How Credit Card Processing Work

by : Steve Depraida

There are, basically, five key elements to consider in the entire credit card processing system. This starts with the bank that issues the credit card, and includes the consumer who uses the card to make purchases, the merchant services account where the funds are initially transferred, the acquiring bank that authorizes the transaction, and lastly, the merchant bank where the funds are wired and the transactions completed. The basic credit card authorization process remains the same whether you are operating in the physical environment or online environment. The difference lies in the level of security involved in processing the credit cards. This is, basically, how credit card processing works and what should be kept in mind before hiring a credit card processing service provider.

In a retail store, where the business owner or the retail merchant is dealing with his customers face to face, he personally swipes the card in the processing terminal and the machine dials the acquiring processor for credit card authentication. The transaction is then sent to card association, which then forwards the same to the issuing bank. The credit card transaction is either accepted or rejected by the issuing bank. If accepted, the credit card processor is contacted by the card association with the card authorization and a request is sent to the merchant through the POS terminal to deliver the goods and services. The merchant is then required to send a notice to the credit card company that he/she has already delivered the goods or they are ready to be shipped. Finally, the amount is captured from the credit card when the credit card authorization information is forwarded to the issuing bank and the customer's credit card is charged. When the merchant is ready to settle the batch, the credit card transaction is finalized by the acquiring processor with the issuing bank and the money is transferred into the businessman's personal account.

Merchant accounts have a number of benefits. Merchant accounts make financial transactions flexible and versatile. With merchant accounts, you will have the liberty of accepting a variety of credit/debit cards from your customers. This will definitely help you attract more customers, thereby increasing your profits.

By logging on to, the online website of Advanced Merchant Services (AMS), you can have the opportunity to associate your business with the best merchant service provider in the industry. Advanced Merchant Services provides merchants with a number of unique advantages that will help cut back on the monthly service charges by several hundred dollars. For example, AMS offers a free credit card terminal with every new account. Moreover, the rates offered by AMS are the lowest in the market. AMS, unlike its competitors, won't bind you to expensive contracts or make you pay heavy termination fees. To know more about AMS, please visit us at