What is Credit Card Transaction Processing & How Does it Work?
Credit card transaction processing is the process of authorizing and settling credit card transactions. The process begins with the customer swiping their card at the point of sale (POS) or entering their card information online. The POS then sends a request to the acquirer, which is typically a bank, for an authorization code.
Once the acquirer receives the authorization code, they will send a response back to the POS with either an approval or decline. If the transaction is approved, the POS will print a receipt for the customer and the funds will be transferred from the customer’s account to the merchant’s account within a few days.
If the transaction is declined, the POS will print a decline message for the customer. The decline message will typically state that the card was declined or that the transaction was not approved.
The credit card transaction process is completed within a few seconds, but it can take up to a few days for the funds to be transferred from the customer’s account to the merchant’s account.
The credit card transaction process is regulated by the major credit card companies, such as Visa, Mastercard, and American Express. The credit card companies set the rules and regulations that all acquirers and merchants must follow.
There are two types of credit card transactions: authorization transactions and settlement transactions. Authorization transactions are obtained when the customer swipes their card at the POS or enters their card information online. Settlement transactions occur when the merchant submits the batch of authorization transactions to the acquirer for settlement.
The credit card transaction process is important for both merchants and customers. For merchants, it ensures that they are paid for the goods or services that they provide. For customers, it provides a way to pay for goods or services without having to carry cash or write a check.
There are a few things that can go wrong during the credit card transaction processing. If the POS is not able to connect to the acquirer, the transaction will be declined. Additionally, if the information that is sent from the POS is inaccurate, the transaction may be declined. Finally, if the acquirer does not have enough funds to cover the transaction, the transaction will be declined.
Despite these potential problems, credit card transactions are typically very smooth and easy. The process is quick and easy for both merchants and customers. Additionally, credit card transactions are very safe and secure. Credit card companies have a very low tolerance for fraud, so merchants and customers can rest assured that their information is safe.