Credit cards have undoubtedly made our lives a lot easier. Since their inception, they’ve continued to impact our daily routine in more than one way. The little travel credit card you have in your wallet is quite a powerful tool. It enables you to purchase items anywhere at any time you like.

But have you ever wondered what goes behind the scenes and how credit card processing works? Let’s take a deeper look into the entire payment process.

Authorization

Authorization is the first step that takes place in the entire process. The merchant is required to take approval to deduct money from the credit card from the issuer. So, when a cardholder gives their card to pay at the POS, the information is acquired and transferred to the acquiring processor.

The bank forwards crucial credit card information to the network (Visa, Mastercard). The network approves the transaction and then proceeds to get the relevant approval from the bank that issued the credit card. This leads to the next step, which is authentication.

Authentication

At this stage, the bank that has issued the card verifies all the important information. Some of the information will include:

• CVV number
• Available funds
• Billing address
• Credit card number
• Expiration date.

The bank that issued the credit card to the customer will make a decision and send the appropriate correspondence to the area where the transaction occurred. Upon authorization, the merchant will go ahead with the transaction. The customer will get the receipt which indicates that the transaction is complete.

Clearing and Settlement

The last stage is the clearing and settlement, where the transaction appears on the customer’s monthly bill and the merchant statement. Merchants send a batch of approved transactions to the relevant forum, which then is rerouted to the network to ensure a swift settlement process.

Within 24-48 hours, the credit card issuer will provide the necessary funds to the merchant and deduct the interchange fee shared with the merchant (that’s how Visa and Mastercard make money!)

The network holds the money and makes the relevant payment to the acquiring bank and processor their due share, and the acquiring bank credits the merchant’s account for the purchases made by the customer. The issuing bank posts the transaction to the customer’s account, which they can see when they receive their monthly statement.

Where to Apply for The Best Credit Cards

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