credit card

What is Credit card Processing and How Does it Work?

For those who have a business, the best way to accept payment from customers is by using credit cards. And, for your customers who pay with a credit card, you need a system that can read the information on their card and process their payments. That’s where a credit card processing machine comes into play. Today we will look at how credit card processing machines work, along with the benefits of using them.

How does a credit card processing machine work?

A credit card processing machine is an electronic device that uses the latest encryption technology to keep your customers’ information secure when you process their payment. Basically, it reads their credit or debit card information and transmits it electronically to the credit card processing network. This network then verifies that the credit or debit card is valid, approves or declines the transaction, and sends back the response in just seconds.

Advantages of using a credit card processing machine

The main benefits of using a credit card processing system are: (1) It’s fast; (2) It’s secure; and (3) It’s convenient.

Entry-level businesses use “off the shelf” machines that may not be customized to their specific needs, but these systems can still process transactions extremely quickly and securely. While they don’t offer as much support and customization options as custom-built solutions, they are usually very affordable.

Businesses looking for a more advanced solution can opt for custom built hardware and software which are developed according to their specific needs. These are designed with the business owner’s preferences in mind, provide optimal functionality, and are extremely secure. Custom-built systems are usually much more expensive than off-the shelf solutions, but you get what you pay for.

Another factor that should strongly influence a business owner’s decision is whether they want to offer online payments through their website or not. If you plan on offering online credit card processing, then you will have to opt for one of the two systems mentioned above as this functionality requires a hardware and software that specifically supports these transactions. The reason why custom built and off the shelf machines do not work with online credit card processing is that they lack the appropriate hardware to connect to wireless GSM cell towers.

The main difference between these two systems is that you can expect a much better customer service experience with custom built machines, but it will cost you more than an off-the-shelf solution.


Every credit card processing machine will have its own fees. For instance, in order to obtain a merchant account that you can use with your system, you may have to pay an application fee of $50, plus your monthly service fee which can be anywhere between $19 and $49 per month. Then there is the processing fee that you will also have to pay every time that the customer uses their card.

Another fee worth mentioning is the service provider’s charge-back fee which usually ranges from $15 to $25, and can be as high as $35 if there were more than 10 disputes filed against your business over a three month period. Whenever a customer disputes a transaction, their card issuer can ask the merchant’s credit card processing company to investigate the case. Once they determine whether or not your customer is right you will be notified and then charged accordingly.

So what are the benefits of using a credit card processing machine? They are fast, secure, and convenient. With one of these systems you can quickly process your customer’s payment in just seconds, you can accept payments in person or online, and you can manage your business’ finances accurately.