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How does Credit Card Processing Online Work?

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  • Written By: Florence J. Tipton
  • Edited By: John Allen
  • Last Modified Date: 11 September 2016
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By following routine procedures, credit card processing online may secure payments for goods or services made with a credit card. Credit card processing online typically begins at the moment of purchase by a consumer. Once the consumer authorizes a credit card payment on the website, a credit card processing company typically verifies the information with a credit card issuer to secure the payment. On approval, the credit card processing company may deduct processing fees and forward the remaining balance to the merchant.

The infrastructure for credit card processing online typically requires a sophisticated system capable of processing real-time online transactions efficiently and securely. Each part of the system transmits information over a secure processing network in an effort to prevent fraud or theft. This intricate system typically has checks and balances to prevent unauthorized transactions by hackers.

Typically, credit card processing online involves five separate entities to complete the online transaction. The consumer, merchant, credit card issuer, and the company that processes online payments have an active role in the transaction. A credit card transaction could take up to three days for completion from credit card authorization to receipt of payment by the merchant.

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When a consumer makes an online purchase, most merchant sites require personal information to verify the consumer’s identity. The personal information provided is generally knowledge that only the consumer named on the credit card can supply. Along with the credit card number and expiration date, most sites also request a three-digit security code typically found on the back of the card. For credit card processing online, the consumer enters this information, plus the billing address that receives account statements.

The configuration of the online processing system captures the personal information for transmittal to the credit card issuer for verification. The credit card issuer compares the personal information provided by the consumer with information on file. If the credit card issuer confirms the consumer’s identity, the transaction process continues.

Generally, the configuration of the processing network may decline transactions. A transaction is typically declined if the personal information provided by the consumer conflicts with the credit card issuer database. The credit card issuer may also decline the transaction if sufficient funds are not available to cover the purchase.

The processing company secures payment once the credit card issuer verifies the purchaser’s identity and available funds. Normally, the credit card processing company will debit the purchase amount from the available balance on the credit card. After deducting processing fees, the company sends the remaining balance to the merchant, usually via a business checking account.

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