14 / 02 / 17

How Does Credit Card Processing Actually Work?

Every time a bankcard is used, there is a series of carefully orchestrated steps involved before the payment is fully processed. Understanding how credit card processing works can help merchants save on unnecessary fees and markups, and choose the best credit card processor for their business.

Before we get into the step-by-step breakdown of a credit card transaction, let?s introduce the five key players that are typically involved:

  1. The cardholder is any consumer or business using a credit or debit/check/ATM card.
  2. The issuer is the financial institution that issues a credit or debit card to a cardholder.
  3. The merchant is an authorized acceptor of credit and debit cards for the payment of goods and services.
  4. The network is the system that acts as an authorization service for card transactions, as well as a clearing and settlement service to transfer payment information between parties.
  5. The acquirer is the financial institution that contracts with the merchant for card acceptance and enables card payments from customers.

Now that you understand who is involved in a credit card transaction, here is how it happens:

Step 1: The customer decides to make a $50 purchase with a credit card.

Step 2: The credit card is swiped through a processing terminal, and that terminal recognizes the card and contacts the issuer (the bank that issued the card).

Step 3: The customer?s bank sends $50 to the merchant?s bank through a certified merchant services provider (this is where Aliant comes in).

Step 4: The merchant?s bank deposits the payment into the merchant?s bank account.

Step 5: At the end of the month, a statement is sent to the merchant that details the interchange for all transactions that month ? which is the fee set by credit card companies for merchants to accept their cards.

Here at Aliant, it is our job as the acquirer to ensure smooth credit card processing from start to finish, from confirming the authorization of the transaction, to the funds captured from each issuer to the direct deposit of your funds into your bank account. Our merchants can rest assured that their customers? online credit card processing transactions will be swift, secure and seamless ? every time.

Are you interested in getting started with Aliant? Click here to receive a personal consultation and pricing quote for your merchant service needs!

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