Credit card processing can be confusing—
here’s everything you need to know

Running a business today means you need a credit card processor that is quick, reliable, and secure. Choosing the right one isn’t always simple. Many business owners face challenges with hidden fees, unclear terms, and systems that won’t integrate with their business.

If you choose the wrong credit card processor, it can slow down checkouts, lead to frustrated customers, and result in lost revenue. That’s why understanding how credit card processing works is so important.

This guide will walk you through the basics of credit card processing, so you know exactly who to trust.

Understanding Credit Card Processing

What is credit card processing?

When you think of a credit card transaction, you may think of a scenario like this: a customer wants to purchase something from your business, so they use their credit card. Once the customer swipes, taps, or inserts their credit card, a whole system unfolds behind the scenes.

There are multiple participants involved in the transaction, each with an important role in transferring the money from your customer's account to your bank account.

We’ll take a closer look at the role each participant plays and explain how understanding credit card processing gives your business an advantage over your competitors. As a credit card processing company, Elavon has years of experience with credit card transactions and can help your business understand how each step works.

Why is credit card processing important for your business?

Without credit card processing, your customers wouldn’t be able to purchase your goods or services, and you could lose revenue. Rather than losing a sale when customers don’t have cash, you can make payments easy with a credit card processor. It can boost sales, expand your business’s reach with online and mobile payments, and allow for secure payment options.

Additionally, accepting credit cards means your customers can pay for larger purchases, so you can complete more sales.

Who’s involved in credit card processing?

Every transaction made requires an entire chain of participants, ensuring the process is seamless. Here’s every participant involved:

• Cardholder: A customer who uses a credit or debit card at checkout.
• Credit card: A card with payment credentials used to make a purchase. Each credit card has a unique EMV chip embedded on the card, adding additional transaction security and reducing fraudulent transactions.
• Merchant: A business (like yours) that accepts credit cards as a form of payment.
• POS: The point-of-sale system used by the merchant (your business) to accept credit card payments.
• Issuing bank: Provides the customer with their credit card and an accompanying line of credit. Examples include U.S. Bank and BMO*.
• Acquiring bank: This is your credit card processor's banking relationship, which will collect the card transaction information from your POS system and route the transaction through the card network and the card issuing bank for authorization, settlement and funding to your business's depository bank.
• Card network: This is the card brand “middleman” (like Visa, Mastercard, and Discover) that manages the network to authorize, settle and eventually direct your customer's payment request to your business. It goes from your credit card processor and the acquiring bank to your customer’s card issuing bank. Then, it returns with either an approval or a decline.
• Merchant services provider: The company that may provide your business the tools and services to accept payments. They put everything in motion, so each step in the transaction process connects properly between banks, card networks, and your POS system. 
• Payment gateways: Facilitate the transfer of payment information between a payment portal, such as a business website and the credit card processor and the acquiring bank.

Without every participant, transactions would fail, and you would lose sales. See how Elavon’s merchant services and payment gateways work.

How are credit cards processed? 

What are other common payment methods?

Although credit cards are one of the most common forms of payment*, there are other ways customers can pay. They expect your business to accept multiple payment options. This ensures you make more sales while keeping customers happy.

Other common payment options include:

• Debit cards: Card type that pulls funds straight from your customer’s checking account.
• Digital wallets: Mobile payment apps that allow customers to pay in-person or online without presenting a physical card. Examples include Apple Pay, Google Pay, and Paze. 
• Bank transfers: Seamless payments from one bank account to another.
• POS Lending: Installment plans that allow customers to pay for larger purchases over time, like U.S. Bank Avvance, with the merchant receiving the full amount of the customers' payments.
• Cash/checks: Traditional ways for customers to pay directly from their bank account. 
  
• Gift cards: Prepaid cards that have a stored value to be redeemed at specific store(s)

Types of payment acceptance

Offering these three types of credit card acceptance options helps your business meet customers’ expectations and makes it easier for them to buy from you. The three types include in-person, online, and mobile payments.

Payment types vary in how they work, the benefits they offer, and the situations they are best suited for. Understanding how each payment acceptance method works can help you select the most suitable solutions for your business and customers.

Types of credit card acceptance

• In-person: Your customer pays for your goods or services in person at checkout.
• Online: Your customer pays for your goods or services online from your business’s website with secure encryption of the payment data.
• Mobile: customers’ mobile devices. POS providers (such as Elavon) offer hardware and software designed for fast, dependable transactions.

How to accept credit card payments

When you’re ready to start accepting credit card payments, you’ll need a credit card terminal or point-of-sale system, which allows your customers to use their credit cards to make the necessary payment.

