Whether you pay your credit card processor one lump sum at the end of the month or have a little amount deducted from each daily batch of transactions, you are paying for a service. But, what services are you paying for? Your credit card processor is merely one component of completing transactions with your families as they pay for a case. There is a vast and complex network of companies that are involved in every single transaction and your credit card processor manages the process between all of the companies that are involved. In a nutshell, your processor represents your business with each of the card brands you accept for payment such as Visa, MasterCard and American Express.
The Behind the Scenes Magic
When you accept a credit card for payment, there are a number of steps that take place before money actually lands in your bank account. While the steps vary slightly based upon the type of card you accept, the steps involved all begin with capturing the card information. This can be done manually, through a funeral home website with a shopping cart or with a terminal that has a chip or stripe reader. The card data, along with your business information and the information about the specific transaction is sent to an Acquiring Bank such as First Data. The Acquiring Bank sends the information to the card brand (Visa, MasterCard etc.) who then checks with the specific Card Issuing Bank (Wells Fargo, Capital One, Bank of America, etc.) to see if there is enough available credit on the cardholder’s account. Assuming the funds are available, the Card Issuing Bank holds the funds required for your business. The Card Issuer sends back a status of approved, declined or error to the Acquirer (First Data), who then reports back to your business, all within a few seconds. At this point, the transaction might be considered complete. But, it is far from complete. At the end of each business day you close your transactions for the day by sending a “batch submission”. This likely happens automatically each day. The Acquiring Bank then deposits the total batch amount as a “batch settlement” into your bank account. The Acquiring Bank then sends a request to the card brand for reimbursement of the funds they advanced to you. The card brand sends a request to the Card Issuing Banks for all of your transactions. This could be many, many banks such as Chase, Capital One, Bank of America etc. The Card Issuing Banks then pay the money back to the Acquiring Bank and adds the amount due to the cardholder’s monthly statement. During this process, the fees that a business pays to process that credit card are collected by all the parties involved.
The Card Issuer receives the majority of the fees, called an Interchange Rate, and the Acquirer gets the remaining amount after the Interchange fee is paid. This remaining amount is split between the Acquirer and your credit card processor. Acquirers also charge fees. Some are mandated by the Card Brands that make up the remainder of your total processing fees. Your processor makes sure that all of this gets handled.
Where Your Processor Fits In
A credit card processor serves as a link between your business and the Acquirer and is registered with the Card Brands to legally provide merchant services. Your processor has access to specific card and transaction information to assist you in managing your merchant account. As you can imagine, this requires a great deal of security and trust from Visa, MasterCard and others. The registration process is a very thorough, rigid and expensive endeavor and many companies are turned down by the Card Brands. Your processor should provide a dedicated account manager that understands your funeral related business and your unique operations such as what type of funeral home or cemetery management software you use. These are the services you are paying for each month through the fees you are charged. FBA
Jim Luff is a Marketing Manager with Chosen Payments, a national credit card processor serving the funeral care industry. He is an active member of the California Funeral Directors Association serving on the Legislative, Public Relations and Expo committees with firsthand industry knowledge and 25 years of experience working with Central California funeral homes. Jim can be reached by phone at 805-427-9180 or by email [email protected]