A “Merchant” is any business establishment that accepts credit cards. For a Merchant to be able to accept credit cards, it should open a “Merchant Account” with a “Merchant Bank or Sponsoring Bank or Acquiring Bank”.
This would be the bank that receives the “Net Settlement Amount” from the issuing bank after the transaction is processed. The Net Settlement Amount is that amount of the actual sale less the transaction fees, also called the “Discount Rate”. There are times when the merchant has to pay “Pass-through Fees” because the transaction doesn’t meet some requirement.
Credit Card Processing Steps
A transaction would start when the magnetic stripe at the credit card’s back passes through the credit card terminal, or if the credit card account number is entered into the system. This enters the transaction information into the Processor’s network.
An “Authorization Request” would then be generated.
The Processor would link with the Visa/MasterCard network to transmit the Authorization Request to the Issuing Bank’s computer network.
The Issuing Bank would verify that a valid credit card number has been received, and that the Cardholder has enough money (“Open to Buy”) for the transaction.
A “hold” for that amount is placed against the Cardholder’s Open To Buy thereby reducing the amount of his or her Open To Buy for future transactions.
A “Deposit Transaction” will be transmitted after the approval is received. The merchant can then release the item that the Cardholder bought.
The Net Settlement Amount will be deposited to the Merchant’s account by the end of the same business day.
When Credit Card Processing Go Wrong
There are times, however, when the process hits a snag and human beings have to get involved. Although it is 100% computerized, the Visa/MasterCard network is programmed with many “triggers” that will route the transaction to a human being for closer scrutiny when one of those triggers are pulled.
The most common triggers are.
Spending patterns that are unlike the Cardholder’s usual purchases. Purchasing “high fraud” products or services. Purchases abroad. Some Card Issuers even require their Cardholders to notify them if they will be out of the country.
The amazing thing is, the entire process just takes a few seconds!
Akillia Ccekto shows you the best methods for potty training a puppy. Learn about how to potty train a puppy the easy way.
Other articles you might like;
Tags: credit, Credit Cards, finance, loans, personal finance