How are credit card payments processed?

May 17 2019 01:01 PM
How are credit card payments processed?

Credit cards have made transacting safe, quick, and convenient. Though making a payment via a credit card takes just a few seconds, the entire payment processing chain is complex. In short, when you swipe or enter the credit card details to make a payment, the information is routed through the merchant's processing company to the credit card network and finally to the issuing bank. On receiving such information, the bank either approves or rejects the transaction and sends the message in the reverse order to the merchant. But, all this happens in the blink of an eye!

Here is a step-wise illustration of how a credit card payment is processed so that you are better informed as a credit card user. 

Step 1: Consumer

The first step of a credit card payment process begins with you. When you swipe your card or use it for online purchases, you give your credit card information such as the number, your name, PIN, and others to the merchant.

Step 2: Merchant

Depending on how you choose to pay, the merchant collects your credit card information via a specific medium. For instance, if you wish to swipe your card, the machine reads your information to pass it on to the next level. Conversely, if you make an online payment, the merchant collects your information via an online payment gateway.


Step 3: Processor

At this stage, a credit card processor joins the payment process. The processor is responsible for passing on your information from the merchant to the credit card network in a secure manner. The processor is also responsible for facilitating communication between various parties like the merchant and your credit card issuing bank.

Step 4: Card networks

All credit cards work via one or the other credit card network including VISA, MasterCard, American Express, and the like. At this stage, the processor passes your information to your credit card’s network, which routes it to the next level.


Step 5: Issuing bank

Now, your credit card issuer receives your merchant’s payment request and verifies the details. They also check whether you have available funds, so as to approve the transaction. In addition, to protect you from fraud, the issuer also conducts security checks to make sure that the payment request is legitimate.


If everything looks good and you have sufficient balance, the issuing bank passes on the approval message in the reverse order. First, it goes to the network, then the processor and finally the merchant.


Step 6: Approval

If your payment is approved, the card reader shows an ‘Approved’ message. If it is rejected, you can read a ‘Declined’ message. Accordingly, the merchant presents you a receipt. If you have initiated an online payment, you will see an approved or declined message on the screen of the medium that you are using.

                  You can benefit from smooth transactions and payment processing when you have a good credit card in your hand. To make the most of a credit card, sign up for one that not only allows you to make credit purchases and payments but also offers added benefits. For instance, the Bajaj Finserv RBL SuperCard is a versatile 4-in-1 credit card. This not only serves as a basic credit card, but also lets you make interest-free cash withdrawals at any ATM, convert your purchases of Rs.3,000 and above into EMI, and avail interest-free emergency loans basis the available credit limit. Thanks to these features and the reward points you earn on achieving various milestones, you can make a savings of over Rs.55,000 per year on your SuperCard! To get started and enjoy instant approval, check your pre-approved credit card offer and view your tailor-made deal today! 

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