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3 Things To Know About Card Payment Processing

  • March 23, 2021

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credit card processing

Business is a lot more fulfilling when you get paid for what you provide. Billing for goods and services has become more difficult in the modern world than it used to be. Once upon a time, businesses could simply write up a paper invoice and hand it to their customers. Now, to accept credit or debit card payments online, several steps are required, including identity verification. Accepting and processing credit cards quickly is critical for any business to remain competitive.

Here are the vital things you need to know about card payment processing and why it matters. 

1. The Key Factors In Card Payment Processing

  • Cardholders

The term "cardholder" refers to someone who has a credit card from companies like Visa, MasterCard, or American Express. If you have a credit or debit card, you're likely already familiar with the cardholder role. Only a cardholder should have access to a bank-issued card, which can be used to pay for goods or services.

  • Merchant

A merchant is the party that sells goods or services to customers. They typically offer various payment methods – credit cards being one popular option. Many will also accept other payment forms such as PayPal or Alipay.

Some merchants use price comparison websites like the Cardswitcher website to get the best out of card processing and minimize fees. Such services help merchants gain the best value in the market. 

  • Merchant's Bank

A bank is sometimes referred to as a merchant bank because it develops and maintains merchant accounts. Banks help merchants to accept credit cards and assist with other aspects of a merchant's operations such as customer service.

Many merchants believe their payment system provider is more important than their acquiring bank. Banks' involvement is growing less prominent as online payment systems evolve. Merchant accounts are often contracted with third-party independent sales and service providers to conduct and monitor the day-to-day activities.

  • Cardholder Bank

A consumer bank issues credit cards. Some or all of the issuing banks are also members of the card associations, such as Visa and MasterCard. The issuing banks may reward their customers with points or incentives for every purchase they made using the issued credit card.  

The cardholder's responsibility is to pay their credit card issuer under the terms of their credit card agreement.

  • Card Associations

Visa and MasterCard aren’t banks nor do they issues credit or debit cards. Instead, they serve as a repository and transfer center for their respective card issuer. In addition to being the governing body for a community of financial institutions, businesses, ISOs (International Organization for Standardization), and MSPs (Managed Service Provider), they oversee the mutual association on card transactions and electronic payments. As a result, the word ‘associations’ was used to describe the cards' arrangement.

2. Payment Processors

A payment processor is a company that helps customers pay for their products. This, therefore, means that the payment processor communicates and routes information from your customer's credit or debit card to their bank. If your customer has enough money in their account, the transaction will proceed. This all happens in an instant, too.

Also, the payment processor verifies security features like ensuring that the customer's card data is accurate. Since fraud does happen on occasion, the financial transaction service provider's responsibility is to prevent it.

Furthermore, if a customer disputes a charge and can demonstrate that it was incorrect, the payment processor will refund the money. However, that doesn't mean they will do it for free. The customer will not be charged, but your company will. If you make a mistake when inputting or your customer returns an item, you have to pay the processor and credit the customer back in full.

3. Payment Gateways

The payment gateway connects the payment processor and the credit and debit card providers. It's an account linking your customer's financial statement with your payment processing account. You would be missing a significant part of a financial transaction by default. With a payment gateway, you would have all the details needed to receive payments, but you cannot move your money.

Merchant accounts and payment processors can be used together with a payment gateway. It’s entirely dependent on whether they outsource or conduct the work internally. If a third party is used, the third party completes the transaction and communicates with the credit card issuer.


At its simplest, this is how card payments work. With this brief guide, you’ll now have a greater understanding of all the entities involved in online transactions and operations stages.