Online Credit Card Processing Tutorial - How Does A Transaction Work
This is a short Online Credit Card Processing Tutorial to help you understand the mechanics of this process. There are five key things involved in an online credit card transaction: the merchant, merchant bank, consumer, card holder issuing bank, and the acquiring processor. The merchant, using an account provided by his merchant bank, sells goods or services through his website. The consumer purchases those goods or services using a credit card provided by a credit card issuing bank.
As soon as the consumer enters his credit card information into a website, the data is encrypted and transmitted to the acquiring processor. Next, the acquiring processor contacts the card holder's bank, who either approves or declines the transaction depending on the amount of credit available for the card holder. If the transaction is approved, the transaction amount is reserved on the card holder's account, but the customer is not yet billed. Also, the approval is transmitted to the merchant's website and to the card holder. When the merchant delivers the merchandise purchased, the approved transaction amount is gathered to be settled. At the time of the settlement, the merchant transmits the batch of approved transactions to the acquiring processor, who collects the transaction amount from the card holder's issuing bank and deposits it into the merchant's bank account.
Before a merchant can begin accepting credit cards, he or she must first establish a merchant account with a credit card transaction processor or acquiring processor. The role of the processor is to determine whether or not credit card requests can be satisfied with the credit card issuer, and to oversee the transfer of funds from customer to the merchant's bank. Every credit card transaction request initiated by the merchant incurs a small fee from the credit card transaction processor. This is unavoidable, as the transaction processor is a necessary step in the process. You can look on the internet for reviews to find out the cheapest, fastest, or most reliable processor service available to you if you wish.
Transactions done under "automatic settlement" are settled once per day, at usually 2:00 A.M. Eastern Standard Time. All pending transactions for the day are settled at this time as well. At any time, you may look up the results of the most recent settlement, to be sure that all transactions you expect to be settled are indeed settled. Automatic settlement is the easiest method, in that you can be sure your transactions will be settled every day without intervention on your part. This method does, however, have a slightly higher processing fee than the standard or "manual settlement" method. Hopefully this Online Credit Card Processing Tutorial answered a few of your questions.
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