The credit card is a commonly used financial tool and its use forms an important part of personal finance. A credit card though simple to use has a networked system and structure that enables payment through a plastic card with minimal chances of misuse and fraud. The credit card industry mainly comprises of:
- Card Provider: Cards providers are very few in numbers. Some of the known credit card providers are: VISA, MasterCard, JCB, American Express etc. The logos of these card providers are what we very often see on entry to a store.
- Card Issuers: financial institutions such as banks issue a MasterCard or VISA or any other card to card holders. This card will have logos of both the financial institution and the card provider.
- Card Acquirer: The card acquirer processes the cards accepted by any store and this service is known as credit card processing or merchant account services.
- Merchant Account: The merchant or stores have an account with a credit card processing service to enable credit card payments in their store.
Every credit card transaction initiates a flow of information and exchange of money between the credit card processing organization, card issuer and the merchant account authorized and conducted by the credit card provider.
Credit card processing services do not limit their services to acceptance of credit cards alone but also enable the processing of various payment mediums such as: debit cards, electronic cheques, gift cards and other forms of payment.
The credit card processing organization performs the key task of authorizing the credit card when presented to the merchant instantly. The credit card processing organization then debits the card issuers account and credits their account with the amount of purchase made by the card holder.This implies that the card issuer pays the card processing services for the transaction. The card services organization then makes the payment to the merchant after deducting a transaction processing fee.
This is the procedure followed for every credit card transaction and it is made easy for you due to the efficiency of various parties that are involved in making credit card transaction an easy process.