Standing at the cash register to pay for your items means reaching for your credit card in some cases. The small electronic card reader faces the customer, ready to take your credit card information as you swipe your card through it. Swiping your credit card sets in motion the processing of your payment.
After you swipe your card through the card reader, the magnetic strip on the back of the card provides identification details from your credit card account. The card reader electronically transmits these details to the “acquirer” -- the bank with the job of making credit card payments for your credit card account. The acquirer moves the payment and account details to your credit card issuer for authorization. As long as you have enough credit available on your credit card, the issuer sends approval back to the acquirer and then back to the merchant. You’ll see an “approved” message on the card reader and you’ll be good to go with your purchase.
Merchants store credit card payments that come in each day to submit them together at the end of the day. This is called “batching.” The merchant will gather all credit card transactions and submit them as a group to the acquirer. The acquirer moves the payments through the process based on the authorization that occurred at the point of sale.
Clearing the Payment
After approving the credit card transactions, the acquirer sends transaction information on to the “card network” or credit card association. The card network has the job of routing transaction information to the correct credit card issuer to get payment. Part of the clearing process involves fee subtraction. Credit card issuers subtract an “interchange fee,” shared with the card network. The card network returns the financial data to the acquirer, which also subtracts a “discount fee.”
Show Me the Money
After the acquirer gets the financial data back from the card network, it sends the electronic funding for the transaction back to the merchant. In simple terms, the merchant gets the money to pay for your purchase. The time between the initial swipe and the final funding is typically 24 to 48 hours.
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