There are several methods of processing credit cards. Most credit card transactions are sent electronically to merchant processing banks for capture, deposit and authorization. There are many ways for presenting a credit card sale to the system. In most circumstances the entire magnetic strip is read by swiping a credit card into a terminal or reader where a computer chip is read. Or the credit card is manually entered into a credit card terminal, website or computer.
Methods of Processing Credit Cards
- Credit Card Terminal – It is a piece of electronic equipment that allows a merchant to swipe or key-enter a credit card information, as well as other information required to process the transaction. Although it is a dedicated piece of equipment for processing credit cards only, it can also process gift cards and check verification. When a credit card is swiped through a magnetic stripe reader or keyed into the keypad, the terminal contacts the network to verify whether the credit card can be authorized. The transaction is stored on the machine waiting for the polling window to open. It will then either upload the electronic funds directly to the merchant bank or the polling service provider will dial to collect, process and submit the data to the merchant bank.
- Automated Response Unit – It allows the manual keypad entry and authorization of a credit card over a landline telephone or a mobile phone. That is why it is also known as voice authorization, capture and deposit. In this method, the merchant imprints their customer card with an imprinter to create a customer receipt and copy of the merchant. The transaction is instantaneously processed over the phone.
- Payment gateway – This is an e-commerce service that authorizes payments for e-businesses and online retailers. It is comparable to physical point-of-sale in retail outlets. This is different from a merchant account provider. However, some companies use a third party payment gateway. The gateway has two components. The first component is the virtual terminal where the merchant can securely login and key in the credit card number and the second component is the website’s shopping cart connected to the gateway through an API so that real time processing can be performed from the merchant’s website.
- Level 2 or Level 3 Processing-Purchasing Card – The most popular method of processing card is the one used by Visa and MasterCard. These cards are specialized and many corporation and government agencies are using these cards to pay for service providers and suppliers.
