Facts about Credit Card Processing
The process of purchasing goods or services using a credit card seems easy and simple enough; however there are actually several steps that the transaction needs to go through before it is approved. In you want to know how exactly credit card payments are processed from the moment your customer pays using his or her credit card to the moment the funds are transferred to your bank, read on.
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After the credit card of your customer is swiped at the cash register or after he or she enters his or her credit card information on your online store, the information is sent to the credit card processing service provider or merchant account provider and then to the credit card issuer via the payment gateway (for online transactions) or via a phone line, internet connection or wireless connection (for face-to-face transactions).
The credit card issuer or credit card processing service would then review whether or not the cardholder has a valid account and sufficient credit to charge the purchase to his or her account. If the account is valid and there is sufficient credit, the transaction is authorized and approved. The information is then sent back to the payment gateway or to the credit card terminal at the brick-and-mortar store via the same connection used in sending the credit card information through.
As the merchant or the business owner, you would then need to request to have all the credit card transactions released to your account. This is usually done in batches at the end of the day or a shift. The request is then sent to the credit card issuers of your customers and then processed so the money can be credited to your account and debited from your customers’ accounts.
Through understanding how the process works, you would be able to know exactly where the money you are paying for transaction fees and other fees charged by your merchant account provider or credit card processing company goes to.