Credit Card Processing-How it Works

Using plastic money is in vogue. More than providing emergency cash, it has become a necessity. On an average, an American household has as many as 14 credit cards. Shopping with a credit card may appear to be a very simple affair but a lot goes on once your merchant swipes your credit card at POS or Point of Sale. Credit card processing is intricate and involves a series of operations.

What actually happens once you swipe the card?

You are the owner of the card so you are the cardholder. It can be a MasterCard or a Visa card provided by any “Issuing bank”. You may or may not have a checking account with the issuing bank. At the POS, your merchant swipes the card for you.

The Merchant should be having a Merchant account with the Merchant bank. The Merchant bank is also referred to as the “Acquring bank” or a “Sponsoring bank”. The Net Settlement Amount is received by the Sponsoring bank from the Issuing bank. The Net Settlement Amount is the amount that is obtained after transaction fees are deducted from the actual sale amount.

How credit card processing works?

•A transaction is initiated when the magnetic stripe of the credit card passes through the credit card terminal. Your credit card number can also be typed manually. After the transaction information is fed into the network of the processor, an “Authorization Request” gets generated.

•The Authorization Request is transmitted to the Issuing bank by creating a link between the processor and the MasterCard or VisaCard network.

•The Issuing bank checks whether the credit card number entered is valid or not or if the cardholder has sufficient money to make the purchase.

•If there is sufficient fund for making a purchase or if the number is valid, the transaction gets finalized by transmitting a deposit transaction. The cardholder is allowed to take the items he has purchased.

•Net Settlement Amount gets deposited thereafter to the Merchant Account.

Credit card processing may go haywire sometimes

There are a couple of triggers which may necessitate human interference. If you encounter any one of the following problems, contact the concerned officials without further delay. Some of the commonly encountered triggers are as follows-

•Your card may have been used to make purchases outside the country and you are not aware of it.

•The spending pattern of the cards is unusual and doesn’t match your normal buying habits.

•Purchasing services or items that belong to the highly fraudulent category

Related resource:

Credit card secret – creditcardnumbersecrets.com is a personal blog which aims to give additional and educated information to any credit card holder regarding its use and its vulnerabilities.