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How is my Merchant Credit Card Account processed?

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When you set up a Merchant Credit Card Account the bank may contract out the processing to a transaction clearinghouse. When you process the purchase, the clearinghouse lets you know if the credit card number is valid or over the customer’s credit limit. You do not pay the transaction clearinghouse directly though they may deduct bank fees and make net deposits.

A gateway connects you to a transaction clearinghouse. There are three common gateways:

• Card swipe machines. Cash registers to swipe your card through and enter the amount of the transaction. A little later the terminal responds with an authorization code which is printed on your credit card transaction slip. That authorization comes from the clearinghouse. It assures payment to the merchant when the customer signs the dotted line and the purchase is made.

• Desktop Software. Many businesses do not see the customer's credit card. They get the credit card number over the phone, by mail or over the Internet. The merchant enters the credit card numbers and transaction amounts in special software, and transmits that list to the clearinghouse. The clearinghouse responds with a list of good and bad cards. The merchant sends a message back to accept good transactions. This solution works unless you have a large volume of orders because it requires rekeying data which can get time-consuming and introduce errors.

• Real-time Website Gateways. The processing clearinghouse checks the customer's credit card while he is waiting online. These gateways provide a bridge from your website to a different modem channel to check the credit card in real-time. These gateways may be easy to set up but not all shopping cart programs can accommodate one.

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