Understanding the Steps of Credit Card Processing

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Understanding the Steps of Credit Card Processing

Posted On : Feb-16-2010 | seen (693) times | Article Word Count : 792 |

Accepting credit cards at your business can dramatically increase your customer base, resulting in the growth of your business and an increase in your sales and profit. Opening a merchant account is an important step in the credit card process. But before you begin your search for a merchant account services provider, it’s probably a good idea to be sure you understand what is involved in an average credit card transaction, both in a retail establishment and in an online or mobile business.
At first glance, and especially from your customer’s point of view, the credit card process involves swiping a card through a scanner, or handing the card to the seller who will enter the card information, and waiting for an approval message to appear on the register or scanner screen. But in fact, credit card processing is an involved series of events and transactions that ultimately ensure the transaction is valid and that you will receive payment for your business’ goods or services. And the course of those events and transactions will vary, based on whether your business is a retail establishment, or whether you accept payments online or on the road.
Unlike a cash transaction, where cash from the sale is immediately deposited into a cash drawer and, usually later that day, into an account, proceeds from credit card transaction take a little longer to show up in the merchant’s bank account.
These guidelines will offer an overview of the steps involved in processing a credit card transaction, enabling you to more fully understand the services and benefits you can expect from your merchant account provider.
• In a retail establishment, the transaction begins when the buyer swipes his or her card through a countertop credit card terminal, or hands the card over to the sales clerk, who then manually enters the card information or swipes it through a terminal attached to the register. In an online or mobile transaction, credit card information is entered manually through a computer keyboard or a cell phone, either by the buyer (for an online purchase) or the business representative (during a mobile transaction). For businesses using telephone ordering as part of their process, the card information is entered by a telephone representative, or may be captured through an automated ordering system.
• Once the credit card information is entered into the system, it is transmitted to the card issuer. The transaction information contains the credit card data, including the cardholder’s name, as well as the date and the amount of the transaction. In online and mobile transactions, a “gateway provider” will handle the automatic transfer of information, while in a retail establishment, no gateway is needed and information is usually transmitted directly between the card issuer and the merchant’s establishment.
• After the data is transmitted to the card issuer, the use of the card is authorized and the amount of the sale is compared to the cardholder’s available balance.
• Based on the data transmitted, the card issuer will either approve or deny the transaction. At this point, if any “red flags” have been attached to the use of the card (for instance, if it has been reported stolen or if the account has been closed or suspended, or if the card is out of date), the card issuer will return a message that the card has been denied.
• If the transaction is approved, an approval message is transmitted to the merchant, or appears on the cell phone screen or computer screen and a receipt is generated for the customer, either online or on paper.
• At this point in the transaction, a hold is placed on the cardholder’s account in the amount of the transaction and the available balance is reduced by that amount. From the customer’s point of view, the transaction is completed.
• At the end of the business day, or in the case of online businesses, at a predetermined time during the day (often at midnight EST, or midnight in the time zone of the card issuer), the transaction is actually processed by the card issuer, and fees and charges are deducted from the amount of the transaction. These fees are usually based on the amount of the transaction and your sales volume, and are defined by your merchant account agreement.
• Once the transaction and account fees are deducted, the remaining amount is deposited into the business bank account associated with the merchant account.
As you can see, although a credit card transaction may appear simple to the untrained eye, the steps actually involved in processing a credit card transaction are involved and complex. Understanding the underlying mechanisms involved in accepting credit cards can make you a more educated consumer during your search for the ideal merchant account for your business.

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<h1>Understanding the Steps of Credit Card Processing</h1> Author: <a href='http://www.articleseen.com/profile_zabel9.aspx'>zabel9</a> Accepting credit cards at your business can dramatically increase your customer base, resulting in the growth of your business and an increase in your sales and profit. Opening a merchant account is an important step in the credit card process. But before you begin your search for a merchant account services provider, it’s probably a good idea to be sure you understand what is involved in an average credit card transaction, both in a retail establishment and in an online or mobile business.
At first glance, and especially from your customer’s point of view, the credit card process involves swiping a card through a scanner, or handing the card to the seller who will enter the card information, and waiting for an approval message to appear on the register or scanner screen. But in fact, credit card processing is an involved series of events and transactions that ultimately ensure the transaction is valid and that you will receive payment for your business’ goods or services. And the course of those events and transactions will vary, based on whether your business is a retail establishment, or whether you accept payments online or on the road.
Unlike a cash transaction, where cash from the sale is immediately deposited into a cash drawer and, usually later that day, into an account, proceeds from credit card transaction take a little longer to show up in the merchant’s bank account.
These guidelines will offer an overview of the steps involved in processing a credit card transaction, enabling you to more fully understand the services and benefits you can expect from your merchant account provider.
•	In a retail establishment, the transaction begins when the buyer swipes his or her card through a countertop credit card terminal, or hands the card over to the sales clerk, who then manually enters the card information or swipes it through a terminal attached to the register. In an online or mobile transaction, credit card information is entered manually through a computer keyboard or a cell phone, either by the buyer (for an online purchase) or the business representative (during a mobile transaction). For businesses using telephone ordering as part of their process, the card information is entered by a telephone representative, or may be captured through an automated ordering system.
•	Once the credit card information is entered into the system, it is transmitted to the card issuer. The transaction information contains the credit card data, including the cardholder’s name, as well as the date and the amount of the transaction. In online and mobile transactions, a “gateway provider” will handle the automatic transfer of information, while in a retail establishment, no gateway is needed and information is usually transmitted directly between the card issuer and the merchant’s establishment.
•	After the data is transmitted to the card issuer, the use of the card is authorized and the amount of the sale is compared to the cardholder’s available balance. 
•	Based on the data transmitted, the card issuer will either approve or deny the transaction. At this point, if any “red flags” have been attached to the use of the card (for instance, if it has been reported stolen or if the account has been closed or suspended, or if the card is out of date), the card issuer will return a message that the card has been denied.
•	If the transaction is approved, an approval message is transmitted to the merchant, or appears on the cell phone screen or computer screen and a receipt is generated for the customer, either online or on paper. 
•	At this point in the transaction, a hold is placed on the cardholder’s account in the amount of the transaction and the available balance is reduced by that amount. From the customer’s point of view, the transaction is completed.
•	At the end of the business day, or in the case of online businesses, at a predetermined time during the day (often at midnight EST, or midnight in the time zone of the card issuer), the transaction is actually processed by the card issuer, and fees and charges are deducted from the amount of the transaction. These fees are usually based on the amount of the transaction and your sales volume, and are defined by your merchant account agreement.
•	Once the transaction and account fees are deducted, the remaining amount is deposited into the business bank account associated with the merchant account.
As you can see, although a credit card transaction may appear simple to the untrained eye, the steps actually involved in processing a credit card transaction are involved and complex. Understanding the underlying mechanisms involved in accepting credit cards can make you a more educated consumer during your search for the ideal merchant account for your business.About the Author: Karen Zabel is a freelance writer who writes about <a rel="nofollow" href="http://www.northamericanbancard.net/">North American Bancard</a>. Article Source: <a href='http://www.articleseen.com/Article_Understanding-the-Steps-of-Credit-Card-Processing_11096.aspx'> http://www.articleseen.com/Article_Understanding the Steps of Credit Card Processing_11096.aspx</a>

Article Source : http://www.articleseen.com/Article_Understanding the Steps of Credit Card Processing_11096.aspx

Author Resource :
Karen Zabel is a freelance writer who writes about North American Bancard.

Keywords : North American Bancard, Credit Card Processing,

Category : Business : Business

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