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Understanding Retailer Credit Card Processing and How It Can Help Your Business

Understanding Retailer Credit Card Processing and How It Can Help Your Business
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From Starbucks to Shake Shack, a growing number of businesses have floated the idea of doing away with cash transactions altogether, media reports have observed. But given that a significant number of U.S. businesses still do not accept credit cards at all, perhaps a more relevant conversation to be having is what continues to hold some businesses back from accepting credit card payments?

For many retailers, confusion and misinformation still abounds about the process of and benefits associated with accepting credit cards. If you’re among those businesses still shying away from card payments, keep reading: this post will simplify retailer credit card processing and explain how accepting credit cards can provide some important business benefits.

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Retailer Credit Card Processing 101

The invisible underlying processes involved in getting paid for a credit card transaction might make the nature of receiving money this way seem excessively complicated – especially if you’re used to cash and checks. While credit card payments are indeed more complex than those other, more familiar, payment forms, understanding how credit card payments work and the various players involved can help to illuminate some of the opacity.

For starters, let’s look at who is involved in a credit card transaction. On the payor side, there is your customer and the issuing bank, which is the financial establishment that issued their credit card and will forward the funds associated with the transaction. Your business is the payee, and you will receive your money via the acquiring bank that works with your Merchant Service Provider, which provides the merchant account.

But credit card transactions also involve some silent middlemen and equipment providers, which help to communicate between the two banks involved. For example, Payment Processors maintain the computer networks that transmit transaction information, Payment Gateways facilitate the transfer of that information for online transactions, and Card Associations set the rules by which it all works. Businesses also require a way to securely collect credit card information, whether online or via a credit card reader.

During a credit card transaction, each of these players has a role in communicating information about the transaction and verification information provided, including PIN and signature details and validating AVS and CVV information. Processing fees for credit card transactions are determined by a number of factors, including how the card is run and other variables related to fraud risk, as well as the credit card brand, provider markup fees, the type of rate plan you have, and other considerations.

It’s also worth noting that some credit card terminals can help to reduce the cost and complexity of transactions by keeping track of various credit card companies’ rules and prompting cashiers based on the requirements of a specific transaction, enabling recurring payments, and other helpful benefits and features.

How Accepting Credit Cards Can Boost Your Retail Business

Money is money, right? In other words – the type of payments you accept shouldn’t really matter, it’s about making the sale in the first place, yes?


As the debate around cashless payments reveals, accepting credit cards has significant implications for both you and your customers. For starters, though proponents of cashless payments argue that credit card transactions are often quicker – allowing cashiers to ring up more customers in less time – there are some even more compelling business arguments to be made for accepting credit card payments. (That said, some credit card processors can get transaction processing times down to just a few seconds - that's way more efficient than counting out change.)

But the greatest potential benefit in accepting credit cards is that you won’t lose out on sales from customers who can’t pay you any other way. The number of Americans who don’t carry cash is slowly growing – according to the Pew Research Center, about three in 10 Americans say they don’t buy anything in a typical week using cash, while the number of people who reported making all or nearly all of their weekly purchases with cash decreased from 24 percent to 18 percent since 2015.

If you don’t accept credit card payments, you’ll have to turn away the one-third of adults under the age of 50, and 23 percent aged 50 and older who say they make no cash payments at all in a typical week, according to the Pew survey.

And even if you do make the sale, you could be ringing in less at the register. Data from U.S. Bank shows that when people do carry cash, they carry less of it than in the past: nearly half of U.S. consumers keep less than $20 in their wallet, while more than three-quarters of American adults carry less than $50. Furthermore, while not having cash on hand can be a factor, psychology plays a role in differing transaction values between payment forms too: in a phenomenon known as the credit card premium, research shows people are often willing to pay more when using a credit card, and are more likely to recall a product’s benefits – and less likely to recall its cost – than their cash-paying counterparts. In other words, accepting credit cards might not only help you grow sales, but you might improve customer satisfaction at the same time.

Learn about evolving your retailer credit card processing.


Are you still dragging your heels on accepting credit card payments? What is the top factor that is currently holding you back? Let us know your biggest concern or confusion about retailer credit card processing.

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PayJunction Team

Content written by the PayJunction team encompasses broad business topics including marketing, brick-and-mortar business operations and management.

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