|
|
|
How Credit Cards Work
ou find something you let’s just say the stripe
absolutely have to have, contains the account number,
slap down a piece of cardholder name, country code,
plastic and voilà – it’s yours! expiration date and other
Life sure is good, isn’t it? But validating information that’s
have you ever wondered what unique to the credit card issuer
happens behind the scenes, from and the banking industry.
the time your credit card gets
swiped (actually or virtually) The Credit Card “Family”
until the time the purchase shows
up on your credit card statement? Quite a few organizations are
involved in the credit card
Anatomy of the credit card purchase and approval cycle. Here
are the major ones:
Transmission of the account
number, a systematic rather than Acquiring Bank – The bank that
a random combination of numbers, the merchant works with to get
is where it all starts. The credit card purchases converted
account number identifies: the to cash and deposited into the
type of credit card being used merchant’s account.
(VISA, American Express, etc.), a
bank number, an account number Association – The family of banks
and a check digit. In the case of and credit card issuers that are
America Express, the third and behind a branded card. Fort
forth numbers indicate the example: Visa and MasterCard are
currency. associations.
Equally important is the magnetic Cardholder – That’s you and
stripe on the back and it tells anyone else who carries a credit
quite a story. For simplicity, card.
Authorization
Independent Sales Organization
(ISO) – This is the company that The multi-step authorization
provides basic credit card process goes on hundreds of
services to the merchant such as millions of times every day. This
merchant accounts and credit card behind-the-scenes flow of data
funding reports. forms the foundation of credit
card purchasing.
Issuing Bank – The financial
institution authorized by the The cardholder initiates a
Association to issue credit cards purchase from a merchant.
to cardholders.
The merchant access the Payment
Merchant – A place of business Gateway and transmits the
that is authorized to accept customer’s credit card and
credit cards for purchases. purchase details.
Payment Gateway – The company The payment gateway looks up the
that provides the credit card merchant’s acquiring bank and ISO
processing terminals and network details and forwards the
that ties the merchant to the transaction to the appropriate
credit card processing network. Payment Processor.
Payment Processor – The company The payment processor determines
that moves the approved funds the Issuing Bank’s ID and sends
between the various financial the transaction information to
accounts that exist between the that bank.
cardholder and the merchant’s
bank. The issuing bank verifies the
customer’s account status,
open-to-buy limits and security At the end of each day, the
details. If everything is in merchant performs a “capture
order, the bank deducts the routine” which sends details on
amount of purchase from the all completed transactions to the
cardholder’s available balance Payment Gateway. The Payment
(open to buy) and transmits an Gateway passes the data up the
authorization code back to the chain to the Payment Processor
payment processor. If there is which determines which issuing
any problem with the transaction, bank to send the transaction to.
the issuing bank transmits a The issuing bank electronically
“transaction declined” message. transmits the money to the
In cases of fraud, the bank may acquiring bank which transmits it
also issue an order to pick up to the merchant’s own bank
the card. account. And everybody is happy.
The payment processor passes the
approval or decline code back to the payment gateway. type="text/javascript">
google_color_border =
"FFFFFF";
google_color_bg = "FFFFFF"; type="text/javascript"
google_color_link =
"0000FF"; src="http://pagead2.googlesyndica
tion.com/pagead/show_ads.js">
google_color_text =
"3E3F43";
google_color_url =
|
|
| Recent Articles | Eliminating Debt
Debt seems to surround our modern life; we get up in the morning and put on clothes that we bought on credit, drive to work in a car that we borrowed money to buy, put petrol in our tank with a credit card, and spend 8-9 hours a day slaving away at work just so we can continue paying our ever-mounting stack of bills... Is Retail Therapy Coming Back To Haunt You?
Have you ever found yourself going shopping just because you were feeling a little depressed and needed something to do If so, you are not alone — a recent survey showed that 74% of the world's consumers admit to having shopped for purely recreational reasons, even though they did not need to buy anything
How can shopping be a cure for the blues... Purchasing A Home
Buying a house is normally the largest and longest-term debt that the average Australian will incur in their lifetime This alone can make buying a home a daunting undertaking, especially if you are a first-time homebuyer It is very important that you understand some of the basics involved in taking out your first mortgage... A Brief History Of Credit
The term “credit” can mean a number of things, depending upon its application To an accountant, a credit is merely the opposite of a debit Debits appear in the left tally column of a ledger and credits appear in the column directly to the right... Copyright (c) 2009 Isnare.com. All rights reserved. |
|
|
