Can someone explain the entire credit card process;who makes money after my card is swiped? First Data?

Question

I'm looking to see how a company like First Data or Mastercard makes money. I read that JPMorganChase decided to move away from First Data to process their cards.

Can someone explain how First Data makes money (not via Western Union)?

Am I to understand that they "process" the credit card or debit payment? So if they process payments for a particular bank or credit card company, they make a fee for every transaction? What is that fee normally?

Is this in addition to the fees Mastercard or Visa makes as well?

It seems to me that credit card usage will keep increasing, even in rough economic times, and that the companies that will benefit would be companies like First Data and Mastercard. Can someone chime in on that? Thanks in advance!

Answer 1

I hope this doesn't confuse you even more. Credit card companies make money when you, the consumer, fail to pay off the entire balance by the end of a 30 day period. This is where you start paying interest and this is where the credit card companies like Visa and Mastercharge make their profits. Target issues credit cards too, and I'll use that as another example. Target banks heavily that their credit card users will not keep a zero balance from month to month, so Target does successfully make alot of money from the interest. It's because people use cards, over use them, and cannot possibly keep up. The card companies know this. But if you have a credit card, use it only modestly and pay it off each month, you escape the fees that others pay in your place. That's the key - don't carry debt from month to month. Do that responsibly and the card is a good tool for building up a good credit score that may benefit you later when you want to buy a home and need a loan.

Answer 2

As a former employee of First Data I can tell you that FDC makes money from the merchant.

For example, FDC sells the merchant the idea that their Point-of-sale machine (POS) will increase sales and traffic by allowing the use of debit/credit cards rather than limiting that merchant to cash-only.

Now there are many other competitors to FDC, like LynkSystems and TSYS who compete to offer the best deals to the merchant as far as fees charged, services offered, etc.

The POS provider will then take a percentage of the sale when a customer swipes his credit card, thus collecting this fee from the vendor.

First Data's mission is to make the world cashless and rely solely on credit based transactions.

Answer 3

Whether or not you put the money back on to the card, your BF's mother will likely still pursue the investigation. Suicide is a ridiculous thought to consider over $500. If you're going to top yourself, it's certainly not worth doing it for such a small amount. The easiest thing to do, for this amount of money, would be to simply admit it. Come up with a good reason why you stole from your mother-in-law, and simply admit it. If you can't face doing it face-to-face, do it with a little more drama - leave a written confession and babbling apology where your mother-in-law will find it, then disappear to a friend's house for a few days. Your mother-in-law will call you and tell you everything is all okay. And all will be well. Probably.

Answer 4

Any payment, checks or credit cards incur a fee. Sometimes banks eat these charges or mask them in another fee.

Small businesses often get charged for each check they submit for deposit (e.g. 15 cents). Processing credit cards is no different. Someone has to build an infrastructure that allows the merchant, when they process the credit card to get acceptance for that charge. Then the money has to be deposited into the merchant's bank account. First Data has the largest infrastructure to support credit card processing.

In credit card processing, a key player is the Acquiring Bank. Acquiring banks are also called merchant banks, or acquirers. Acquirers are so named because they acquire a merchant’s sales tickets and credit the order value to the merchant’s account. When a merchant signs an agreement to accept credit cards, they normally do so with an acquiring bank.

Merchants who accept Visa cards pay a Merchant Service Charge (MSC) to their acquiring bank. The MSC is set by
negotiation between acquiring banks and merchants, and not by Visa. The fees merchants pay reflect factors such as the level of risk in their industry sector, and the costs associated with handling retail accounts of different sizes.

In return for paying the MSC, the acquiring bank will provide you with a range of services that typically includes:
1. Payment guarantee
2. Connectivity to the Visa network
3. Terminal hardware and software
4. Decals and signage
5. Customer support

An average transaction fee is between $.10 and $.35, with $.20 being an average.

Next, Visa and MasterCard has approximately 200 Interchange rates. Interchange is the fee paid to Visa/MasterCard between the issuing and acquiring banks every time a Visa/MasterCard card is used. Interchange rates examples are Reward Cards (various types), Signature Debit, Restaurant, MOTO (Mail Order/Telephone Order) etc. Most acquiring banks put these 200 interchange rates into a tiered structure call Qualified, Mid-Qualified and Non-Qualified. Since acquiring banks are different, check with your acquiring bank on their tiered structures.

Now, let's visualize a conference call. One person on the call is the Merchant, another is the Consumer, one more is the Acquiring Bank and the last is Visa/Mastercard. First Data is the technology that allows all of those folks to be on the conference call.

To pay for that technology First Data charges a very small fee. But multiply that tiny fee by billions of transactions and it adds up! Without companies like First Data, we'd be back to writing checks. They are needed to keep money moving from the consumer to the merchant.

Is it worth the money? Research shows that merchants who only take cash or check have approximately 20% less revenue than those who take all forms of payment. Why? Because use of debit and credit cards are increasing 22% a year and check usage is declining 3%/year. Recent studies by Dove Consulting and the Federal Reserve have shown that we carry less cash, write few checks and use our plastic (debit/credit cards) more often. As usage rises, a need for a more robust infrastructure is required to support our economy.

Let me know if you have any more questions about Merchant Services.

Answer 5

Yes you are correct. These companies take a fee for every transaction that they process. The fee is dependent on the type of transaction, the card type used, and even the industry classification given to a company when they sign up to have their payments processed.

They will most likely do well but you have to remember they are working small margins and for them its about managing volume mainly.

Answer 6

The merchant (place you used the card) pays a fee to the card processor. If you don't pay the balance in full every month, you pay interest to the bank that issued the card. The fees vary from processor to processor and by type of card and amount of purchase.

Answer 7

its called interchange usually less than 2% if u have a good sales man it will be higher, even though there are over 170 diff card types called downgrades, each percentage, a normal reps breakeven is around 1.59-1.69 and 19 cents per swipe

Answer 8

uhmm, here are a couple of links that get me best answer quite often so hopefully if you have time to read they'll do the trick for you:
http://credit-cards.ebookorama.com
and http://finance.ebookorama.com
good luck

Answer 9

That's a good question!