How Credit Card Processing Works

Have you ever wondered how credit card processing services
work? With the average credit card transaction there are six
participants in the transaction. the buyer the seller the acquiring
banks payment processor the credit card interchange the bank or
company who issued the buyers credit card the sellers acquiring
bank With online payment processing via Ecommerce trades, there is
an additional participant. The first step in an online payment is
the payment gateway, which initiates the online transaction. All
other steps are identical no matter where payment originates. A
customer who makes a payment online will have their payment first
go through the payment gateway, which will route the payment to the
applicable credit card processor for that type of card. The
processor passes the payment request on to the credit card
interchange. After the payment request clears through the
interchange it goes on through to the bank that issued the buyers
credit card. The available funds are verified to see if its safe to
pass payment on up the line. The card number, the expiration date
and other information are also verified at this time for security
purposes. If payment is approved then the signal gets sent back
down the line to let the merchant know the transaction has been
approved for payment. Meanwhile, payment is made by the buyers card
issuer to the sellers merchant account provider, the sellers
merchant account provider accepts payment, and eventually the
payment passes on to the sellers bank account. With the exception
of payment to the merchant, this whole process amazingly takes just
a few seconds. The actual payment to the merchant usually takes
place the next calendar day, depending on the card issuer. If you
have a Merchant Perfect merchant account all Visa, MasterCard, and
Discover, payments are transferred into your bank account the next
day. Each step in this process incurs a fee. Merchant account
providers pay these fees, and charge the seller a transaction fee
and a payment fee that is a percentage of the sale, which covers
the cost of all the fees down the line, and allows merchant account
providers to make a profit after paying overhead.