When running a business it’s not always easy dealing with physical money, in fact, most people prefer using payment cards because it is safer than carrying bundles of cash around. Credit card processing is a series of actions done often by a third party company on behalf of a merchant to verify the details provided in the card holder’s making them eligible to make that particular purchase. Once the right message is conveyed, the merchant completes the transaction. Here are the steps that involve that process.
- Making the purchase
Once a customer finds a product that they like, they may want to make a purchase. The customer can now pay for the goods using their credit card through an online payments gateway by phone or by mail.
- Starting the transaction
When you have decided on what item you want, your credit card is then swiped through a secure credit card terminal or the card transaction and the information is entered in.
- Transmitting the data
Your credit card data or the information entered is then transmitted for approval as the terminal system or secure payment gateway connects to the processing network.
- Approval or decline
Once your data is transmitted, the merchant will now send an electronic request to the credit card processing company which will, in turn, send a request for authorization to the credit card issuer. The card processing company will request the information on behalf of the merchant and act as a bridge between the merchant and the credit card holder. The processing company charges a fee for this service, which is usually either a flat fee or a portion of the transaction amount and sometimes it can be both. Once the transaction is issued, the credit card holder can accept or decline the transaction.
If and when the transaction has been approved, the processor and the merchant receive an authorization response. In case the authorization is not sufficient for the merchant to receive actual payment from the credit card transaction, he or she will have to collect all the credit card transactions of that day and send the entire grouping to a financial institution. This institution will act as a further link between the merchant and the credit card company.
- Completion of the transaction
The merchant completes the transaction by closing the batch. This locks out all the transactions that have been made during that day. The processing company’s acquiring bank then collects the funds from the credit card users.
- Depositing the funds
The processor’s acquiring bank will now deposit the funds into the merchant business account. It may take up to 48 hours. Therefore, the merchants receive their payments directly from the financial institution they use as their intermediary.
In conclusion, the aforementioned steps taken in credit card processing are important for a merchant so as to avoid being conned or tricked by malicious people. To a customer, it helps them keep a record of the things bought and also have an idea of how to manage and limit their spending.