How Does a Credit Card Reader Really Work?

Posted by Elite Internet Technologies on June 1st, 2018

Every one of us processes our transactions by using them almost every day, but do you really know how exactly a credit card reader works, what is the mechanism behind the machine, or what exactly happens when we swipe or chip our cards in order to complete our sales?

We will guide you through the credit card processing system and how a credit card works. Knowing the mechanism of a card reader will make you a better-informed business owner.

How do credit card readers work?

Credit card readers tend to read the card of your customer and information in a secured manner to communicate the transaction data to the banks as well as the credit card networks. So, whether you want to opt for conventional methods to accept credit cards to process the payment flow or you want to use them for the moment to swipe or dip into the settlement.

Credit card processing system explained

The credit card processing system can break into three amazing stages, read on to know more about them.

Authorization:

When you dip the card of your customer, the payment request is sent to the credit card reader and a request is sent to the square. So, you can then pass the transaction to the bank or any other financial institution, this is known as acquiring the bank or even the acquirer. The acquiring bank then acts like a third party between and send the request to the issuing bank. The issuing bank then checks whether the customer has the money or the credit for the charge. The issuing bank also checks any fraud detection and make sure that the transaction is genuine.

Capture:

The funds are then transacted from the credit card company to the acquiring bank. At times a huge amount of payments are transacted across together in a single batch. This part of the process is also known as batching sometimes.

Settlement:

It is the payday. The funds from the credit card sale as well as get settled by using the credit card processing system and are deposited into the account of the seller. The processing system receives the funds in one or two business days. Also, for the business owners who would like to transfer their funds instantly, then the system also comes with swifter options, each comes with a certain amount of fee of the total deposit amount.

Also, the scheduled deposit provides you with the options to receive the amount on the sales day of the bank account on the same day at the same set of time. The business owner can also opt for instant deposit; this is one of the immediate deposits of a specific sale into the accounts.