The Anatomy of a Credit Card Transaction

The Anatomy Of A CREDIT CARD TRANSACTION * VISA DISCOVER VISA CREDIT CARD ASSOCIATIONS ACQUIRING BANKS Aka acquirers: ISSUING BANKS Also known as processors, these institutions act as messengers between merchants and credit card These are the companies that create the credit cards, like Visa, Discover MasterCard, and American Express. These are the guys These are the financial institutions that issue the credit cards, like Chase, Citi, and Wells Fargo. Some card associations take on the role of a bank as well, developing and issuing their own cards. Examples include Discover and American Express. associations. They pass batch information and authorization requests along so that merchants can complete transactions in their businesses. A merchant may encounter several acquirers for one transaction. that set the rules. PAYMENT GATEWAYS: MERCHANT ACCOUNT PROVIDERS: These are companies that manage credit card processing (e.g. sales, support, etc.), usually through the help of an acquirer. They could be financial institutions, independent sales organizations, or double-duty acquirers, depending on the situation. These are special portals that route transactions to an acquirer, usually in PAY NOW VISA the case of an online shopping cart. CARD IS PRESENT DURING TRANSACTION CARD IS NOT PRESENT DURING TRANSACTION CARD PRESENT CARD NOT PRESENT (2 $100 $100 Customer's Card is Keyed In Customer wants to Customer wants to Customer's make a $100 purchase. make a $100 purchase. card is swiped. An average of 2% (after taxes) of the payment is taken as 2% an interchange fee. An average of 2.5% (after taxes) of the payment is taken as an interchange fee. :2.5% $1.75 $2.19 Most of this money goes to the card issuing bank (about $1.75). Most of this money goes to the card issuing bank (about $2.19). A smaller percentage A smaller percentage goes to the credit card company (about $0.18). goes to the credit card company $0.18 $0.22 (about $0.22) l$0.05 $0.07 $0.07 An even smaller percentage goes to the payment processing company (about $0.05). An even smaller percentage goes to the payment processing company (about $0.07). $0.02 $0.04 o Finally, the bank the money is being moved to also takes a small The bank the money is being moved to also takes a small cut (about $0.04). cut (about $0.02). Finally., an additional gateway fee is taken for online transactions (an average of $0.10). $0.10 o 98% Merchant only gets 98% of the price of the good. 97%-97.5% Merchant only gets 97%-97.5% of the price of the good. As a Merchant, make sure YOU UNDERSTAND YOUR TRANSACTION FEES VISA Many credit card processors charge you more to use certain credit cards, so you don't always get the best rates. ProPay offers a single, blended rate regardless of the card type so you know you're not getting blindsided with card Mastercard KEEP YOUR FEES LOW WITH DISCOVER PROPAY PROPAY MERICAN EXPRES VISA downgrades and hidden fees. Sources: http://en.wikipedia.org/wiki/Interchange_fee http://www.merchantmaverick.com/the-complete-guide-to-credit-card-processing-rates-and-fees/ A TSYS° Company THIS IS JUST FOR REFERENCE, TO HELP UNDERSTAND THE PROCESS BETTER. For one example of how interchange functions, imagine a consumer making a $100 purchase with a credit card. For that $100 item, the retailer would get approximately $98. The remaining $2, known as the merchant discount[11] and fees, gets divided up. About $1.75 would go to the card issuing bank (defined as interchange), $0.18 would go to visa or mastercard association (defined as assessments), and the remaining $0.07 would go to the retailer's merchant account provider. (the $0.07 would be split if the merchant account provider is different than the acquiring bank) www.propay.com > M LO