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Credit Card Processing
Having secure payment processing services for your ecommerce business is essential to your success. For most businesses, credit cards will be the most frequent form of payment. In fact approximately 95 percent of all on-line consumer transactions are done by credit card.
To begin accepting payments by credit cards, you will be required to set up a
merchant account (search). Note that not all merchant accounts are suitable for Internet credit card processing, so be sure the one you get is.
Attaining a merchant account can be hard for a small business, especially if it is a home based business or a mail order business. Reputable banks and financial institutions limit the risk to themselves by being selective about which businesses they will give merchant accounts to. Their concern is that at an at-risk business will not be able to handle any charge backs to the account. If a merchant account can't handle the charge back then the institution that processed the credit card will be forced to absorb the loss. Home based and mail order businesses are perceived as being high risk businesses. There are other options then the banks to obtain a merchant account. You may be able to find private companies who are less selective in whom they give merchant accounts to, but they insure against the risks they run by charging much higher rates.
The typical sequence of events for online credit card processing is as follows:
- The customer enters the credit details onto a secure online form
or SSL (search) , which is usually part of the shopping-cart system provided by the web site.
- The details are forwarded from the credit card processing system on the web site to the Credit Card Association (e.g. Visa or MasterCard) via a Payment Processing Network.
- The transaction is either authorized or declined, depending on the state of the customer's credit limit. If it is authorized, funds are reserved to cover the transaction.
- The results are communicated to the merchant. After the goods ship, the merchant can issue a "Capture Request" which is a request for the final stage where the funds transfer takes place from the Credit Card Association to the merchant.
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