How Credit Card Processing Works

Article submitted by How Merchant Accounts Work.com.

Most of the transactions that occur today are done with a credit card, or some variation on the card like a debit or pre-paid gift card. At a basic level these transactions are electronic and serve as a method to send payment information from a merchant, to the bank of the customer initiating that transaction. There are some similarities in these transactions that apply to all types, such as the magnetic strip, but important variations exist too.

How Credit Card Terminals Work

Every store needs this important piece of equipment, and most of us will use one multiple times a day without a care or thought as to how they work. In fact, the operation of these terminals has become more complex as people utilize more electronic transactions.

The terminal at a store is very different from placing an order at an online retailer. Stores have a dedicated terminal to take credit cards only, although most stores also have machines that can read gift cards as well. Most of this information is relayed through a telephone wire, which seems old fashioned by today’s broadband standards.

Newer machines are beginning to utilize the Web, and may even be battery powered to help with portability.

All credit card terminals have the same basic principles behind their design. Terminals need a modem to connect with the card processor, a keypad for manual entries and a printer to give the customer proof of purchase. Most also need a power supply, and some newer models require a memory card as well.

Thanks to the prevalence of electronic transactions, machines are getting smarter too. Modern processors can take into account tip amounts, or handle refunds with ease.