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The Life of an Online Credit Card Transaction

Date Added: February 24, 2009 10:40:10 AM
Category: Finance
Very frequently used credit card mode of payment is online transactions. But there are very confusions among the people in understanding how exactly the credit card works. As soon as the credit card is swiped by the cashier the credit card and payment details are sent electronically to merchant's acquiring bank. The bank then contacts the bank which issued the credit card. If the transaction is approved then the finance is then deposited on the merchant account. The processing steps of the online credit card processing in ecommerce sticks to the similar processing steps, except the physical credit card terminal which swipes your card in a retail store is replaced by the payment gateway like Authorize.Net, 2checkout, CHASE Paymentech, etc. Payment gateway is service provider which practice online payments in a secure way. Credit card processing scheme over all seems to be very similar to the system in an online store. It is as follows: Usually a merchant wants to have a merchant account along with the payment gateway account so as to set up credit card processing in his store. The whole procedure from the time a customer types his credit card number in an online store so as to pay for his order till he gets a response either the payment went all the way through is as follows: 1)As soon as on a safe site of an online store places an order and enters his credit card number, the shopping cart details of the order and billing information are seen by the store administrator. 2)Payment gateway secure server is then provided with the shopping cart details along with the merchant account for processing. 3)The transaction information is then forwarded to the merchant's acquiring bank by the payment gateway. 4)For the transaction verification, merchant’s attaining bank forwards the transaction information to the credit card issuing bank. 5)After verification of the transaction by the credit card issuing bank, response code is sent back to the merchant’s acquiring bank. The response could be a denial, approval and reason for denial if applicable. 6)Credit card transaction details and response are sent back to the payment gateway by the merchant’s bank. In case the payment is approved, the money will be deposited on a merchant’s account on planned time by the bank. 7)Transaction details are sent by the payment gateway and the response is reverted back to the merchant’s online store. 8)All the payment information like “credit card was charged”, “credit card was denied”, etc. is displayed to the customer. Fee is also taken at certain stages from the transaction total. But the amount of fee is dependant on the payment gateway used, merchant account, credit card type, and other factors. Generally the fee is 2-3 % of the total charges. For More information visit Credit Card Processing and Merchant Account Services.
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