Credit Card Processing

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Credit card processing involves the following parties:

1.    The customer; the owner of the credit card who is going to make the purchase.
2.    The merchant business who is selling the product or service to the card holder.
3.    The service provider which provides the credit card processing service to the merchant. Usually called the acquirer.
4.    The institution which issued the credit card to the card holder. Usually called the issuer.
5.    The network which acts as a gateway between the acquirer and issuer. For example Visa, MasterCard. They will authorize and fund the transaction.

As the merchant swipes the card or when the online form is filled up, the card details and the transaction is validated by the acquirer through the issuer.

After the transaction is over with the customer, the merchant will send such collected transactions to the acquirer at the end of the day to receive payment.The acquirer sends this to the gateway network that will debit the issuer and credit the acquirer for the amount of the transactions.

When the customer places the order his credit limit is reduced by the transaction amount, but no actual money is deducted. Once the merchant has shipped or delivered the goods then the usual process takes place and the customer’s card gets debited.

Once the acquirer receives his payment, the merchant in turn gets his account credited. The merchant receives the transaction amount minus a fee charged by the acquirer to process the transaction.

It usually takes 3 days for this full process to be completed. A few good acquirers offer a next day credit to the merchant.

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