Credit card processing is a major part of most business transactions. Most people prefer using cards over carrying cash or writing checks. Merchants find that accepting credit cards provides their customers with convenience and adds to their profits when customers spend more than they might have with cash. Most credit card processing companies provide merchants with rapid funding within hours of the completion of a credit card transaction. This feature is welcomed by all businesses but especially by small or new businesses in need of cash.
When a buyer makes a credit card purchase, the merchant completes the transaction usually at the end of the day by “batching out” or “settling” the day’s transactions, which sends the final totals to the processing network. It is here that each individual transaction is then sent to the cardholder’s bank for credit card processing. At this point, the bank debits the funds from the cardholder’s account. The next step takes place when the processing company acting as a go-between for merchants and banks and deposits funds into merchant accounts. The merchant receives the total amount of funds in the batch minus any fees for processing the transaction.
Whether the business is large or small, funding plays a key role in its success or failure. Once merchandise has been sold and inventory depleted, the merchant needs funding from the sales to reorder merchandise and replenish stock. That is why it is important to batch out credit card sales at the close of the business day. The merchant should be prepared for chargebacks that may occur in the event of a disputed transaction.
Merchants are compensated for processing credit cards from customers through funding. Daily funding is important to all businesses, but especially for those who operate on weekends. They need the funding in order to be able to keep their business flowing smoothly during the hours when the banks are closed. Restaurants need to be able to process cards regardless of the day of the week or time of day. Next day funding of merchant accounts helps them to continue running a successful business at all times. The funding process is considered compensation for services already rendered.