![]() The credit card issuer verifies the cardholder’s account for available credit to cover the purchase. The acquirer then sends a request to the issuer to authorize the transaction. When you swipe your credit card at merchant’s POS terminal, the merchant submits a request to the acquirer via a dial-up modem phone connection or a dedicated network connection. It is the equivalent of a physical point of sale terminal located in most retail outlets. It refers to an online application for authorizing credit card payments. American Express act as both the credit card issuers and the payment processing network.Į) Payment Gateway: is used when you shop online. Eg: HDFC Bank, Citibank, American Express, Standard Chartered etc.ĭ) Association: are also known as payment processing networks like Visa and MasterCard. provide EDC machines to various merchants.Ĭ) Credit Card Issuer: is a bank or credit card company who offers credit cards to people. Ex: Axis Bank, ICICI Bank, HDFC Bank etc. An acquirer is a bank or financial institution that processes credit or debit card payments on behalf of a merchant. Following is a pictorial representation of the way it works:īefore we understand the process to what happens when you swipe your C redit Card at the merchant location or enter card details for online shopping, let us first know the parties involved in the whole process.Ī) Merchant: uses point of sale (POS) terminal to swipe the credit cardī) Acquirer: issues the POS machine to the merchant. However, by that due date, if some portion of the due amount or complete amount does not reach the credit card issuer, then a pre-defined interest is charged on your previous dues as well as fresh purchases, till you do not repay the complete amount due on your card. If the complete payment is made within that (interest-free) period, then no interest is charged by the credit card company. Every card issuer has a set due date, by which the borrower is expected to repay the complete amount due on their credit card. How a credit card works financially! (The broader view )Įach time you use your Credit Card, you are borrowing money from your card issuer (Bank / Credit Card Company). Let us explore that tiny portion of time in detail through this article. how a credit card functions financially and how does it work technically. If we talk about- how a credit card function? Then, there are two different aspects to understand i.e. Using a credit card must be a simple process but the process of routing the payment is not. ![]() But have you ever wondered how a credit card actually works? What happens in those fractions of seconds when you swipe your card? How the money does reach merchant? And how many parties are involved in the payment process? ![]() We use plastic money to pay for our groceries, utility bills, shopping and many more. ![]()
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