subject: Two Main Phases Of Credit Card Payment [print this page] You must have swiped your credit card at various merchant stores quite a lot of times. Have you ever wondered how the payments get processed? When you swipe the card, the details of your card are read by the machine and then the amount to be charged is entered by the merchant. When the magnetic strip of the card is brought in contact with the machine, the card details get verified and then the payment process is initiated. It is slightly different when it comes to online shopping. There are two main phases for credit card payment. These are discussed below.
Authorization
When you enter the card details online, the information has to be verified by the bank. If one of the digits that you enter is incorrect, the payment should not go through or else the payment will be charged to someone else"s credit card. Hence proper authorization has to be done in order to honor the payment. This process is carried out by verifying the name of the card holder with the credit card number. When you initiate a credit card payment, these details are to be verified in order to make the transaction error free.
The amounts entered should be correct too. If the merchant enters a different amount, the payment should not go through. Most banks provide different types of alerts to let the customers know about transactions done using their cards. If you find that a wrong amount was charged to your credit card, you can call up the credit card company and get the details. The bank has to authorize the transaction in order to complete the credit card payment. If you report that the amount entered is incorrect, the bank will block the sum and will not allow it to leave the bank even though it gets debited from your account. You will be able to get back the money if you report a correction in the payment.
Settlement
Once the credit card payment is done, the transaction amounts have to reach the merchant"s bank. Once the transaction is approved by the customer and the bank, the funds will leave the customer"s bank. The amount actually stays in the customer"s bank even though it is not visible to them. The amount will get debited from the main balance and stays as hold amount. This is similar to the float amount that is added to the main balance when there is an incoming check deposit in your account. The money will leave your account but not the bank. The process of sending the money from your account to the merchant"s account is known as settlement.
The settlement process has to take place in a secure manner as the funds should not go missing. The funds get transferred to the merchant"s bank only when the merchant claims for the funds. If in case of failed transactions or if the products are not delivered to customers as promised, the merchant will not claim the funds which will return to the customer"s main balance after a number of days.
