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.