Merchant Account Credit Card Transactions

Written By Steps To Faculty Published June 9th, 2010

An account at any financial institution that permits acceptance of credit cards and transfers the amount directly to the bank account of your choice is called a Merchant Account. Credit cards are accepted through PC processing software, credit card terminal, through telephone or Internet virtual terminal.

Step 1: There are plenty of institutions that work with the software, Internet option or any terminal of your choice. Though this sounds easy there could be a few problems like processing companies that are below the standard, overcharges, frozen funds, middleman surcharges. The right choice of merchant services can eliminate these problems to a certain extent. Application gee will be charged for almost all Merchant accounts and in case there is no fee charged, probably the difference will be compensated with sale of equipment or software or charging for transactions.

Step 2: The transaction process though a bit complicated, takes only a few seconds. For processing a credit card transaction through Internet, the customer chooses the products from a Merchant’s website and then checks out with the items. He then opts to pay through credit card. The browser connects to the host’s server and provides the payment form. The credit card information is entered by the customer on the payment form that is totally confidential, and gives authorization to the transaction process by clicking on “complete order” button. The information is transferred to the secure server of the host through SSL encryption. Now the secure host server connects to the processing bank of the Merchant through a third party like Secure Payment Gateway who connects the processing bank through landline. This can also be done directly because some processors have their own secure payment gateway and do not need the service of a third party.

Step 3: The processor cross verifies the validity of the card and its network like Master Card or Visa and confirmation of the fund availability. In case the transaction is approved, the processor is given a code for authorization or the code is given to Secure Payment Gateway by the processor. The Payment Gateway then converts the authorization into an encryption and transmits to the Merchant web server that then completes the order, The web server of the Merchant sends a confirmation to the customer’s browser. The due amount is then transferred from the bank of cardholder to the processing bank of the Merchant. The Merchant’s bank can then transfer the money to the local bank of the merchant within the next three days.


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