Modern POS systems go beyond swiping a card. They accept contactless payment methods such as Apple Pay, Android Pay, and Samsung Pay, so your customers can pay the way they want. 

Before you can start accepting credit card payments, you’ll need a merchant account that connects your payment processor to your business bank account. From there, you’ll install your POS hardware or software, train your employees, and run diagnostic transactions to ensure a seamless checkout.

Choosing the right credit card processor

Now that you know the credit card process, it’s time to choose a processor. Some may seem trustworthy at first, but once you sign a contract, they can charge hidden fees or include unclear terms. Ensure you read all the contract’s fine print before signing. It’s important to choose a credit card processor that is transparent, dependable, and works well with your business.

What should a payment processor offer?

• Fast payments: Your payments should reach your bank account as soon as possible. Search for processors that offer multiple payment payment settlement and funding options.  
• Helpful business tools: Choose a processor that provides data, reporting, and support tools to help you make smarter business decisions.
• Data protection: Credit card processors should have advanced security features and include PCI DSS compliance validation processes to help protect your customers' payment data collected at the point of sale.
• Customer service: A good processor offers 24/7 support to answer questions and resolve issues quickly.
• Transparent fees and terms: Your processor should explain what services they provide and how much they cost, with no hidden fees.
• Multiple solutions: Every business is different, so a credit card processor should offer options that work for your business, including additional services, mobile payments, and online solutions.
• Credible transaction volume: Look for a processor that proves its transaction success. Large processors like Elavon process, settle and fund 6 billion transactions per year globally.

The cost of credit card acceptance and processing

There isn’t just one cost for credit card processing. Often, it varies depending on the card types accepted and the manner in which those payments are accepted. Understanding these fees can help you avoid high-cost surprises when you choose a processor.

The three common types of fees include:

• Flat rate: Every transaction has the same acceptance cost percentage. The card type and purchase amount do not change the acceptance rate applied.
• Tiered pricing: Different types of cards and purchase amounts have different rates depending on the manner in which the payment is accepted.
• Interchange plus: The credit card processor charges a small processing fee on top of the applicable interchange rate, which is the standard rate established by the involved card network.

Other credit card processors may charge additional fees, including a one-time setup fee. If you know the details of each type of fee, you can more effectively choose the right provider that fits your business preferences.

With Elavon, you can accept payments in person starting at 2.60% + 10¢ per qualified swipe or chip transaction. For online payment acceptance, rates start at 2.90% + 30¢ per qualified transaction. For more information about the cost of Elavon’s credit card processing, click here.

Credit cards you should accept

More people are using their mobile devices to make purchases.* Accept Near Field Communication (NFC) mobile payments such as Apple Pay or Google Pay.

These payments are faster than normal credit cards. Mobile payments occur almost instantaneously as the customer places their mobile device hovering above the POS system to make their purchase.

Industry-specific transactions 

Does the credit card processor handle the types of transactions your industry requires? Not all processors can support your business or industry type. Choose the one that can.

Here are the industry-specific transactions Elavon supports:

• Restaurants
• Travel & Hospitality
• Retail
• Professional & Field Services
• Healthcare
• Public Sector
• Higher Education & Non-profit
• Automotive
• Mass Transit
• eCommerce

Elavon works with a wide range of businesses across many industries. Depending on your industry, it’s important to choose a credit card processor tailored to your business needs.

How do credit card processors help keep payments safe?

A credit card processor wants your business to trust them as a reputable partner, which means keeping all payment transaction data safeguarded.. Payment data security should be your top priority when it comes to choosing a credit card processor.

All businesses that accept card payments must validate and comply with the Payment Card Industry Data Security Standard (PCI DSS). These standards cover rigorous practices and requirements for processing, storing, and transmitting card data via payments, devices, and e-commerce websites, ultimately protecting both customers and merchants.

PCI DSS requirements help protect card payments from fraud and cyber threats, keeping transactions as safe as possible.

Critical ways credit card processors can help merchants protect payment data:

• Data encryption: Transforms data into code that prevents unauthorized use of the data. Provided solutions will encrypt the customer payment data at the point of sale.
• Tokenization: Replaces your customers’ payment data with random, non-sensitive numerical values that cannot be converted back to the original payment data.
• EMV Chips: Credit and debit cards have Europay, Mastercard, and Visa (EMV) chips, which enhance payment authentication by generating a unique code for each authorized transaction.
• Secure payment gateways: Helps your business securely transmit accepted payment data to your credit card processor to collect the transaction authorization from the card issuing bank.
• Fraud detection systems: Identifies and potentially prevents acceptance of any suspicious transaction alerting the business at the point of sale.
•  Multi-factor authentication: The system requires authorized users to provide multiple levels of information at login, adding extra levels of security to various payment solutions.
• Digital wallets: Minimizes the exposure of sensitive payment details and speeds up the transaction authorization process.

