22:10
Faizan
People who want to obtain merchant processing so that their businesses can take credit and debit cards and other forms of electronic payment are sometimes annoyed by all the information they must provide to the processing company. They aren't applying for credit cards, they just want to accept payments, so why should the company need to run their credit records? It seems like an unnecessary intrusion to some merchants, and some will refuse to provide that information because they're outraged. They shouldn't. They should make the deal.
Processing Companies Extend Credit
There actually is a legitimate reason for the processing companies asking for this sort of information. Processing companies and the receiving banks (collectively here, "the credit card company" or "the company") do, in fact, extend credit to merchants who process through them. How?
Remember the way taking a credit card (or debit card or other form of electronic payment, as in this example it doesn't matter much which it is) works. The customer hands you, the merchant, a card, you "swipe" it through your reader with or without checking identification and the name on the card, and the reader "approves" or authorizes the transaction. You hand the customer the goods, and the next day the funds show up in your bank account.
There's a lot of trust implied in that transaction - much more than meets the eye. First, you trust that the card bearer is the actual owner of the card, and even if you did check identity, in these days of identity theft, what are you going to do? At some level you trust. The customer trusts you or your product enough, at least on first blush, to part with the money. And you trust the credit card company to put the money in your account, since otherwise you wouldn't part with the goods.
Chargebacks Are Sometimes Necessary
Suppose something goes wrong? Let's say that the customer decides you misrepresented your services or overcharged him for the services. If you have taken credit payments before, you are probably aware of "charge-backs," but in the final analysis the merchant gives the customer back his money. Or at least, supposedly. What actually happens, though, is that the credit card pays the customer back and then tries to get its money back from you. It will do that, in most cases, by taking money from your future receipts.
Processing Companies Extend Credit
There actually is a legitimate reason for the processing companies asking for this sort of information. Processing companies and the receiving banks (collectively here, "the credit card company" or "the company") do, in fact, extend credit to merchants who process through them. How?
Remember the way taking a credit card (or debit card or other form of electronic payment, as in this example it doesn't matter much which it is) works. The customer hands you, the merchant, a card, you "swipe" it through your reader with or without checking identification and the name on the card, and the reader "approves" or authorizes the transaction. You hand the customer the goods, and the next day the funds show up in your bank account.
There's a lot of trust implied in that transaction - much more than meets the eye. First, you trust that the card bearer is the actual owner of the card, and even if you did check identity, in these days of identity theft, what are you going to do? At some level you trust. The customer trusts you or your product enough, at least on first blush, to part with the money. And you trust the credit card company to put the money in your account, since otherwise you wouldn't part with the goods.
Chargebacks Are Sometimes Necessary
Suppose something goes wrong? Let's say that the customer decides you misrepresented your services or overcharged him for the services. If you have taken credit payments before, you are probably aware of "charge-backs," but in the final analysis the merchant gives the customer back his money. Or at least, supposedly. What actually happens, though, is that the credit card pays the customer back and then tries to get its money back from you. It will do that, in most cases, by taking money from your future receipts.
Posted in: business
