Credit card processing in a nutshell

Credit card processing in a nutshell

Credit card processing in a nutshell

Credit card processing is gaining more and more public attention due to increase in use of plastic money world wide. This invisible system helps the business owners to receive the payment for their product/service in a hassle-free and les time consuming manner from the customers. An economist has rightly described credit card as a plastic piece with a nifty mind. This offers safe and secured transaction both to the consumer and the seller. This plastic also reduces the risk of any sort of monetary accident such as theft, missing etc. For a credit card user there is no need to carry a large amount in his or her handbag while going for shopping.

If we go through the history, credit card as a medium of payment was started only after 1950. In the initial phase, the credit cards were highly simple in technology and offered limited facilities. With the progress of time, new types of credit cards like VISA, Discover and MasterCard are now found in market. With the increased complexity and services associated with this plastic money, several new guidelines and systems were evolved to make credit card processing system hassle free, safe, secured and user-friendly. This new system allows the stores and business ventures to sell their products/services to the costumers through credit cards to receive immediate payment for their product.

From a customer's point of view the credit card processing is a simple process. In a store (be it online/onsite) that accepts credit cards, the seller simply swipes the card through a machine, which is capable of reading the card language perfectly. In the next step, the required amount is deducted from the consumer's account and there after the customer has to sign on a credit card slip for confirmation of the purchase amount.

However, in actual practice there are lots of complicacies that occur behind the scene. Those stapes are-

1-After the card is swiped, the credit card processing machine can readout the language behind the card. This information includes the credit card number and other account information.

2- In the next process, the machine sends the information through electronic process to the concerned credit card company with a request to authorize the funds (the purchase amount) to be deducted from the consumer's credit card account.

3- The credit card processor establishes link with the credit card network to transfer request to the computer network of the issuing bank.

4- After verifying the credit card number and the card holder's account details the issuing bank confirms that the card holder has/has not enough money in his/her account for the required transaction.

5- A hold is placed on the cardholders account for the transaction amount to cut required amount from the available balance. Deduction is made for the available balance for future transactions.

6-After receiving the approval, the processing network send responses to the receivers' credit card terminal.

7- At the end of a business day, the seller forwards a request message to the processing network to secure all fund transactions done on that whole business day.

8-If the credit card processor has the provision of transaction charge then it cuts down that nominal amount from the requester's account and then deposit all the rest amount to the seller's business bank account.

Above listed credit card processing is not the complete and detailed one. There are several process related to the software applications, computer programming and fraud prevention techniques and authorization procedures behind the credit card processing system.

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