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The credit card transaction process in not intuitive, it is therefore helpful for small businesses to understanding what parties are involved in a card transaction and how it works.

Who Are the Parties Involved

The acquiring bank (otherwise known as the merchant account provider) is an institution that is required for a merchant to be able to accept card payments.

The card issuing bank is the bank that is employed by the customer to be able to purchase services or product with a credit card.

Credit Card Transaction Process

These are the steps that occur when a good or service is purchased using a credit card.

Credit Card Information Input

The two methods by which card information can be obtained are by swiping or keying. Swiping happens when the customer is physically present during the purchase (like at a restaurant, or pharmacy). The information is taken into a machine that reads the magnetic strip on the card.

When the customer is not physically present and the credit card transaction is done using the internet or over the phone or by mail order, then the information needs to be keyed in. This method requires the card number and additional information to protect the merchant and the customer from fraud.

Authorizing

After the card information is input, the merchant’s account provider connects to the customer’s credit issuing bank to ensure that sufficient funds existing for the purchase. If they do, then a hold is put on those funds and authorization code is sent back to the merchant and merchant account.

Batch Processing

During the course of the day the various merchant transactions are stored by the merchant account provider. By the close of the day these transactions are batch processed, which results in money being transferred from the card issuing bank to the merchant account bank. Before this done the card issuing bank subtracts a fee and then merchant account bank also takes a fee.

Here is example with hard numbers. If a $100 service is purchased and the merchant account fee is $0.50 and the card issuer’s fee is two percent then first $2.00 is subtracted and given to the card issuer and then $0.50 is subtracted and paid to the merchant account provider, leaving $97.50 for the merchant.

Want to Know More? Click Here For FREE Information on Credit Card Processing for Small Business. http://www.creditcardprocessingsmallbusiness.com.

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