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Credit Card Processing: A Pretty Good Deal for Merchants
By nature, extending credit entails some risk of loss.
That is why companies who process credit card purchases will never do so for free or anything like it. Any party thats involved in the credit chain needs to be paid for not only its troubles, but for its risk of loss. Credit card fraud, for example, happens every day.
In recent years, however, credit card processing fees have gone down. So much so that many merchants now accept credit cards for purchases of as low as one dollar.
How did credit card processing become so cost-effective, and can this trend continue?
Credit Card Processing: The Early Years
In 1946, the Flatbush National Bank of Brooklyn offered the first bank-issued credit card. The merchant was thus relieved of the risk of actually extending credit and the headache of collecting payment. Credit card processing had been outsourced to the banks.
That became the model.
MasterCard and Visa built effective systems for credit card processing, and American merchants benefited hugely. People bought more and more stuff on plastic, and the big credit card companies raked in the money for handling the messy details.
Then, suddenly, the Internet happened.
The Internet Changes Everything, Including Credit Card Processing
Today, credit card processing on and via the Internet is a massive trend thats only getting larger. Just for the months of November and December in 2008, online retail sales are projected to top $44 billion. Almost all of those transactions occur via credit card.
With the pie so big and the technology there to make the job doable, thousands of companies are competing for the privilege of processing credit cards for merchants large and small.
This has resulted in drastic price decreases. Online processing gateways now routinely cost ten dollars or less per month.
With credit card processing so cheap and at such low risk for the merchant, using a credit card to buy a pack of gum is now often perfectly acceptable.
Reliability Essential in a Credit Card Processing Company
The best credit card processing companies justify their fees by providing excellent service to their merchant partners. Sometimes, getting it cheaper somewhere else isnt as appealing to a busy merchant as seeing things working perfectly now.