The transaction of credit cards is performed via several networks, including shops, e-commerce stores, wireless devices, mobile or telephone systems. The entire sequence from your card sliding through the card reader until a receipt is issued takes 2-3 seconds.

The credit card transaction procedure[i] appears on the surface simple: Customers swipe cards, and the transaction is finished before they know it. However, every swipe is more complicated than what the eye sees. The cards are actually simply the first and last phases of a difficult procedure when sliding and signing receipts. And the process consists of just a few seconds.

The transaction procedure has been divided into the following phases

1: Authorization: The trader must get payment permission from the issuing bank at the authorization step.

At the point of sale, the cardholder shall provide his credit card to the dealer to be paid. Credit card data are sent to the credit card network by the purchasing bank or processor. The network of credit cards clears the payment and calls on the issuing bank for payment permits. The authorization request contains:

Number of credit card

Date of card expiry

Address of billing — for Validation of the address checking system (AVS)

Security code for a card — CVV, for example

Amount of payment

2: Authentication: During the authentication process, the issuing bank validates the authenticity of the credit card of the client using fraud-protection instruments such as AVS and card security codes such as CVV, CVV2, CVC2, and CID.

The issuing bank will receive the credit card network application for payment authorization. The issuing bank validates the amount of money available, matches the billing address of the person on file, and confirms the number of the card. CVV cards are used by the retailer. It then transfers the relevant answer to the retailer through the same channels. The issuing bank shall place a hold on the cardholder’s account after receiving authorization from the merchant. All authorizations for processing at a ‘batch’ are collected from the POS terminal. The dealer gives a receipt to the buyer to conclude the sale.

3: Clearing & Settlement: A credit card transaction is cleared when the cardholder’s monthly statement and the merchant’s statement both include the transaction. It happens in the settlement phase of the process, which takes place at the end of the month.

Every authorized transaction is forwarded to the relevant issuing bank by the card network. The issuing bank usually transfers money minus the “interchange charge” within 24 to 48 hours after the transaction. The bank bought loans the cardholder account of the merchant, minus a “commercial discount rate”

Credit card Providers:

A credit card is a credit union or bank that supplies a credit card to the end-user directly. American Express, Bank of America, Barclaycards, Capital One, Chase, Citi, Discover, the United States Bank, and major US banks are credit card issuers. Some big credit unions, such as Navy Federal and Pen fed Federal Credit Union, are also major issuers of credit cards.

Credit card network:

The networks of credit cards function in the background to enable transactions on credit cards. The goal of the networks is to conduct the acceptance of credit card payments and simplify transactions between merchants and credit card companies. You want to pay for food with a credit card. The network of credit Cards offers an infrastructure to let the foodstuff accept your payment and collect the money from the issuer of your card (who you agree to repay later).

These are four major credit card networks:



American Express


Businesses have to pay a fee every time a client uses a credit card for a purchase. Credit card networks do not control your cardholder costs, but they do control the cost of accepting the transaction. Excluding interest rates, yearly charges, late fees, international transaction fees, and overstated fees.

Visa vs. MasterCard:

Visa and MasterCard are the world’s most common processors for credit card payment, defeating American Express and Discover, their nearest competitors. The networks for the payment processing have no relation with the interest rates or benefits of a certain card, such as points and cash returns. These are decided by the card issuer’s bank or credit union and any co-brand partners such as airlines, hotel chains, and retail outlets.

What Are Credit Card Merchant Fees?

Commercial Credit card payments are simply the fees for credit card transactions that you have to pay. On every credit or debit card transaction which you accept you will need to pay a merchant charge (also called a “discount rate”). This cost often consists of three factors: Evaluation fees, exchange fees, and the payment processor additional charge.

Credit Card Processing Fees and Costs:

By purchasing from a number of payment processors, companies may reduce their costs. You might receive competitive rates which can save you significant money over time. A bite from the overall earnings is paid for each credit card transaction. In general, we note that credit card costs are around 2 % of each purchase.

Network Average Credit Card Processing Fees
MasterCard 1.55% – 2.6%
Visa 1.43% – 2.4%
Discover 1.56% – 2.3%
American Express 2.5% – 3.5%


The Benefits of Using a Credit Card:

If you use your credit cards properly, you can get a few cents off every dollar you spend. A cashback card can save you money on your shopping and you’re never obliged to pay a cent of interest if you always pay off your whole debt before the date of the statement closure.

Credit card benefits[ii] include: Credit cards provide additional security for robbery or stolen cards. Miles and points earned may frequently be converted for precious flights, hotels, etc. Some cards provide unique and valuable benefits, like flight credits and meals. Unlike debit cards, credit history may be created with credit cards.

Credit Card Shopping Benefits: Shopping advantages improve your trust and security when shopping, giving you the possibility to redeem your money if you discover better prices, if the item breaks, or if you have to redeem it. Depending on the card the specifications of each specific perk will differ depending on the type of card you use.

  • Price Protection
  • Purchase Protection
  • Return Protection
  • Extended Warranty
  • Event Ticket Protection – American Express
  • American Express Complimentary Shop Runner Membership
  • Rental Car Insurance