What is credit card processing?

Even though using a credit card at a business seems simple: a customer gives the salesperson their card, they swipe, then the money goes into the bank a day or so later, there’s a whole network that helps this process seem easy. (With iCheckout, when using Liquid Cash, it lands instantly for 1.5%). But backstage, there’s a lot more going on. From the time they swipe or tap the card, until the time the money is deposited into your bank account, there are a number of different parties involved. They all handle a crucial link in the chain of events. Knowing about how credit card processing works helps you understand where you might incur fees—and helps you make an informed decision about what credit card processing system makes the most sense for your business.

The parties involved in credit card processing

Say you’re a customer buying food from your favorite restaurant and you want to use your card. Let’s walk through the team of who’s involved in getting your money to the restaurant and eventually their food into your stomach. Here are the official names of the players involved in the transaction:

  • The cardholder: this is you with your credit card 
  • The credit card: that piece of plastic with your payment credentials on it (e.g.,Liquid Cash)
  • The merchant: the business accepting your credit card as payment for the food (insert your Favorite Restaurant’s name)
  • The point-of-sale system: the payment terminal used by the restaurant to accept your credit card payment (ex. iCheckout 360 POS )

Now, this is your starting lineup. Let’s look even closer at the rest of the team. There are a few additional parties represented on the credit card and in what’s happening during the transaction itself. They are:

  • The issuing bank
  • The acquiring bank
  • The merchant services provider

Let’s learn more about each of them:

What is an issuing bank?

The issuing bank is the financial institution that offers consumers payment cards and the accompanying line of credit. Issuing banks are the middlemen between the consumer and the credit card networks and are responsible for providing financial backup for transactions made with the card. For example, an issuing bank could be Chase or Bank of America.

What is an acquiring bank?

The acquiring bank (also known as a merchant bank or acquirer) is the bank that processes the transactions and ensures that a business receives their funds. The acquiring bank is there to  “acquire” the funds from somewhere. For example, an acquiring bank could be Commercial Bank. 

What is a merchant services provider?

A merchant services provider is a service that allows businesses to accept payments by credit card, debit card, and also NFC mobile wallet (like Liquid Cash, Apple Pay, Samsung Pay, and others). A merchant services account is established with an organization that has relationships with the issuing and acquiring banks. Your merchant services provider allows the processing of electronic payments when your consumers want to pay for things.

What is a payments gateway?

Say your favorite restaurant has an online store to sell things like your favorite sauce or merchandise . A payments gateway would be involved in processing the online credit card transactions. A payments gateway connects the transfer of information between a payment portal (like a business’s website) and the acquiring bank (remember the restaurant is acquiring funds, so this is its bank). It then encrypts the card data to make sure everything is secure throughout the process.


Merchant credit card processing


How do you get a merchant services account?

Before, if you wanted to start processing payments, you’d apply for a merchant services account at a bank, which can be a long and tedious process. After you were approved, you would then associate your point-of-sale (POS) system with your merchant account and only then could start accepting payments.

But with iCheckout, using Liquid Cash payments, things are much simpler. Liquid Cash itself has a merchant services account with acquiring banks. We are basically one giant merchant services account for all businesses that use Liquid Cash.


What is a high-risk merchant services account?

When it comes to credit card processing, some types of businesses may be considered “high risk.” High-risk merchant services accounts will often have greater fees and stricter terms. Institutions can also deny high-risk merchants an account. There’s no general rule, but there are certain types of businesses that tend to be characterized as high-risk merchants more than others. These include businesses that sell goods or services that border on illegal, buyers’ or membership clubs, credit counseling or repair services, and businesses that engage in questionable marketing tactics. Read Liquid Cash’s user agreement and terms of service for more information.


How does credit card processing work?

Now that we’ve learned about all the parties involved in credit card processing, we’ll walk through how everything actually works. Let’s pretend you’re a consumer going to buy some food at your favorite restaurant. You give the waitress our card and she processes it. What happens next?

Here is how a credit card is processed with Liquid Cash:


When a merchant swipes or taps a customer’s card, the request is submitted to Liquid Cash. We send the transaction to the restaurant’s acquiring bank, which then sends it to your issuing bank for authorization. The issuing bank checks for sufficient funds. It also runs the transaction through multiple fraud models to determine if the transaction is safe (which protects the cardholder and the issuing bank).


When it comes to credit card processing, there are a few different ways merchants can run their transactions. The main type is batch payment processing. Merchants accumulate many credit card transactions throughout the day,  waiting to be settled. Batch credit card processing is the practice of a merchant processing all of its authorized credit card transactions for the day after the close of the business day, or at a time determined by the credit card processor. It’s called batching because payments are sent in a large group or in “batches”, to be processed.

