How a Credit Card Transaction Works

The credit card payment process is an intricate one - from consumer verification and fraud detection to bank communication, multiple components come into play in order for a transaction to be successful. In mere seconds 24000 transactions can occur via the network of Visa-supported processing systems – that’s how advanced our financial infrastructure has become!

Starting with the customer initiating their purchase at point of sale, there are six major steps involved which combine to ensure each transaction runs smoothly. From merchant status verifications through effective Fraud Detection techniques - these elements must all work together efficiently so customers can trust they're getting what they pay for securely every time.

‍

1. Credit Card Holder: The person who owns the credit card submits an online transaction through a merchant’s website, software, or mobile application.  
2. Merchant: The merchant/business has a payment form or shopping cart that the credit card holder interacts with. The business’s online payment page displays the payment options, price, taxes, and approved or declined messages.
3. Payment Gateway or Credit Card Machine: The payment gateway or credit card machine is the software or hardware that facilitates the payment from the merchants store or website. The payment gateway or credit card machine is provided by a merchant services provider like Clearly Payments. This steps validates the consumer’s credit card and routes the transaction information to the Acquirer.
4. Acquirer: The acquirer is the “bank” that underwrites the merchant, meaning it takes on the risk in providing credit to the merchant. The acquirer processes the credit card payment and routes it to the actual credit card network such as Visa, Mastercard, Discover, or American Express.
5. Credit Card Network: The credit card network does verification on the validity of the credit card and communicates with the issuing bank, which is the bank that provided the credit card to the consumer.
6. Issuing Bank: The issuing bank provides the credit to consumers. The issuing bank will validate that the credit card is in good working order and validates there is enough balance of funds on the credit card to approve the transaction.