The Credit Card Payment Process – a Brief Guide

People often prefer to pay by credit card, instead of using cash or signing checks. It’s quick, convenient, and has lots of other benefits. For the ordinary consumer, it’s usually as simple as swiping their card and signing the receipt. Sometimes, they don’t even need a signature. But what happens in the background while that card is being swiped?

First, let’s look at the different ways credit card payments can be done:

  • Swiping at the cash register using an electronic keypad terminal
  • Slipping using a mobile keypad terminal
  • Using a smartphone app
  • Using a secure check-out option online
  • Using a virtual terminal online

In all these credit card transactions, some aspects of the back-end procedure are still the same, and in some they are different. Either way, there are several steps.

Customer verification

In the case of online transactions, once the customer types their details onto your online store, electronic messages are exchanged between their bank, your bank, the credit card network (e.g. Visa, MasterCard, etc.) and the payment processor. These messages are transmitted through a secure digital system called a payment gateway.

The messages double-check things like whether the card was reported stolen, whether there are other indicators of fraud, and whether the purchase is within the cardholder’s credit limit. So, for example, if the credit card is stolen and the owner has blocked it, the transaction won’t go through. And while these checks may seem intricate and involved, the entire process takes less than a second. It’s virtually instant.

In the case of a transaction conducted through a physical terminal, the process is similar, but the communication occurs directly between the terminal and the banks, without the need for a payment gateway.

Making the connection

Once the customer’s identity and their account balance is confirmed, the transaction can go ahead. Cash leaves the issuing bank (that’s the customer’s bank), and then arrives at the acquiring bank (that’s your merchant account). The entire process is encrypted.

The transaction is logged immediately, so you will receive notifications confirming the cash transfer.

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

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