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How credit card processors work?

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by Titank
I wonder if someone could explain how credit card processors work.

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commented by Octopuppy
As per 2005 statistics released, on line trade grew more by more than 22% over previous year. To accept credit cards for online trade, you need a merchant account. Getting a merchant account is not easy for all. It does involve a lot of money. To solve this issue, another fast emerging choice is use of third-party factoring services, also known as credit card processors. These processors process third party orders through their own merchant accounts. A good processor provides a secure environment for sale, ensure that supplier fulfills the obligations of trade and ensure payment for the sale to the trader.

The growth of criminal methods on the net to steal information and rob off wealth is growing at alarming rate. To help these issues, these processors provide very valuable service to newbie merchants who can not afford own merchant account and are quite instrumental in fraud prevention as well as to protect the consumer interest. A good credit card processor instills a strong sense of satisfaction among consumers to protect their interests and thus at a nominal cost boosts the revenue of on-line trader.

A good processor has to be very stringent as they are answerable to their own merchant account provider. Too many dissatisfied customers or traders can make them go out of business. I came across http://www.InternetMerchants.info, which very elaborately describes about various credit card processors. It would be a good idea to check from here.

One of such reputed and well established credit card processor is 2CheckOut (2CO), which is online distribution center for over 300,000 products and services. It provides a customizable transaction interface, multi-level customer service interaction, security features using SSL encryption network. One can get started immediately with no hassles of term contracts, additional equipment and can deal with any international suppliers, except for few prohibited products.

<b>What does it cost?</b>

Charges wise, it may not be cheapest one, but in terms of customers rating and appreciation, it definitely stands out. Initial set up charges include one time setup fees of $49. Besides, a commission of 5.5% per transaction and additional charges of $0.45 are levied. These transaction charges can go up on some classes of products. Charges for additional services are even higher. 2CheckOut supports 28 currencies for payment. For payments in local currency, if it is one of the supported currencies, wire option can be exercised at a cost of $5 per transfer. You can also choose to receive funds in US dollars at fees of $20 per transfer. These charges are definitely steep for small payments, but, 2CheckOut does give option to set a release level of payments and payments would be held till it reaches that level. Additionally, there are charges for stop payment of check and for charge backs.

However, being a processor with one of the lowest fraud rate, such steep rates also gel with market.

<b>Payment to Suppliers</b>

Generally all payments are made on 1st and 16th of the month, when all transactions that occur within 48 hours of this period will be processed, and payment remitted. However suppliers with sales volumes of over $1,000 a week qualify for weekly transfers.

<b>Types of Products</b>

A supplier is not allowed to sell certain types of goods as adult content, firearms, ammunition, tobacco products and multi-level marketing etc.

<b>Protecting Consumer Interest</b>

Protection of consumer interest is basically in own interest of a credit card processor to be able to stay in business. As the terms of agreement with 2CO, a supplier agrees to readdress all the customers complaints addressed to him directly or through 2CO, to the satisfaction of customer, proficiently and harmoniously.

To protect interests of sellers, it reserves the right to impose limits on purchase of products by specific buyers for any reason, in its sole discretion, as it may deem fit.

Payments on an account are made after 2CO's verification processes it also holds money from suppliers account to protect buyer's interest. Generally a 5% of the gross sales are kept as reserve for at least 90 days would be held and in some cases the Reserve is retained at a higher rate for period exceeding 90 days.

It has a provision for refund and charge back too. Either 2CO or supplier may ask for reversal of transaction leading to refund and return the funds to a customer's account. Credit card issuing bank may dispute the validity of transaction through the given credit card either on its own volition or on instruction of its clients and initiate reversal of funds transferred. This is called charge back. In such cases, where supplier feels victimized, he may opt to initiate a dispute and seek assistance of 2CO. 2CO would assist by way of providing any documentation that supplier may need and would charge a fee of $14 for each such dispute that supplier decides to contest.

2CO service has been rated as wonderful by most users. The only suggestions for improvement would be more in depth sales reports and the ability to have custom form fields on. It has reputation of being a company that enables businesses to receive funds from businesses and consumers internationally with zero fraud and at a much lower cost than traditional wire payments.

In fact if you are a victim of such credit card processor, you must immediately take steps, which have been very lucidly at http://www.InternetMerchants.info/complainant-guide.html. Do follow them; I am sure these would come handy.

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