Pointers for understanding payment processing
When it comes to credit card payment processing, there’s a lot to understand so you can make sure you’re getting your money’s worth—and keeping your business safe and secure. Here are some key points to know about merchant processing, accepting EMV chip debit and credit cards, as well as magnetic stripe cards and gift cards.
Processing magnetic stripe debit and credit cards
Magnetic stripe debit cards and credit cards have been around for years—and they’ve been the standard in the United States up until the past year or so. To process magnetic stripe cards, you’ll need a card reader through which your sales associate will swipe the card to gather the payment data. Or, you may use a customer-facing PIN pad that allows the customer to swipe his or her own card to complete the transaction. Either way, once the card has been swiped, the payment information is sent through the network to check for availability of funds in the bank account or credit card account. If there are funds available and the card seems to be legitimate, an authorization is sent back to your terminal. The customer then signs for his or her transaction, and your sales associate gives the customer a receipt.
Once your business has a batch of authorized transactions ready to be sent for settlement (usually at the end of each business day), you will transmit batch of the authorizations. Note that depending on your system setup, this process may occur manually. Usually within a few business days, you will receive the funds for the credit and debit card payments—less fees and interchange—in your bank account.
Processing EMV chip debit and credit cards
EMV chip cards are a newer type of payment card that is quickly becoming standard in the U.S. EMV cards have been in use in Europe, the Middle East and other areas of the world for many years. These cards are embedded with a computer chip in them, which generates unique data for each and every transaction. This way, if a fraudster intercepts EMV processing data, that data cannot be used to successfully initiate other, fraudulent transactions. (In the case of magnetic stripe cards, the exact same payment data is transmitted each time and can, therefore, be used fairly easily in fraudulent transactions.)
To accept an EMV chip card, your business needs to be equipped with an EMV card reader at your credit card terminal. At the time of the transaction, the customer will insert, or "dip", the card into the EMV reader, where it will stay for the duration of the transaction. The customer-facing PIN pad will alert your customer when it’s safe for him or her to remove the payment card. The authorization and settlement process for EMV chip cards is much the same as it is for traditional magnetic stripe cards.
Accepting gift cards
A gift card program is a great way to add a new revenue stream to your business and bring your brand to new consumers. Gift cards are generally accepted in much the same way as other magnetic stripe payment cards. Your sales associate will swipe the gift card on the point-of-sale (POS) terminal or your customer will swipe the gift card him or herself right on the PIN pad.