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| How does the merchant get paid through credit cards? |
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| Written by Cheryl L. True |
| Wednesday, 29 April 2009 08:12 |
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The merchant settles their point-of-sale terminal or cash register and totals their daily sales receivables. This also means performing a function within the point-of-sale terminal to total, and then submit, the approved credit card payments to their Acquiring Bank. The Acquiring Bank receives all authorized transactions from the Merchant terminals and submits them to the third-party processor for clearing. The processor receives the data and formats clearing files for both Card Associations and submits settlement data to them on a daily basis. The Card Associations perform a financial reconciliation, which calculates the total debits for each Issuing Bank -- by BIN -- and the total payments or credits for each Acquiring Bank /Merchant. The totals for each Issuer and Acquirer are then posted to the applicable bank's clearing accounts, with Visa and MasterCard, and reports identifying individual transactions for that day are provided to the third-party processor for their respective banks. The Issuer receives a daily report identifying all transactions posted to cardholder accounts, and the Acquirer receives a report identifying which Merchants need to be paid for sales completed the day before. The Acquiring bank posts those sales to the Merchant's bank account, minus commissions and fees. Cardholder debits are typically posted by the Issuer third-party processor, which also prints the monthly cardholder statements identifying the merchant transactions. Credit card limits and balances are adjusted once the transactions are posted by the third-party processor. The fees charged by the Card Associations to the Issuers and Acquirers are known as interchange fees, and range between 1 percent and 2.2 percent of the card transaction amount, plus transaction fees. The general rule is the Acquirer pays the Issuer the interchange fees required to process the sales transactions. The Card Associations settle to both the Issuer and the Acquirer based on the fees associated with the transaction type, the card product type and the merchant transaction presentment. An e-commerce or Internet transaction replaces the point-of-sale terminal with a certified Payment Gateway Provider; but from here on, the process works fundamentally the same. Internet merchants transmit credit card transactions to their Payment Gateway Provider, which formats the transaction for submission either to the Acquirer third-party processor or the Card Associations, directly. From that point on, the process is identical for authorization of transactions. Settlement is processed by the Payment Gateway Provider at the end of each day, in the same manner as a point-of-sale terminal, in that files of approved online Merchant transactions are generated and sent to the Acquirer's third-party processor for onward settlement by the Card Associations to the banks. No matter what front-end system or device is used to acquire the card transaction, the back-end authorization and settlement process remains the same on a worldwide basis. For quick and easy accounting solutions to manage your business, use quickbook 2009. About the Author: Cheryl L. True is a Manila-based freelance writer who writes on a variety of topics. Kindly provided by MoneyHunter.org You are welcome to use this article on your own website, if you include the link just before this text. |
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