People who have credit cards (and who doesn’t these days?) should make sure that they get as educated as possible about how credit cards work. This makes it more likely that the individual will be savvy about financial details and therefore will save money (and reduce financial troubles). You may think that you already know what you need to know about using credit cards. But do you even know what the steps are that are taken when you using a credit card to complete a transaction? Most people don’t.
Here is a review of the five steps involved in a basic credit card transaction
2. Batching through of the transaction. You may think that when you get authorization to complete the transaction is when the credit card company takes the money out of your account. However that’s not the case. The store where you are making the purchase actually has to submit the transaction information to the credit card company separately before you will be charged. Stores generally send a bunch of transactions through at one time in a process that is called batching. Most stores will do their batching at the end of each work day but some stores hold off for a day or two. If you experience a delay in the time between when you make a purchase and when that purchase shows up on your credit card account, it is most likely because batching was delayed.
3. Clearing and funding of the transaction. After the credit card company receives the transaction, it will go ahead and make payment to the store that batched it through. This is when the transaction with the store is complete and it is also when the credit card company will apply the charge to your credit card account.
4. Disputes and other issues. Sometimes there will be a charge on your credit card account that you don’t believe should be there. In this case, you will dispute the charge. At this time, a hold may be placed on the charge or there may be a chargeback to the account. This step doesn’t always occur in a transaction.
5. Payment by the credit card holder. When the credit card holder makes the payment in full to the credit card company, the transaction is entirely complete.
If you didn’t know that these are the five steps that are common to most credit card transactions then you don’t know all that you need to know about the use of credit cards. Make sure that you’re regularly gaining new education about credit card use so that you can be a great borrower!
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