Payment Processors Explained

Beginner: What a Payment Processor Is

The company that moves the money

A payment processor is the service that carries a card payment from your customer to you. It talks to the card networks and the banks, checks that the card is good, and drops the money into your account.

Without a processor, you can only take cash or a direct bank transfer. With one, you can accept debit and credit cards in person and online.

Why it takes a cut

Processing a card is not free for the processor, so it charges you a fee on each sale. The most common shape is a percentage of the sale plus a small fixed amount per transaction.

That is why a card sale never deposits the full sticker price. A share goes to the processor for handling the transaction, and the rest lands in your account.

Ways to accept a payment

In person, you might tap or swipe a card on a reader or phone. Online, a customer types their card into a checkout page or a payment link you send.

You can also accept bank transfers and, through many processors, digital wallets. Different methods can carry different fees, so it helps to know which one a customer is using.