The Life Cycle of a Credit Card Transaction
This article deals with the life cycle of a credit card transaction. This method is used for
both retail and Internet / MOTO transactions. Processing
events and activities may vary slightly for any one merchant, merchant
bank, or Issuer, depending on card and transaction type, and the
processing system used.
The follow steps listed below is what happens when a credit card is processed.
- Cardholder presents the credit card at the point-of-sale. For Internet or Keyed in
transactions, the cardholder provides the merchant
with the account number, expiration date, billing address and any
special codes on the card.
- Merchant swipes the card or enters the information by hand,
enters the purchase amount and transmits the authorization request
to the Acquirer.
- Acquirer electronically sends the authorization request into
- Interchange passes on the authorization request to the Issuer.
- Issuer approves or declines the transaction.
- Interchange forwards the Issuer's authorization response to the
- Acquirer forwards the response to the Merchant.
- Merchant receives the authorization response and completes the
- Merchant closes the batch and submits the transactions to the
acquirer through their merchant account.
- Acquirer electronically submits transactions into Interchange for
settlement. It also credits the merchant's checking account for the
submitted transactions once settlement information is received
from Visa and MasterCard Interchange (called funding).
- Interchange facilitates settlement by sending settled transaction
information to the issuer and acquirer and providing both with
information on what to credit the merchant, what to debit the
cardholder and the type and amount of the interchange fees that
are to be paid by the acquirer to the issuer.
- Issuer posts the transactions to the cardholder accounts and
sends the monthly statements to its cardholders.
- Cardholder receives statements and pays issuer.
Member banks (both Issuers and Acquirers) do not always handle the
processing of the transactions (authorizations, clearing and settlement)
themselves. In many cases they outsource this to third party processors.
Examples are Global Payments, Vital, Paymentech and
Front-End Vs. Back-End Platforms
Since credit card processing terminals and systems
talk directly to an authorization or
front-end platform, it is important to understand which terminals are compatible
(certified) with what platforms. Contact us for a detailed compatibility matrix.
This information has been provided by USMS.
Credit Card Processing Articles
Merchant Accounts |
Credit Card Logos |
- Why Should you Accept Credit Cards?
- The Different Types of Merchant Accounts
- How to Avoid Credit Card Processing Downgrades
- Merchant Account Responsibilities
- The Different Types of Credit Card Machines
- What is a Merchant Account?
- Why Avoid Credit Card Terminal Leases?
- 3 Ways to Save Money on Credit Card Processing
- Credit Card Processing Checklist
- Pros & Cons of Credit Card Processing
- What to Expect in Your Monthly Statement
- The History of Credit Card Processing
- Recent History & Future of Credit Card Processing
- The Different Organizations of Merchant Services
- The Glory Details of Disputes, Retrievals & Chargebacks
- Understand All the Risk with Merchant Services
- Factors & Guidelines to Merchant Service Underwriting
- The Life Cycle of a Credit Card Transaction
Merchant Account Articles |
© 2014 Gotmerchant.com, LLC