A credit card is issued by a bank or card issuer to an account holder so they can pay a merchant or buy goods and services. The card issuer, in turn, promises to pay the merchant. A card allows the holder to be in debt by paying a certain amount of interest. Credit card involves a third party which pays the seller and is later reimbursed by the buyers. They have an agreement with the merchants to accept their cards.

Each cardholder has a pin that is used as a personal identification while using the card at various places and they receive a receipt in return. When an online credit card payment is made – the card is not present, the merchant asks additional questions to verify that the person is the authorized holder of the card.

Online credit card payments are the most convenient method of making payments. You do not have to worry about a lost or delayed check. The processing of this type of payment is faster. By being online, you can keep track of your payments and expenditure from any device.

With online credit card payment, the statement is updated within 24 hours. An autopay instruction for the card/account automatically debits it on the said date that the bill payment is to be made.

Check your balance and credit card statements for the transactions made. You can set up a one-time payment or recurring monthly payments. Receive emails and card/text alerts/reminders on your phone for transactions made. Transfer funds easily between your US accounts. You can also redeem your rewards/points easily.

Online credit card statements
In the USA, the bank account/ credit card statements have all the information containing a paper statement. The only difference is they are sent online.

Automatic payments
When the automatic payment is set, it does not miss the payment date, time and month.

Who is involved?
Three players are involved in the entire process of online payment – the card transactions, online or otherwise. At one end it is you, the business owner, and the technology that connects the two.

The need is that the merchant is a partner of the bank that will accept and deposit the payment on your behalf. You have to be a holder of the card [issuer bank] to buy or pay the merchant. The technology is the payment gateway that links you and the merchant, and the other is the processor that carries your transaction through the network, sends you a bill, and works with the bank.

How transactions are processed
There are two stages to the payment process the authorization (the sale is approved) and the settlement (money comes into your account). Listed below are the steps on how the transaction is processed –

• You buy something with your card.
• This information is passed through the payment gateway; the data gets encrypted to keep it private before it is sent to the payment processor.
• The payment processor sends a request to the issuing bank to pay the money for the object purchased.
• The issuer gives a response of yes/no.
• If approved, the payment processor informs you the transaction is approved and tells your bank to debit the money from your account.
• This entire process takes place within 1/2 seconds.
• The second part is the settlement where the card issuer sends the funds to your merchant’s account.

Processing fees
Both sides of the transaction; fees are charged to the merchant and the payment giver. Everyone involved wants to be paid – issuing bank, credit card associations, the merchant bank, and the payment provider. Every time you use your card you pay different types of fees.

Types of fees

Interchange: The issuer gets a pre-negotiated percentage from each sale. This fee varies depending on the industry, the sale amount and the type of card used. There are over 300 different types of interchange fees that are charged.
Assessment: The credit card associations like the Visa, MasterCard, etc. charge a pre-negotiated amount of fees, which is called an assessment.
Markup : The merchant bank takes a percentage cut when it charges you a markup fee. This amount varies according to the industry, sale amount and your monthly volume.
Processing: The payment processor (might be your merchant bank) that makes money every time you make a transaction by charging a fixed-rate fee. It does not matter if it’s a decline, sale or return. In addition, it can charge you the monthly usage fees, set up and even for account cancellation.

All the fees are bundled together and can never be clearly demarcated as to who is getting your money.