Credit card processing is the technology that allows merchants to accept payments from customers through their credit cards. The technology includes a card reader that captures the customer’s payment information, as well as a payment gateway that processes the payment and forwards it to the merchant’s bank.
The process of credit card processing begins when the customer inserts their credit card into the card reader and provides their signature on a keypad or directly into the credit card machine. The payment processing technology verifies that the information they keyed in matches what is shown on the physical card – including the security code – and creates a unique transaction number. This transaction number is sent to your merchant account, which contains all of your transaction information.
The payment gateway then contacts the customer’s bank to determine if the funds are available and to get authorization for the transaction. If everything checks out, the bank sends an approval code back to the payment gateway, which notifies the merchant’s bank that the funds are now available in their account. The merchant’s bank then credits their account and the transaction is complete.
The customer and merchant do not necessarily need to be in the same location for credit card processing to work – many transactions process over phone lines, internet connections and even wireless networks – but the card reader and payment gateway must be hooked up to a central computer or server for this process to work. It’s basically like a phone call, except it uses the internet for convenience.
Why is credit card processing important?
Credit card processing has played an integral role in modern society since its invention in 1967 by IBM, but the technology became more prevalent when banks began offering Mastercard and Visa cards to their customers. A new industry was born with this expansion of credit, and soon it became the norm for consumers to purchase items with plastic rather than cash.
Today, credit card processing is more important than ever. Not only has it become the preferred method of payment for many consumers, but it is also one of the most secure ways to pay. In fact, studies have shown that credit card processing is safer than cash and other types of payment like checks, money orders and debit cards – especially for businesses – because it’s almost impossible to counterfeit a credit card. That means that you will never see an unauthorized charge on your statement or lose money through a fake transaction.
However, not all methods of secure payment are created equal. Credit cards offer consumers some of the best protection available, including purchase protection and extended warranty coverage. And if something goes wrong with a purchase you make, you can always dispute the charge with your credit card company.
Credit card processing is an essential part of the modern economy and offers consumers and businesses a variety of benefits that are not available through any other payment method. It’s no wonder that this technology has become so popular over the years.