Credit card purchases seem quick and easy, but behind the scenes, a complex exchange of sensitive information is happening. Every time a customer swipes their card into a card reading device, the data being transferred goes through several different parties before the purchase goes through. Credit card processing is very secure thanks to this several-step system.
1. Customer Makes a Purchase
The customer collects their products of interest then takes them to a cashier or places them in a virtual shopping cart. They then enter the data from their credit card through an online payment gateway or have the cashier swipe their card. Other options include the customer providing the information by mail or over the phone.
2. The Transaction Begins
The information is handed over to the merchant when the credit card is entered manually into a virtual terminal and dipped or swiped through a secure card reader.
3. Data is Transmitted
The credit card data is passed through the point of sales (POS) system as encrypted information through a secure payment gateway. The information is then sent through the processing network to get approval.
4. The Transaction is Verified
The credit card processor verifies with the cardholder’s bank to make sure their information matches up with the account and that the balance available is enough to afford the purchase. Once the purchaser’s bank verifies the information, the credit card processing company is alerted with a confirmation.
5. Merchant and Processor Response
Once verified, the credit card processing company relays the information to the merchant. The merchant receives the results of the verification and then issues a receipt to the customer.
6. Transaction Is Completed
The merchant then allows the customer to leave with the products or ships them to the customer.
7. Batch Closure
Once the transaction is completed, a batch closure is performed. The transactions that were processed that day are closed out. The acquiring bank will then be transferred the information and the funds from the credit card issuers. The credit card processing companies transfer the amount of the purchases from the customer accounts to the merchant’s bank.
8. Funds are Deposited
This takes about 48 hours to process. The acquiring bank is provided the funds, where the processor deposits this amount into the merchant’s business account. If successful, the balance in the merchant’s account increases.
9. Merchant Pays a Credit Card Processing Fee
Because the credit card processing company performs the security check, transfers data between banking institutions, and readjustments of balance, they require a payment for the service. Every credit card purchase comes with a credit card processing fee that varies between 1.55% to 3.5% depending on the credit card issuer. This is usually paid at a monthly or annual rate, based on the merchant’s type of contractual agreement with the credit card processor.
Learn More On How to Minimize Credit Card Fees
While these fees are negotiable, the cost of each purchase often adds up over time for the merchant. The merchant can minimize the cost through programs that help them be compliant with the rules of credit card processors. You can click cashdiscountprogram.com to learn more information on how you can reduce credit card processing fees with the help of a cash discount program.
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