The Intricate, Invisible Process of Charging a Credit Card Online
The items have been added to the cart, shipping charges have been determined, and now it’s time for the final step of checkout: payment. While accepting online payments can seem like an effortless process compared to running transactions at a brick and mortar store, there is still a detailed set of systems in place that conduct the flow of funds from customer to merchant. The two main components of charging a credit card online are:
Authorization – When a customer initiates the payment process while checking out at an online store, their card is first authorized by the merchant’s site to determine whether or not sufficient funds are available to make the purchase. Data is sent through the gateway and then the processing network to the customer’s issuing bank, which in turn accesses the customer’s account information. Depending on the funds available, the transaction is either approved or denied, and this information is conveyed in mere seconds back to the merchant’s shopping cart.
Settlement – As any store owner knows, the full amount paid by a customer for a transaction does not simply flow directly into a business’ merchant account. A number of fixed and variable fees are deducted for any transaction, including interchange fees from the card’s issuing bank, processor fees, gateway fees and assessment fees from the credit card network. The remaining funds are then transferred to the ecommerce store’s merchant account.
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[Photo credit: Fosforix]