If you are a business man and you deal with customers from all over the world then you should have a brief knowledge about the payment systems and necessarily, latest payment systems. With that being said, credit cards are used globally and works almost in every country. The banking system is now much advanced and can process thousands of transaction in seconds. When you are dealing with online customers then you need to have a system of accepting credit cards and if you don’t have the knowledge about how the credit card system works and how it is processed then we are here to tell you some basics about the credit card system.

Basics Of Credit Card Processing

There are four main parties that are involved in the whole process of credit card system. These key players are the cardholder, merchant, acquiring bank, issuing bank.


Well, you must be familiar with the role of the cardholder by now. Cardholder is that person who obtains a bank card either credit or debit. He is the one who is going to make a transaction or start the process. In your case, it will be your customer who is willing to pay you for your services or product.


Then the credit card processing include the merchant. Merchant is the business which is engaged in the business of selling services or products. In this case, the merchant is the business that maintains the merchant account which enables them to accept the credit and debit cards as the form of payments from the cardholder or customer.

Acquiring Bank

Acquiring bank is the registered member of the card association (MasterCard and Visa). They are also known as the merchant bank as they contract the merchants to maintain accounts which allow the business to accept the credit or debit cards. They provide merchants with the equipment and software to accept cards. They transfer the funds from credit card sales in to the merchants account.

Issuing Bank

Issuing bank is the bank which issues the credit cards to the customers. This bank is also a member of the card associations (MasterCard and Visa). Issuing bank will then pay the acquiring bank for purchases that their customer made. And, then the cardholder will have to pay its bank that amount in the form of the credit card bills. Which is the agreement when you obtain the credit card from your bank. And, this is how it all works.

Leave a Reply

Your email address will not be published. Required fields are marked *