Since the time you go to know about those products and services needed for business to keep their business function smoother. That’s why business owners and managers tend to be considered savvy consumers.
It’s understandable how online credit card processing enables you to get paid. You need to select a credit card processing company. Credit card processors are important partners in processing payments’ core services, making it a critical business decision.
If you want to understand how online credit card processing works, you must learn about some terms and their roles in accomplishing the transaction.
8 Important Terms For Credit Card Transaction:
Cardholder: A person who owns the credit card issued by the bank and makes its transaction to pay for their goods and services, generally known as the named Cardholder.
Merchant: This term devotes business types that accept card payments in exchange for goods and services.
Merchant Bank: A merchant bank maintains and establishes merchant accounts. It allows merchants to accept deposits from credit card payments.
Payment Processor: These companies process the transaction made by credit cards.
Payment processors link merchants, merchant banks, card networks, and others to make card payments done.
Issuing Bank: The banks, credit unions, and other financial card issuers issue the credit cards to cardholders for running the transaction at an easier and smoother pace for their goods and services.
Card Association: these are merchants that set interchangeable rates and qualification guidelines and act as mediators between the issuing bank and the acquiring bank. For example, Visa, Mastercard, Discover, and American Express.
What are the three stages of online credit card processing?
Authorization: Payment authorization is a process of online credit card payment where the amount to be verified is to be paid via payment methods.
In terms of payment authorization, It is necessary to check whether a card holder’s credit card holds sufficient funds for approving the purchase or not.
The first request for authorization goes to the merchant acquiring bank to determine the card holder’s bank account. If the card holder’s credit is lined and managed, only the payment can proceed further. Once the transaction is approved, the amount is deducted from the bank account, and the Cardholder gets a notification ping on their mobile phone and can also carry a receipt in their hands.
Settlement is just the next stage after authorization; it comes with exchanging funds between the card issuer and an acquiring bank to complete the cleared transaction. Here banks reimburse the amount mentioned over the network that they need to be accomplished. During settlement, there might be a stage of Chargeback. It is a refund initiated by a credit card holder with their point of sale terminal. Interchangeable fees are deducted from the bank account while settling down the transaction with every credit and debit transaction.
Funding: Credit card funding is the mode of transacting to the new account, business, and other ventures by electronic funding, allowing users to utilize already available sources of funds that can be borrowed and then repaid with a decided interest rate.
Earlier authorization, settlement, and funding take days for processing, but now it can be handled overnight by helping merchants get paid quickly.
