How Exactly Does That Credit Card In Your Wallet Work?
A Deeper Look Into What Makes Your Credit Card Tick
Most of us take it for granted... We want something, we whip out our credit card and -- abracadabra -- the transaction is magically processed by the credit card fairies and the item is ours. However, in real life there aren't credit card fairies magically transporting your credit card information back and forth. In real life, the process is a bit more complex. Wondering just how complex? Read on!
Step One
This is the easy part. You pick out something you want and decide to pay for it with your credit card. There are many of us who could do this part of the process in our sleep (or at two in the morning when we should be sleeping, and are watching an infomercial instead.
Step Two
Once you decide you want to purchase something with your credit card, you give your card (or card information) to the merchant. The merchant then accesses their payment gateway (a nifty term used for the company that provides the merchant with the credit card processing tools and equipment) and enters your account data.
Step Three
One your credit card information has been put into the payment gateway, the gateway forwards your information to the appropriate payment processor (which varies depending on the credit card you are using).
Step Four
Now your credit card details are at the payment processor. Think the journey is over? Not quite yet. Now the payment processor contacts the bank that issues your credit card and sends the transaction to them.
Step Five
Now the bank has your credit card transaction. They check your credit limit, account status, etc. and then approve (or decline) your transaction based on your account details.
Step Six
Now the approval (or decline) has to be sent back to your merchant, which is done via the payment processor through the payment gateway. Finally, the merchant sees whether the transaction has been declined or approved.
Granted, this is all happening in just a matter of seconds, but it still seems like a long journey. So the next time you're waiting longer than 30 seconds for credit card approval, don't fret. Now you know everything that needs to happen for your transaction to go through.