When a customer uses their credit card to make a purchase, it's the first step in a process that involves the merchant, the card issuer, and the card processor. Here is a basic outline of how this process works.
First, the customer inserts their card to make a purchase. This information is captured by the merchant through their point of sale system.
The customer's information and the details of their purchase are next sent to the card processor or the acquiring bank.
The card processor takes the information received and routes it to the correct card issuer through the card network (for example, all Visa cards are routed through the VisaNet network, while MasterCard transactions go through Banknet).
The card issuer then receives the transaction. They check the customer's account to make certain the funds are available or that they are in good standing and check the transaction information to make certain it is a valid transaction. Then the purchase is either approved or declined.
The issuer's response is returned to the merchant through the card network.
Finally, the merchant receives the response. If the purchase was approved, the transaction is complete. If it's not, the merchant appraises the customer of the issue.
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This process occurs every time a customer makes a payment using a credit card, but thanks to high speed data transmissions and computers, it takes only a few seconds each time.