Payment Processor.
In plain English
A payment processor is the company that handles the moving parts when a customer pays you by card. When someone swipes, taps, or types in a card number, the processor checks that the card is good, asks the customer's bank to approve the charge, and then routes the money into your account. For doing this it keeps a fee out of every sale, usually a small percentage plus a few cents. Stripe, Square, and PayPal are common processors for small businesses.
01Why it matters
Those per-sale fees come straight off your revenue, so on thin margins the processor's cut can be the difference between a sale that earns you money and one that barely breaks even.
02The math, step by step
Say a customer buys a $40 item from your shop. Processing fees are set by your processor, so check its pricing; a rate is typically a percentage plus a flat per-transaction fee. If the rate were 2.9% plus 30 cents, that sale would cost you about $1.46 in fees, so you keep $38.54 instead of the full $40. Across 1,000 sales a month, that is roughly $1,460 going to the processor.
03What this is NOT
A gateway is just the software that securely passes card details from your checkout page, and a merchant account is the holding account the money lands in first. The processor is the company doing the actual approval and money movement. Many modern services bundle all three together, which is why people use the terms loosely.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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