This guide contains:

Background on credit card processors
Features to look for in credit card processors
How to find the best credit card processor for you

This short guide was created to help you understand the basics of shopping for a credit card processing service and to help you choose the right credit card processing provider for your business. We do not provide any credit card processing services ourselves, so you can be assured that all of the information in this guide is independent and unbiased.

Background on credit card processing
The credit card has come a long way since it's humble beginning back in 1950. Today, millions of credit and debit card transactions are run every year in the United States alone. Because so many people use credit and debit cards, most businesses choose to accept them as a form of payment for products and services. For a business owner (or merchant), the central component that allows credit and debit card payments to be made is called 'credit card processing'. Here's how the process works:

When a person makes a purchase using a credit or debit card, the credit card information is taken (through a credit card terminal, over the phone, or on the Internet). The credit card information is sent to the credit card issuer to verify that the person has enough funds to cover the cost of the purchase. If there are enough funds, the issuer authorizes the transaction, and the credit card receives an 'approved' response and the transaction can be completed. [This process is typically handled by a third party known as a payment processor.]

At the end of each business day, the payment processor will double check and verify the authorizations that it has handled during that day. If they are correct, individual transactions are forwarded to the credit card issuers, who then post the purchases to the credit card holder's account and the funds are then electronically deposited into your company's merchant bank account within 48-72 hours.

Important features and options of credit card processing services
One of the first features to compare among credit card processing services is the type of transaction that the credit card processor permits. As mentioned above, credit and debit card transactions can be made in person (retail stores), over the phone (catalog sales), and over the Internet. If your business accepts payment in all three environments, you will want to make sure that your credit card processing service accepts credit card payments from all three methods. All credit card processing providers can handle payment through the major card providers (Visa, MasterCard, American Express, Discover, etc.). However, you can still choose which cards you will accept as payment.