Largest Credit Card Processing Companies and How They Work
The Ultimate Guide for Small Business Owners
Hello friends, in today’s day and age, accepting credit cards has become the norm for small business owners like you and me. But with so many options available, it can be overwhelming to choose the right credit card processing company for your business. In this article, we will explore the largest credit card processing companies and how they work, to help you make an informed decision for your small business.
What is Credit Card Processing?
Before we dive into the companies, let’s first understand what credit card processing entails. Credit card processing involves a lot of steps but is broken down into three main stages: authorization, batching, and funding.
During the authorization stage, the customer’s credit card is checked for fraud or any other issues. Once authorized, the transaction is added to the batch for processing, typically at the end of the business day. Lastly, the funds from the processed batch are deposited into the small business owner’s account, usually within 1-3 business days.
Largest Credit Card Processing Companies
Let’s begin with the biggest credit card processing companies in the world – JP Morgan Chase, Bank of America, and Citigroup. These companies are giants in the industry, serving millions of customers worldwide.
JP Morgan Chase, the largest credit card issuer in the US, offers a range of credit card processing services under the Chase Paymentech brand. Bank of America Merchant Services is another major player, providing payment processing solutions for small and large businesses. Citigroup’s Citi Merchant Services division provides innovative solutions for small businesses as well.
Other notable companies in the industry include First Data, Square, and PayPal. First Data processes over 40 billion transactions annually and serves 6 million merchants globally. Square, known for its easy-to-use payment processing tools, caters to small businesses in particular. Meanwhile, PayPal offers both online and in-store credit card processing options for merchants.
How Credit Card Processing Works
Now that we’ve briefly introduced the largest credit card processing companies, let’s dive into how these companies operate.
At their core, credit card processing companies act as intermediaries between the merchant, the customer, and the issuer. The following steps give a gist of how the process works:
1. The customer hands over their credit card to the merchant and requests to make a payment
2. The merchant swipes or enters the customer’s card details into a secure payment terminal
3. The payment terminal sends the transaction to the credit card processing company
4. The credit card processing company checks for fraud, validates the payment, and sends the transaction to the issuing bank for approval
5. The issuing bank approves or denies the payment and sends a response back to the credit card processing company.
6. The credit card processing company informs the merchant of the transaction’s approval or denial.
7. The merchant waits for the funds to be deposited into their account.
Of course, there are many more steps and regulations involved during credit card processing. The specifics vary depending on the credit card processing company and the merchant’s industry.
Credit Card Processing Fees
One of the major concerns for small business owners is the cost of credit card processing. Most credit card processing companies charge a fee for their services, which typically includes a percentage of the transaction amount, as well as a fixed fee per transaction.
Merchant service providers may also charge additional fees such as statement fees, chargeback fees, and termination fees. Some companies may waive certain fees if certain conditions are met, such as processing over a certain amount or using a specific payment terminal.
Choosing a Credit Card Processing Company
Choosing a credit card processing company can be overwhelming, but here are a few factors to consider when making a decision:
1. Fees – Compare the fees charged by different credit card processing companies to determine what works best for your business.
2. Payment options – Some credit card processing companies only allow in-store payments, while others support online payments as well.
3. Integration – Consider whether the credit card processing company integrates with your current point-of-sale system or if you need to make changes.
4. Customer support – Choose a company that offers excellent customer support to address any issues or concerns you may have.
5. Security – Make sure the credit card processing company you choose complies with standard security measures.
Choosing a credit card processing company can be a challenging decision for small business owners. However, understanding how credit card processing works and learning about the largest companies in the industry can make the decision-making process easier. Consider the fees, payment options, integration, customer support, and security when choosing the right company for your business. Thank you for reading and until next time, happy processing!
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