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The Inner Workings of Credit Card Processing Rates

April 26, 2019


The credit card processing fee is the cost merchants are charged to process credit card payments – which sounds obvious, but there’s a lot more to them than meets the eye. If you’re not careful, your business could wind up spending thousands of dollars on processing fees. Here’s what you need to know about the basics of credit card processing fees.

What is the credit card payment process?

The customer makes a purchase from the merchant using their credit card. The merchant runs the sale through the payment gateway, which sends the credit card payment to the credit card processor. The credit card processor submits the payment to the credit card association and then finally to the credit card issuing bank. These are the parties involved in the whole process:

  • Merchant account provider: This is the company that manages the actual credit card processing, usually with the help of an acquiring bank. The merchant account provider’s role usually overlaps with the credit card processor.
  • Payment gateway: This is the portal that routes transactions to the credit card processor, usually for online shopping carts.
  • Credit card processor: Also known as acquiring banks, the processor acts as the go-between for the merchants and credit card associations and passes information and authorization requests to the merchants to complete their business transactions.
  • Credit card association: This is the company that sets the rules for the credit card payment process and also creates credit cards, such as Visa, Mastercard and American Express. Some credit card associations also function as issuing banks by developing and issuing their own cards, such as Discover and American Express.
  • Credit card issuing bank: This is the financial institution that issues the credit cards, such as Chase, Wells Fargo and Citi.

Editor’s note: Looking for information on credit card processors? Use

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