Funding (aka settlement)

The funding (or settlement) step is when businesses get the money from a credit card sale deposited into their account. iCheckout 360’s deposit schedule is usually within one to two business days. But if you accept Liquid Cash, you can get your money instantly—24/7 for 1.5%. 


Credit card processing fees

Often, companies have a ton of hidden fees when it comes to credit card processing. Usually written in small, legal jargon, these fees can add up quickly without you even knowing they exist. These can include transactional fees, flat fees (like PCI fees, annual fees, early termination fees, and monthly minimum fees), and incidental fees (like chargebacks or verification services). Liquid Cash has none of these.

iCheckout 360 Merchant Processing pricing is straightforward —we have no hidden fees. It’s just 1.5% for Liquid Cash and for credit cards as low as 1.5% for magstripe card transactions, chip card transactions, and contactless (NFC) payments. The fee for manually entered transactions varies based on industry. These fees apply to all business types, including nonprofit organizations.


Accepting credit cards

What is a credit card machine?

After you choose your credit card processor, you may need to get a new piece of technology to process credit cards. A payment terminal, aka a point of sale (POS) is a device that interfaces with payment cards to make electronic fund transfers. Modern point-of-sale systems also accept mobile NFC payments like Liquid Cash, Apple Pay, and Samsung Pay.

Credit card machine prices

Some credit card machines can cost you hundreds of dollars. iCheckout 360 has Business Plans starting at $29. Our contactless and chip reader accepts EMV chip cards and NFC payments.

Mobile credit card machines

A lot of point-of-sale systems are outdated in terms of style. They are usually big and bulky. iCheckout 360 POS products are aesthetically pleasing and completely mobile. They’re designed to match the stylish look on your countertop when you’re selling at your brick-and-mortar shop, and easily fit in your pocket if you’re selling on the go.

See what POS fits your business. 

How to set up credit card processing for your small business?

If you’re new to all this, or you’re just starting your first business, getting your financial processes can seem like an overwhelming task. Luckily, that doesn’t have to be the case. Nowadays, with tools like iCheckout 360,  it’s very easy to be ready to accept credit cards at your business. We believe in being accessible, so all you need is your mobile device. iCheckout 360 also can work directly with the device you already have to accept credit card payments and NFC payments like our own Liquid Cash.


Here’s a step-by-step guide for how to start accepting payments:

  1. Choose a Business 360 Plan (You instantly can start accepting Liquid Cash)
  2. Order your iCheckout 360 POS and tell us where to mail it.
  3. Set-up your iCheckout 360 POS Software – It accepts Liquid Cash, no extra set-up required
  4. For Credit Card Processing, apply for Processing and upon Approval, receive your Merchant ID
  5. Add your Merchant ID to the POS Software
  6. Start taking Credit Card Payments 

How to process credit cards

Credit cards are processed differently based on the type of card. Magstripe cards are swiped horizontally through the credit card reader. EMV chip cards are inserted vertically into the payment reader for the entire transaction. You can identify an EMV card by its tiny chip at the bottom of the card.


What type of credit cards should you accept?

The magnetic strip card paved the way for electronic payment terminals and chip cards. It offered more security (at the time) and real-time authorization while making it easier for businesses of all sizes to accept cards, instead of writing a customer’s card information down by hand. However, technology has evolved and created a more secure card which is why it’s important that you set your business up to accept EMV chip cards as soon as possible. EMV chip cards are far more secure than magstripe cards. Magstripe cards are now relatively easy to counterfeit and have sent fraud rates in the United States to the moon. EMV chip cards have enhanced security features that protect against cloning and counterfeiting. To help curb fraud, many U.S. banks are giving their consumers EMV chip cards to help protect them. Soon, most people will have them.

Another reason you should accept EMV chip cards at your business is due to the “liability shift”. Under the liability shift (which went into effect in October 2015), businesses that aren’t set up to accept EMV chip cards can now be on the hook for certain types of fraudulent transactions, which was the bank’s responsibility before. So if you want to protect your business from charges and fraudulent chargebacks, it should be high on your list of priorities to get a point-of-sale system that is EMV compliant.

What other types of payments should you accept?

In addition to EMV chip cards, it’s a good idea to also accept NFC mobile payments like Liquid Cash, Apple Pay, Android Pay, and Samsung Pay. These new, modern payment methods are just as secure as EMV but are a far better customer experience. EMV chip cards can take several seconds to process, but NFC mobile payments are instantaneous. They’re also becoming one of the most popular methods of payment for millennials and younger. According to a survey conducted by payment solutions provider Blackhawk Network, three out of five U.S. smartphone users have a mobile wallet. Capitalizing on this will take your business to the next level.