Third Party Processing
Third-Party Processing refers to a method of credit card processing in which a business uses a service provider, not directly affiliated with a bank, to handle the transactions. This provider acts as a middleman between the merchant and the customer’s bank.
PayPal and Square are examples of third-party processors. These companies provide an easy way for businesses to accept credit card payments without having to set up a merchant account with a bank.
This can be particularly useful for small businesses, freelancers, or online sellers who may not have the transaction volume or credit history required to obtain a merchant account.
However, the convenience of using a third-party processor often comes at a cost, as they usually charge higher fees than traditional merchant accounts.
Additionally, using a third-party processor can sometimes result in delayed funds availability, as the processor may hold onto the funds for a certain period before transferring them to the merchant’s bank account.
Despite these drawbacks, third-party processors remain a popular option for many businesses due to their ease of use, quick setup, and minimal upfront costs.