Credit Card Processing « Credit Card Processing Blog

Posts Tagged ‘Credit Card Processing’

Credit Card Processing Fees – ridiculously expensive or surprisingly low and productive?

Tuesday, September 8th, 2009

One thing for sure, no one stays indifferent when credit card processing fees are at stake. Bloggers and others often write about credit card processing in general and interchange fees in specific, usually to argue the rate charged and the need for such.

Many attack the credit card processing industry and state that credit card processing fees increase the cost of goods and services to the end consumer, as merchants embed such in the final prices charged from shoppers. Others, failing to understand the difference between credit cards and debit cards often compare credit card processing fees with those of debit cards only to realize that the latter is materially lower than the former, which helps them conclude the credit card processing fees are ridiculously expensive, non productive and increase overall costs.

“The truth is out there”, as well stated by Fox Mulder, yet is somewhat less obvious than it sounds… Credit card processing fees in general and interchange fees in specific are actually used for a good cause. When performing a credit card processing transaction, the credit risk embedded within the shopping transaction is transferred from the merchant to the issuing bank.

The issuing bank receives the interchange fees to manage this risk. As banks are better equipped to manage credit risks than merchants, this risk transfer lowers the historical costs previously incurred by the merchants. Cutting collection and bad debt costs out of the equation, actually lowers the costs of running a business and enables merchants to lower the final prices of goods and services.

This statement remains true as long as the merchant cuts the right deal with the right acquiring bank…

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

Tags: Credit Card Processing
Posted in Credit Card Processing, Domestic Merchant Account | 4 Comments »

Credit Card Processing is Magic

Monday, August 10th, 2009

Nowadays, when kids are using plastic debit cards, loaded with their weekly allowances by their parents, people are taking credit card processing for granted, yet that wasn’t always the case.

Credit cards were invented less than a hundred years ago, and initially only used by individual firms and their customers. The first ones adopting this technique were the big oil companies. Still, the cards were only accepted by the issuing company and in very limited locations.

The first break through occurred around half a century ago, when the first bank card was issued. This ‘bank card’ could only be used by customers who had an account with the first issuing bank. These fortunate people could purchase goods from merchants maintaining an account with same bank. A very limited and local use, no doubt, yet the first break through enabling one to ’shop around’ using credit card processing.

We’ve gone a long way, and today each and every one of us has opened an account with an issuing bank and got that piece of plastic. All the merchants you can think of, around the world, have signed up for merchant accounts with acquiring banks and know what to do when presented with same cards.

All of us, though most of us tend not to think about it, are connected with binding legal agreements, which enable us to pull out our card, basically everywhere around the globe, in person or on the internet, and purchase any product we can think of, as long as our credit limit enables it…