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Credit Card Processing

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Credit card processing is the name of the system in which you can use credit cards for making your financial transactions. When a credit card is swiped, the amount is withdrawn from the account of the bank which issues the credit card and is transferred to the seller's account. You have to then make the payments to the credit card issuer bank that paid for your transaction. This entire process is known as credit card processing. Big names in the credit card world include MasterCard and VISA. Credit card processing is very important in the financial world of today where most people buy things on credit and pay it back later.

Major credit card providers are Diner's Club, Discover, MasterCard, VISA, etc. They all provide business accounts. Each of these banks has a list of their own rules which need to be strictly adhered to. This also applies to business debit cards.

How it Works

When you apply for a credit card, the credit card company will provide the finance for you and you will get a notification that the transaction has taken place with your card. For each transaction, some fees may be levied. Once the notification is obtained, the funds are transferred to the merchant account by the issuing bank.


If credit cards are handled well, they could actually spell savings for a business account. There are various kinds of discounts and offers that are provided to people who use credit cards. A discount with a credit card, also known as cash back, could be from one to three percent. In some cases, the discounts could be higher depending on the manner in which the credit card is used. For example, if the credit card number is keyed in rather than swiped, the discounts could be more.


Credit card processing entails considerable amounts of fees. These fees are the primary sources of income for the credit card providers. These are the costs that you will incur when you process credit cards, but there is no fixed value of the costs. Different credit card providers have different ways of levying the fees.


It is important to decide carefully when to begin using a credit card for the business. People may decide to begin using credit cards right from the start of the business or later on. Most people would not want to use a credit card for their business purchases at all. However, people who use it mostly do so for the convenience of not having to transact in cash. Also, by using credit cards, people can get some interesting benefits such as frequent flier miles and other rewards, which could be very profitable for businesspersons.

If the business credit card is required right from the start of the business, then a merchant account will need to be opened with the issuing bank. There are also some fees to be paid when the account is opened.

Last Updated: January 19, 2012
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