Credit Card (Charge Cards)

How are credit cards cards charged?

When you, the credit card merchant, want to accept a credit card for payment, the following process occurs: The following is a brief summary:

1) You submit an "Authorization Transaction" to your processor using your preferred processing system (POS terminal, PC software, etc.)

2) The processor accesses the Visa/MasterCard network to communicate the authorization transaction (including the transaction amount) to the issuing bank. This ensures that the card is valid and that the transaction amount does not exceed the cardholder's credit limit.

3) Besides authorizing the transaction, the authorization puts a "hold" for the transaction amount on the cardholder's credit limit. That way, the funds are available to you when you complete the transaction.

4) If the authorization succeeds, you will submit the deposit transaction to receive payment. By doing this, you are promising the processor, sponsoring bank, and issuing bank that you are prepared to deliver the goods and services expected by the cardholder.

5) Your processor requests the issuing bank to deposit the net settlement amount into your bank account at your sponsoring bank.

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