Whenever an individual pays for a purchase, that is a form of payment processing. In reality, the minute a purchase is paid for either in cash, through direct bank withdrawals or via credit cards, this begins the actual trail of payment processing. Most of the time, this trail is unseen to all but banks and/or vendors and suppliers from whom items or services are purchased.
Processing a Payment Expediently
Depending on the particular bank regulations, payments are recorded at the point of sale. This is true even for cash payments. In accounting, cash is totaled and sorted according to purchase type. This data becomes part of general business accounting. Hard cash is deposited in either a regular business bank account or a money market account where it can accrue interest. Money market accounts are popular because interest accrual adds to the value of customer purchases. In other instances, debit or credit card payments are processed by direct withdrawal from the purchaser’s account. This withdrawal is transferred to the seller’s account.
The span of time it takes for payment processing depends on the specific bank’s policies. In most cases, there is an allowable amount of time of up to five business days for payment deposits to be processed by the receiving bank. This allows banks to hold payments on deposit long enough to accrue interest. Payment processing time is a crucial factor that individuals and business owners should take into consideration. For the individual, the amount of time it takes to pay for purchases depends on the method the individual chooses. Today’s debit cards, for example, process payments in less than a few hours. Whereas credit card payments can take several days until they are recorded and received by the seller. Interestingly, credit card payments, although approved at point of sale, do not actually pay the seller until all of the credit information is verified and approved by the intermediary bank.
The Importance of the Type of Payment Processing You Choose
Individuals and business owners should consider the importance of the type of processing they choose. Some individuals use a credit card without evaluating the interest charged versus the cost of the item or service purchased. One example is to use a credit card to pay for small household items that cost under $10. Once the interest charged, usually around 18% by most credit card companies, the $10 cost is likely to be doubled by the interest charged. Understanding interest rates with regard to processing payments is crucial to avoid errors and unnecessary additional costs. Choose timely, financially advantageous methods of processing payments by studying payment terms and how interest rates affect your use of your personal or business credit.