How a Credit Card Transaction Works
January 22, 2014 by admin
Filed under Merchant Accounts
Most businesses understand that they need to be able to accept credit card payments in order to provide a wide range of payment options for their customers. However, a surprisingly high number of business owners are unsure about how a credit card transaction actually works. It’s important for business owners to understand this process in order to plan for handling their transactions and to know when something is wrong.
If you are confused about the credit card transaction process, Charge.com Payment Solutions, Inc. can help you with a step-by-step guide:
- When a person presents their credit card for payment, a business enters their credit card information into the system. This can be either by swiping the card on a terminal or, in the case of an Internet merchant account, by receiving it electronically through their eCommerce shopping cart.
- The credit card information is then sent to a processing network associated with their provider of merchant accounts. The processing network then provides the merchant with an authorization that allows them to capture the funds from the customer’s credit card. If there are insufficient funds or other issues, the request is denied.
- If authorization is approved, the business receives an approval with an authorization code. This is stored with the transaction information in the “batch” inside the terminal or computer. A receipt is either printed or delivered electronically for the client.
- At the end of the business day, the business “closes” the batch. This means that all of the credit card transactions that were received during the day are sent over to the provider of credit card merchant services. Once this is received, the merchant bank checks to make sure that the amounts in the batch match up with the authorizations they sent out during the same time frame.
- If there are any credit card sales that need to be voided or changed, the business owner needs to do this before the batch is settled. If there are no changes and everything matches up, the processing network sends a statement showing all of the credit card transactions that were approved since the last batch settlement. This can be broken down several ways including by type of card.
- The business receives the funds from a batch settlement anywhere from 48 to 72 hours after it is received and approved by their payment processor. Any fees associated with the credit card processing are taken out of the final deposit before it reaches the business’ account.
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This article was provided by Charge.com Payment Solutions, Inc. Go to their website to find out more about how they can offer an Internet merchant account for a business of any size.
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