The Flat Plastic That Runs Our Lives: Credit Card Basics

All of us use the plastic cards. They can be a blessing or a curse depending on how you use them. They can rule your life or you can rule over them. They are both debit cards and credit cards.

The Flat Plastic That Runs our Lives: Credit Card Basics

First, credit cards need to be issued to consumers. Credit card companies prescreen individuals to qualify them or consumers fill out applications themselves. A credit card application processing system helps credit card companies prescreen customers. Once credit cards are out in the world then the fun of spending can begin.

In order for a credit card transaction to occur there are several variables that need to be in place. First, there has to be a credit card holder in the picture. Second, there has to be a merchant that is selling a product or services that the card holder determines they can’t live without. Third, you need a financial institution or another such organization that provides the card processing services to the merchant. Then there needs to be a card association involved. VISA MasterCard or Discover are several of the major card associates that consumers might be familiar with. Finally, the institution that issued the credit card to the consumer is also involved.

So, there are a lot of people involved in one simple credit card transaction. Who knew? Most of us just think of the application we filled out or the paperwork we received in the mail with the new credit card. From there we dialed a number to authorize it and we started to use it.

When the flow of information and money happens between a consumer and merchant there are several important steps that take place. The essential first step is an authorization which takes place to ensure that the transaction amount and the card number are both valid. This protects the merchant and the card holder. Then, from here, the transaction, almost instantly, is authorized and batched until later. Usually at the end of day the transaction is sent to the acquirer to receive payment.

Settlement is the best for merchants. They like when they get paid. The transactions in the batch are sent through to the card association. Money switches hands, people are paid for their services and then the merchant gets paid. In most cases, this can take up to three days. This depends on whether or not you are using a debit card or credit card.

Often times small business owners have to charge the credit card processing fee back to the consumer. Usually it is around a $.50 charge. In these situations, consumers just need to remember cash if they don’t want to pay the fee. Unfortunately, credit card processing can be an expensive part of owning a business; that is why they have to charge it back to the consumers.

We use them on an almost daily basis but we often don’t think about the process that takes place with a single swipe. For many of us we need to control the urge to let the ease of credit card use control how much money we spend. It can be easier to spend money we don’t have when we don’t see it leaving the bank. There is a lot involved in a single credit card transaction. From the merchant side to the consumer’s side there are a lot of variables to take into consideration for each simple transaction. Credit cards may not be going away soon but at least we can understand them a little better.

About the Author: Rebecca Beckett is a freelance writer for Innuity. If you would like more information about Prescreen or Credit Card Application Processing System go to Zoot Enterprises.