PAY BY CARD
A credit card is a plastic token with magnetic stripe containing readable machine codes. It is a substitute for cash or checks used for e-commerce and Internet transactions. Credit card holders get credit limit from a card issuer. The credit limit is a 30-day cycle. The Cardholder pays at the end of the month. Failure to pay at stipulated time attract very high interest and penalties.
Process Of Using Credit Cards To Pay Merchants
A merchant account does not get credited immediately after the credit card used at POS. A transaction undergoes many processes before it finally hits the merchant account. It takes between 24-72 hours before payment reflects, some of these processes are.
● Authorization
In this stage, the credit card holder submits the card to the merchant. After swiping the payment service provider gets the transactions related information. The processor, in turn, transmits the details to the credit card network. In few seconds the processor sends a signal to proceed or decline the transaction.
Proceeding With Transaction Only Takes Place With The Following Information
- Credit card number
- Billing address of the cardholder
- CVV or credit card pin number
- Expiry date of credit card
- Transaction amount
- Credit card holder’s name
In most cases, the merchant can accept all major card brands. In rare cases, some merchants specify the types of credit cards they accept.
● Authentication
This is one of the most sensitive stages in any credit card transaction. The card issuing bank verifies the originality of the card. Sensitive tools determine and verify details of the cardholder. The card information is cross-checked with the information saved in the database of the bank. It also verifies the fund’s availability in the card holder’s account. The card issuing bank places a hold on the exact transaction amount. It communicates with the merchant through the card network. Once the acquirer approves the transaction then the receipt appears on the POS.
● Clearing and Settlement
Merchant compiles all transaction authorization and sends to his bank for onward processing. This is a daily activity. Merchant’s bank initiates clearing and settlement processes by contacting the card network. The card network also communicates with the issuing bank for release of funds. Within 24 to 72 hours the funds issuing bank releases
the funds. The card network plays a critical role in the approval and decline of any transaction. The card network charges an interchange fee. The merchant pays the interchange fee. The PSP or Merchant account acquirer can also mark up the charges by increasing the TDR or MDR. High Risk Merchants pay a very high Transaction rates.
Interchange rates depend on the transaction amount. Immediately the card network releases the fund to the merchant’s bank. The merchant gets the fund deposited into his account in no time.
● Declined Credit Card Transactions
A lot of factors are responsible for declining a transaction. Most common are insufficient funds or incorrect CVV/PIN Number. Other factors are inactive cards, reported stolen card and damaged/cracked magnetic stripe.
