How Retail Credit Card Processing Works

Last Updated on May 25, 2024


For retailers who would like to accept credit card payments it is important to understand how retail credit card processing works. Regardless of the type or size of your business, retail credit card process allows you the opportunity to offer convenient payments to customers while benefitting from a fast payment process.

Retail Credit Card Processing

To get started with this process you must first apply for a merchant account. The options for such accounts include credit card companies and banks. After the approval process, which typically involves a credit check, you will then be ready to begin accepting sales via credit card. A credit card terminal will be used for accepting such payments. The customer will swipe their card at the terminal at your place of business so that the necessary information can be collected and then forwarded to your credit card merchant account.

The credit card processing company will accept the required information from the customer’s credit card and then forward that information to the issuer of the card or the bank in order for the transaction to be authorized. At this point, the bank will make a determination regarding whether the card has sufficient available funds to allow the purchase. The customer’s transaction will then be accepted or rejected based on that determination. This check is important because it not only ensures business owners do not lose protection on sales, but also allows an instantaneous check regarding whether credit cards have been reported stolen or lost in order to protect business owners as well as consumers.

If the transaction is approved, a valid response will then be transmitted back to the processing company. That information will then be sent back to the terminal at your place of business. All of this information is transmitted electronically and typically can be completed within just a few seconds. Provided there are no problems with the payment from the credit card holder, the credit card issuer or bank will deposit the amount of the sale into your merchant account within two business days from the date of transaction. There may be a hold fee applied in the event there is a dispute, also known as a charge back. Once the payment has been cleared, this hold will then be released to you as the retailer.

 Credit Card Processing Equipment and Hardware

Some equipment and hardware is necessary in order for business owners to utilize a retail merchant account. This equipment and hardware can be leased or purchased and includes a terminal that can be used for swiping credit cards as well as a keypad. We always recommend that you find a merchant service company such as Merchant Warehouse that offers terminals for purchase at cost, avoid leasing machines at all costs as you will likely recoup your expenses within a few months buy purchasing the terminal outright. Business owners will also need a telephone jack access. Some business owners do elect to integrate their point-of-sale systems with their credit card terminals for increased simplicity during the checkout process. POS software can be used along with the retail merchant account in order to streamline record-keeping and increase efficiency.

When choosing a retail merchant account be sure to research your various options and choose a credit card processing company with a good reputation as well as one that offers the latest technology. It should be noted that retail credit card processing does differ from some other types of merchant accounts, such as an online merchant account. Online merchant accounts have become increasingly common and popular in the last few years. Typically, an online merchant account does not involve a terminal where the card is swiped at your business location. Instead, all information is transmitted wirelessly or online. While this option may be convenient for many online businesses, including e-commerce, it is typically not the best option for retailers where transactions take place at point-of-sale.

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