Understanding How Online Credit Card Processing Works
Credit cards have completely transformed the way business is carried out today. They have made it easy, faster and safer. This is because technological advancement has made passage of information much faster. Again physical handling of cash has almost been eliminated. With emergence of online stores and online trading, things have become even more exciting. Most of us have credit cards but very few know exactly how online credit card processing works. When you visit a retail store and hand over your credit card at the till, the cashier swipes it through an electronic credit card reader an within seconds you are able to know whether your transaction has gone through or not. Online credit processing is not different. The same process takes place except that the physical swiping at the credit card reader does not take place in an online transaction. Instead, you are supposed to provide your credit card number in a secure online store. In online credit card processing transaction, the card reader is replaced by a payment gateway. A payment gateway is a secure online credit card processing service. For a merchant to effectively engage in credit processing business, he needs a payment gateway account as well as a merchant account.
When you enter your credit card number in a secure online store, the following chain of events takes place. All these processes take very few seconds.
a) Immediately you enter your credit card number, the information and the merchant account are immediately relayed to secure server that has that payment gateway account.
b) After processing, the data is now forwarded to the credit card issuing bank asking for authorization to transact. The issuing bank system checks the status of the credit card holder account. If the account is healthy, a positive response like card accepted is relayed back to the payment gateway and eventually on your screen.
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