Batch Credit Card Processing: Pros & Cons

Here the pros and cons of batch credit card processing:

When a person has an online business where they need to accept credit card payments, they need what is called a merchant's account. The merchant's account is a type of sponsored bank trust for receiving payment. If an online business is successful and the vendor takes a lot of credit card payments, then these might be processed in batches. When a customer makes payment to an online vendor, the vendor submits it to the merchant account. The acquiring bank is the organization that accepts payment on behalf of the seller. The bank first checks the customer's name and credit card number for authenticity. The acquiring bank also checks the transaction and the amount with the bank that issued the credit card. The acquiring bank holds onto the payment while validation takes placed. If all checks are valid, an approval code is generated and the seller keeps that code together with information relating to the sale.

Usually, authorized cards are stored in batches and then the seller sends the batch to the acquiring bank each day at close of business. The acquiring bank then sends the batch to the credit card association that debits the customer's accounts. The credit card issuer then pays the acquiring bank. Once the acquiring bank has been paid, they pay the seller, less the fee they charge for processing. Although batch processing can be convenient for a seller, there are times when he or she may not benefit from it.

Pros and Cons of Batch Processing

Credit card payments can be beneficial to a seller because they are secure form of online payment. When a person pays with a credit card, the card issuer promises to pay the seller once the card is authorized. There is only a problem with credit card payments if there is a legitimate complaint about the goods or services being sold. Most credit card payments go through without a hitch and all parties are happy. Batch processing is convenient for the seller because they only need to send in authorizations once a day.

The bank pays the merchant a commission on each authorized payment. If the seller neglects to send in all the authorizations received in one day, this can cause problems. The payment remains valid for a period determined by the card issuer, usually 1-to-5 days. If the payment remains unauthorized throughout the specified period, then the money is credited back to the customer's account. The seller pays lot of fees for the privilege of accepting credit cards. Low value transaction may mean that the seller loses money by accepting a credit card. Sellers may specify a floor, or lowest amount payable, so as not to lose money on credit card payments. Some sellers pay a hefty monthly fee for the batch processing machine that is used to send authorized payments to the acquiring bank, rarely will the vendor end up owning the machine. Most banks charge more for batch processing than for other credit card transactions.

On occasions where there is a problem with the credit card payment, then the seller may not know till the next day. The seller may lose the money for that sale if he or she cannot track the customer to ask for payment.

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