Behind the Scenes of Credit Card Payments

With a quick swipe of your card on a credit card point-of-sale terminal, you can electronically conduct a transaction whose effects take only moments to unfold.  Nowadays, the common question “Cash or card?” presents the two most common options in paying for goods and services. This article focuses on the latter option, which is rapidly becoming the more preferred choice: credit card and debit card payments. These have assumed a crucial position in the game-changing field of e-commerce, by offering convenient, safe, cashless payment options. Accordingly, it is important for business owners to understand the process of credit card payments, especially for any business wishing to adopt a credit card payment facility.

The Stakeholders

There are numerous players in the process:

  • The Cardholder, who is the customer paying for the product
  • The Merchant, who is the business owner selling the product to the cardholder.
  • The Acquiring Bank, which is the bank that holds the business’s merchant account, and which is responsible for requesting and receiving payment from the customer’s bank.
  • The Issuing Bank, which issues the credit card to the cardholder.
  • The Acquiring Processor, a third party, which supplies the platform or tools in the form of devices or software which allow the business owner to conduct the payment, and which provides risk-management services, by assuming some risk of default and/or fraud on the part of the merchant.
  • The Credit Card Networks, which are the global entities that facilitate the payment networks all around the world, for example, American Express, Visa and MasterCard. (also known as Association Members)

The Process of the Transaction

An e-transaction process takes place once the cardholder swipes their credit card or enters their credit card details on a website when making a purchase. The purchase information is sent to the issuing bank by the acquiring processor. After being relayed to the credit card network, the information is used to clear payment and request permission from the issuing bank, this is known as authorization. The issuing bank verifies the validity of the card, and checks if there are sufficient funds to undertake the transaction, then approves or declines the transaction. This response is sent back to the acquiring processor after which it is sent to the acquiring bank. Once this new authorization is received, the issuing bank places the amount paid on hold to be processed later, and a confirmation is issued, also known as authentication. When the payment is cleared, both the cardholder and the merchant will see the post in their bank statements. The entire process reflects in just moments despite involving several checks. The final step is clearing and settlement, which makes the funds available to the merchant. This step can take up to 1 to 3 days.

For more information on behind the scenes of credit card payments, or to sign up for a merchant account, please call (888) 924-2743 or go to

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