The Ins and Outs of Retail Credit Card Processing

Credit cards have become an important part of shopping for people in today’s economy. They provide customers with revolving credit lines that can be utilized at almost every retail store nationwide.

While using a credit card as a form of payment is as simple as sliding it through a card read reader, credit card processing is a complicated, multi-step process that happens behind the scenes. Understanding how this works can shed some light on why this type of payment is so popular.

Card Reading

The first step in credit card processing is to capture the card’s information using one of a number of card reading methods. Many retail stores often have specialized card readers that are tied directly into their point-of-sale system. This will allow cashiers to effortlessly integrate card processing into retail transactions.

Store owners can also equip their employees with smartphone retail credit card readers in order to capture their client’s data while on the go. Aside from using technology to read the magnetic strip found at the back of the card, a retailer can also key card information into their individualized point-of-sale system manually. This method is perfect for a company that is selling products over the phone or online where physical credit card reading is not possible.
 
Retailer’s Accounts

All retail companies that accept credit cards need to sign up for service with a merchant account provider. A seller’s transaction processing systems sends captured retail credit card data along with the transaction information straight to their merchant account provider. Their provider then passes the data to a card network interchange. This interchange connects credit card providers and banks around the world.

Network Interchange

The merchant account provider then passes this information through a network interchange to the institution that holds the retail credit card account. They will assess the credit card’s account current balance against its transaction amount limit. After checking, payment for the transaction will either be authorized or denied. The credit card provider then returns this information to the company that holds the retailer’s account. All of this usually takes as little as three to four seconds.

Payment Results

After receiving an authorization or denial for payment, the provider that holds the retailer’s account does a couple of things simultaneously. The company first notifies the seller of the outcome, and they in turn inform the buyer. If a transaction is accepted, the retailer account provider sends the credit card and transaction information back through the network interchange to the seller’s bank. The seller’s bank then requests the authorized funds to be transferred from a buyer’s credit card company.

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