Understanding How Credit Card Transactions Take Place
You may be surprised to know that your credit card transactions include more than just you and the merchant you are making a purchase from. In fact, it also involves the credit card company (such as Visa or MasterCard), the bank that issued the credit card, and the bank of the merchant you are making your purchase from.
Once your card is swiped to make a purchase, the merchant sends that information to the bank that issued the credit card to you. This bank then contacts the credit card company with the information it received from the merchant. The credit card company then forwards this information to the merchant’s bank.
After the transaction is complete, it will show up on your monthly statement. When you make your payment, it goes to the bank that issued the credit card to you. This money is then sent to the merchant bank, minus an interchange fee. A portion of the interchange fee that is kept by the bank that issued the card to you is then sent to the credit card company. The amount of this fee is usually determined as a percentage of the total transaction. The merchant’s bank also deducts an interchange fee before the remaining funds are placed in the merchant’s account.