Visit Elavon’s PCI DSS Compliance page here for more information.

Benefits of efficient credit card processing

Credit card processing is a necessity for modern businesses, offering numerous benefits. From faster transactions to advanced security, efficient credit card processing provides you with the tools to stay competitive, such as:

• Reduced fraudulent transactions
• A single platform to manage all transactions
• Software integration to streamline operations
• Lower operational costs
• Zero cash management
• Simplified cash flow tracking and forecasting
• Easier dispute management

What are the risks of poor payment processing?

Taking the risk of a poor payment processor results in many negative consequences that can hit your business hard, including:

Lost sales:

If your current payment system is slow and unreliable, customers are less likely to make a purchase, causing you to lose sales.

Frustrated customers:

Long checkout lines and declined transactions can lead to frustrated customers, which may hurt your reputation.

Security breaches and fraud:

Weak or outdated payment systems increase the risk of accepting stolen payment data or loss of payment data leading to fraudulent transaction liability, card brand fines, fees or assessments and other legal or regulatory issues.  Keep your customers’ data protected with advanced data security solutions available through your credit card processor.

Slow or inconsistent cash flow:

Delays in your payment settling and funding can affect paying your staff, bills, and investments. A processor should support your business’s growth.

Business inefficiency:

Manually inputting a customer’s card or trying to fix an incompatible system can waste your time. This ultimately creates errors and potential complications in the future.

Difficulty switching processors later:

A processor that locks you into a bad system or long-term contract makes it harder to upgrade or switch to a better solution later.

What if I want to switch processors?

If you realize that you're paying way more for credit card processing than you expected, it may be time to switch processors. When you switch to a new processor, make sure it aligns with your business’s goals and will not keep you in the dark. Make the switch and start saving on transaction fees.

Follow these steps if you want to switch processors:

1. Review your current contract – If your contract does not allow you to make the switch, you may have to wait until the contract ends. However, if you can change processors, give them an advanced notice to avoid penalty or cancellation fees, which vary depending on your processor.
2. Assess business needs – Determine what your business requires from a credit card processor. Compare various processors to find one that better fits your business.
3. Provide business information – When you make the switch, provide all of your personal and business information. Some credit card processors require more information than others to reduce any risks.
4. Sign up with a new provider – Switch processors, and start saving with a credit card processing company you trust. Set up your new processing equipment, but keep the old system until the new one is fully operational.

Elavon can answer any additional questions you have about switching from your current processor here.

Setting up and using credit card processing

Setting up credit card processing doesn’t have to be difficult. Many processors allow businesses to accept payments across in-person, online, and mobile channels.

Setting up credit card processing as a business owner

Your business needs a credit card processor that will be with you every step of the way. Some providers let you sign up without talking to anyone, which may seem nice, but the minute you have a problem, they’re not there to help.

A good credit card processor will offer clear guidance, reliability, and easy setup methods. They should be helping you through the entire process and beyond. 

Here are the basic steps to setting up credit card processing:

1. Choose the right plan and system that fits your business.
2. Open a merchant account with a credit card processor to allow them to settle card transaction proceeds to your depository bank account.
3. Install a POS system that integrates with your business operations.
4. Train your team on how to use the new processing system.
5. Run test transactions before you start accepting payments, ensuring the system works correctly and payments are seamless.

Optimizing the customer experience

Customers need to know that they can trust your business. They’re not just buying a product or service from you.

Instead, they want to have a positive experience with your business. You can offer them that by making the payment process easy. Efficient credit card processing helps ensure quick checkouts, which creates a better experience for your customers.

Make every transaction positive

Customers will judge your business based on how seamless your checkout process is. Accepting credit cards not only builds trust but also offers flexibility and convenience. Give your customers a positive checkout experience, so they’ll be more than happy to come back.

Accepting credit cards means your customers can:

• Pay quickly using their preferred payment method, reducing frustration.
• Get authorization in seconds for a faster checkout.
• Choose how to pay, either in-store or online.
• Feel secure knowing your business protects their information.
• Trust that your business processes payments consistently, without errors or delays.

Confidently accept credit card payments

Understanding credit card processing means you know how transactions work and how to give your customers a consistent, dependable payment experience. With credit card processing, your business will continue to grow. We recommend choosing the right processor to help build customer trust, protect their data, and boost overall sales. Because every transaction matters.

To learn more about how Elavon can support your business with credit card processing, start here.