Credit Card Payment Processing

Credit cards are no longer things that are labeled as “for the rich”. In fact, many people have chosen to rely on credit cards for certain purchases and transactions. Although credit card transactions are fast and easy, some people may wonder how online credit card payment processing works. If you are part of that population, allow this card to shed some light on credit card payment processing. This may also help clear up any kind of misunderstanding that may be causing you not to get a credit card or not to get a merchant account for your business in the first place.

The First Phase of Credit Card Payment Processing

When it comes to credit card payment processing, always remember that it has two phases. The first phase is the authorization phase. This is basically getting the transaction approved. It is at this phase that a consumer or card owner will find out if using his card will cause it to be declined or not. There are many reasons for a card to be declined. One good reason, for example, is that the customer has entered a non-existent or erroneous credit card number. If a card is declined, the card owner will be asked to try a different payment method. If it clears, however, the buyer will then be asked if he or she wants to confirm the order.

The Second Phase of Credit Card Payment Processing

The second phase of credit card payment processing is the settlement phase. It is in this stage that the amount is credited from your card and then transferred to the merchant’s account. Basically, it’s where the merchant approves his end of the transaction and accepts the payment. There are different ways for this phase to happen depending on what the online establishment method is using. PayPal, for instance, often uses a separate authorization and capture process. Many companies utilise a method known as ACH Payment Processing.

Why Do People Use Credit Card Payments Online?

Whether you are a consumer or a merchant, using and paying with credit cards is a very convenient method of shopping and accepting payment. Also, with the aforementioned processing phases, it provides a certain level of security. Merchants can track a person’s identity using the credit card and they can also make sure that they are not receiving “bad checks” of any sort.

Consumers, on the other hand, won’t have to risk having to send a large amount of money through wire transfers and can always notify their bank or PayPal in case of scamming for any kind of refund.


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