Credit card payment mechanism

Credit Card Payment Mechanism Everything You need to Know

Updated July 15, 2022 – Credit card payment mechanism: If you want to know how to Credit card payment Mechanism work then this article is very important for you because today we will explain how to credit card payment mechanism work.

The credit card payment system is shown in the figure below.

Credit card payment mechanism
  1. Products and services are sold and provided to customers at credit card member stores.
  2. The customer is a credit card user and pays with a credit card.
  3. The price of the product is paid from the credit card issuer to the member store.
  4. The member store pays about 3 to 5% of the sales price to the credit card issuing company as a settlement fee.
  5. The credit card company charges the card used for the user’s card usage fee (the price paid by the credit card company in exchange for the member store).
  6. After a certain period of time, the card usage fee will be paid from the user to the credit card company by automatic payment such as a bank deposit account transfer.

This completes the payment for one purchase by credit card. Why is such a payment method valid? Let’s consider the merits of each of the three.

■ —– Advantages of Credit card users —– The biggest advantage of card users is that they can purchase products and services without cash at hand. There is also security in that you do not have to carry cash with you when purchasing high-priced items.

■ —– Advantages of Credit card merchants —– Credit card merchants are required to pay a settlement fee of about 3 to 5% of the sales price to the card issuer. However, we will introduce credit card payment for the needs of customers who do not have cash on hand or who want to purchase products in installments.

In reality, you can sell products to customers who do not have a product price at the time of sale, so you can expect sales to increase without missing a sales opportunity. In addition, since the credit card company pays for the product, you can avoid the risk of uncollected receivables. The settlement fee to the card company can be said to be the underwriting fee for the debt collection risk.

■ —– Advantages of Credit card issuers —– Credit card issuers offer payment fees from card member stores, annual membership fees from card users, and interest rates for installment payments and revolving payments (installment fees). ), Earn money with interest rates on card loans and cash. With the aim of increasing profits from these, each company will make attractive cards in order to acquire card members. Various types of insurance such as travel insurance, points, cash back for shopping, special treatment at restaurants and entertainment facilities, car life support, etc.

As mentioned above, you can enjoy the merits of the three parties, so a payment method called a credit card has been established.

Credit Card Payment Process

The credit card payment process is filtered into four processes:

  • Authorization
  • Batching
  • Clearing
  • Funding

Some time Other cases work on Credit card payment Mechanisms:

  • Mobile Wallets and Contactless Payments
  • Card Not Present (CNP) Transactions

Thanks For Visiting this website any doubts you can comment below, if you want to latest updates on this type of useful information just follow Google News.