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Find Out How Credit Card Processing Works Behind The Curtains

Not everyone knows what happens when a credit card processing operation takes place. This is something that is done on a regular basis, but the complete understanding of how this process works is something that might elude you.

Everything begins when a customer decides to perform a purchase. They use their card on the merchant's terminal, which is connected to either a phone line or an Internet connection. The terminal then communicates with the merchant's bank, so that it may confirm with the credit company if the number on the card is valid and if the amount is available.

The transaction then needs authorization from the card issuer. They will receive the purchase information and communicate back to the terminal if it is authorized or declined. The information provided by the issuer if it is declined is very limited, so the customer might not be aware of why this happened right away. This all happens in a matter of seconds.

The cardholder needs to get in touch with the issuer's customer service to understand why his purchase was not processed. In these situations, the most common scenario is when the amount surpasses the limit available to the customer. Less often it may be declined when the card has been used too many times during the course of the day.

These operations are done in a quick and easy manner, allowing the customer to believe that the merchant has received payment already. This is not the case. The purchases that are processed correctly stay in the terminal. They must be printed at the end of the day and sent to the bank for further processing.

The bank's job is first and foremost to gather payment. By doing this, they communicate with the credit networks who then proceed to pay the bank. After it is done, the networks will refer to the issuer in order to retrieve the value. This can be easier in some cases, as the network and issuer might be the same company.

All of the above applies to a common store, but the process for an Internet-based shop is different. All the information is entered by the customer, which will then be transferred to the bank. In order to prevent information theft, there is a specific security measure in place. The information that will be transferred will be encrypted so that it cannot be intercepted. This measure is also in place for the communication that returns from the issuer.

One of the most important points in this whole process is when the merchant gets paid. The bank is responsible for this part, and will do so after getting paid by the networks. This process normally happens every week or month. Because this is a service that is being delivered, there are fees that the merchant must pay, which are dependent on the network, issuer and acquiring bank. The world of credit card processing does seem simple from the consumer point of view, but it consists of an intricate network that allows it all to happen.

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