Credit Basics 101
What You Need To Know About Credit

How Does the Credit Card Work?

If a caveman came back and made his way to a store offering Point of Sale (PoS) payment mode, he would be baffled by the ease at which modern man does their own version of hunting. In truth, the simple act of swapping a small card into a terminal to initiate a transaction would bewilder the unlearned, and not necessary the early man.

What happens? How the payment is finally processed?

These are just some of the questions that even some card holders don't bother to ask, either to themselves or anyone (it is a possibility that some store workers don't fully understand it as well), so you are not alone.

Here are some quick hints.

Every time one uses a credit card to purchase something, several industry players offer different services, then come forward to complete the transaction.

Once the card is swiped across a PoS terminal, the terminal electronically reads the cards holder information and then through a phone line, it asks for an authorization to complete the transaction from the processing network which is responsible for translating the information given at the PoS sale point.

The data is then sent to the issuing bank to check whether the account is valid and that the transaction is within the allowed credit limits.

The network is then triggered to send an approval code to the PoS terminal. The details are then saved at the PoS which are then sent to the processing bank at the end of the day which then pays funds into the merchant's account.



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