The Steps In Credit Card Processing

Authorized banks when they are members of the Credit Card Associations of Visa and MasterCard make the underwriting for small business merchant accounts. Appraising the risks involved in permitting a merchant to accept credit cards through a full-scale analysis of the credit history is what the underwriting process is all about. As a merchant account processing service is a type of credit, the authorizing banks have to ensure that the applicants are genuine with good records.

Credit card merchant processors verify, authorize, and settle a card payment before it is issued to a merchant. The processor gets the transaction info at the closing of the business day and deducts processing costs and issues the amount to the merchant's checking account. Next step is waiting for the card-issuing bank to remit the payment. In this stage if any fraud is detected or any disputes arise between the parties, the money transaction will be cancelled. The Credit Card Association will initiate fines on the credit card processing company that has underwritten the account of a merchant who creates a high charge back of over one percent.

The merchants get their processing service from Sales Organizations that work independently. These organizations have the license agreement by the Credit Card Associations and also hold good relationships with processing banks of credit cards. The processing bank (merchant bank or acquiring bank) after the signing of the processing agreement is responsible for getting the merchant's card transactions and granting the transaction amount deducting the processing costs. These banks, the processing or acquiring banks, also act as the card issuers in many of the cases.

The credit card supplier at first loads a payment into the system to initiate the process. The card supplier will be the middleman during the transaction process. The owner of the card has the authorization through the credit card numbers and expiration dates.  Confirmation numbers will be given to the institutions upon completion of the transaction.

Credit cards can be processed through online and offline methods as desired by the cardholder.

Offline processing of credit cards

This type of processing is very slow. Bur it has the advantage that it is cheaper compared to online processing because it is less complicating and one need not to have the credit card in-hand while payment processing is going on.

Online or real-time credit card processing

In case of online processing everything is fast from order processing to authorizations. The credit card owner makes the transactions, while the retailer gets them through an online mercantile account.

The salesman in due course verifies the card owner when it gets approved, and then the owner is given notification about the accepted order. The total approved amount then will be billed to the credit card. Accepting a card in real time or online is little bit complicated and it is expensive also. Online card processing may be better for merchants that perform large amounts of credit card transactions and for them they require the fastest way to process their cards.

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