The Plastic Swipe

The Plastic Swipe
by Gabriel Nijmeh

I'm sure that most of us don't really know what happens between
the time your swipe your credit and receive purchase approval
(or, ugh, credit card declined). This is a process that happens
millions of times over during the course of a day and one which
we take for granted.

Let's VISA as an example, although this process works similarly
for MasterCard. American Express works through a closed loop
system whereby the company alone authorizes and settles all
transactions directly with merchants and consumers.

1. You buy a new pair of fancy shoes for that upcoming dinner party
using your VISA card.

2. The store clerk swipes your card and enters the price. The
magnetic stripe on the back of your card is encoded with your
card number and expiry date.

3. The merchant's terminal transmits the transaction to their bank,
electronically imbedding the date, price and merchant information
for the transaction.

4. The merchant's bank sends the transaction details to a VISA
payment network called VISANet which links all 21,000+
international VISA members. The transaction will now include
information about currency and country of origin.

5. VISANet routes the transaction to your card issuer which then
checks that your account is in good standing and that you have
the available credit to make the purchase.

6. Finally, the issuer's decision-- approved or declined appears on
the merchant's terminal.

At the end of the business day, the merchant submits their VISA
sales to their bank. Within 48 hours, the merchant's bank will
issue a reimbursement and the merchant's bank submits its
transaction records to VISANet for settlement, and is
subsequently reimbursed within 24 hours.

Every month, the dreaded card statement is sent out to you
detailing all of your transactions. At this point, the only
people out any money is your bank and VISANet. It's now up to
you to pay up or get dinged by those outrageous finance charges.

That's it in a nutshell. It happens so quickly and is something
that we take for granted each and every time we make a purchase!