How Do I Start a Credit Card Processing Company?

By Nicky LaMarco

  • Overview

    Credit card processing is an extremely profitable service to offer in this competitive age of Internet-based business and widespread application of e-commerce. Accepting credit card payments requires the business to have a credit card merchant account. It's a special type of account with a bank that is a member of Visa, MasterCard, Discover Card, and/or American Express card associations. When a credit card is used, it goes through the credit card processing company that you are going to provide. You will be therefore responsible for handling the steps in exchange for a fee which will be calculated as a percentage of each transaction value.
    Credit Card Swipe Machine
    • Step 1

      Understand credit card processing. When a customer enters the credit card information for purchasing a product/service the data passes to the merchant web server and a secured payment gateway through the secure socket layer or SSL. This encrypts the data for safety. The data is verified through their software for the credit card information, and it is then accepted or declined. Next, the payment gateway confirms the payment to the merchant web server and subsequently to the customer, through an email. With this the payment gateway also sends the order to the merchant bank. Following this the amount is taken from the buyer's credit card account and is placed in a holding (normally 30-day) merchant account owned by the credit card processing business.
    • Step 2

      Buy the equipment and software necessary for credit card processing. You will need to offer your clients credit card swipe terminals, credit card machines, pin pads, wireless terminals, receipt printers, and complete COS systems. You will also need Internet processing with an Internet merchant account. You will use this service to accept credit card payments on your Website. You will also need credit card processing software to process credit card payments.


    • Step 3

      Become and maintain Cardholder Information Security Program (CSPI) compliance. In order to be CSPI you need to install a firewall for information protection, avoid default passwords, protect the data you have, encrypt all transmissions, and constantly use updated anti-virus software to ensure the safety and protection of everyone's credit card information. You will need to get a certification proving that you are compliant with all the major credit cards you will be accepting, i.e. Visa, MasterCard, American Express, and/or Discover. See the Resources section to get more details on CSPI and to apply for certification.
    • Step 4

      Obtain clients by visiting businesses in your area an offering a better agreement than what they already have. Be on the lookout for new businesses in your area so you can offer your credit card processing company. Sign an agreement with the businesses for which you wish to handle the services. It would specify the charge for each transaction and the credit cards you will be able to accept. You may provide the credit card terminals to your clients for free or for a leasing fee. Once the equipment is set up, the business can start accepting credit cards.
    • Step 5

      Determine if each credit card payment is valid and evaluate if the purchaser has enough credit to pay the amount. You will pass this to the processing gateway through the card association you are authorized with. It will debit the business for payment and credit you. As a result, you will be paid for the transaction transactions. The whole process is almost instantaneous and automated and needs no physical involvement. Once the transaction is approved the processing network will return an electronic response or authorization code. This six-digit code authorizes you to capture the funds. Once you receive the acceptance you confirm the terminal confirms which then closes the transaction and prints out the receipts for the purchaser and the business. With the software, this process is also automated.
    • Step 6

      Store your products in your office properly. Use bank boxes or larger boxes to store your credit card processing equipment. When you sell something, package it and mail it to the buyer. Order another to replace it. If you only want to order credit card processing equipment when you sell it, you can sign up with a drop shipper to ship it when you sell it.
    • Skill: Moderately Easy
    • Tip: Your potential clients are retailers and mail order companies.
    • Tip: Create a catalog for interested and potential clients.

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