How Does Visa Process Transactions

By Tiara

When you use credit cards, or any other form of debt-based money, there is always a process behind what can seem like instantaneous transactions.

In fact, contrary to popular belief, it takes an average of around six minutes for a merchant to read your card, approve the transaction, and then actually run the card through their computer system to verify that no fraud has occurred.

This process happens in three steps — which we will discuss in more detail here!

Step 1 - The Salesperson Receives Your Credit Card

Usually, the seller will first speak with another employee before talking to you. This other person may be at the same store as the seller, at the next location, or even at the headquarters.

He or she could also be called a shift supervisor, team leader, manager, etc., so make sure to refer to your phone book or website for those names.

Whatever they are referred to, this individual serves an integral part in the process by verifying that you know who you are, that you have authorization to spend the money you intend to spend, and that you have proof of income.

They will probably ask if you have ever been denied credit due to poor payment histories or if you made large purchases in the past. If so, the bank might do additional research and determine that you don’t deserve a loan because you cannot afford to repay it.

The cardholder agreement

how does visa process transactions

Along with requiring you to agree to their terms, credit cards also require you to accept responsibility for your use of the card. This is more clearly stated as “use this card at your own risk” or even just using it carries risk.

In the case of fraudulent activity, most major banks will place a hold on the account while they investigate who used it and why. If you find yourself in possession of a stolen credit card, immediately notify all three of the bureaus (Equifax, TransUnion, Experian) that you are being fraudulently billed so that appropriate action can be taken.

Additional tips to prevent credit card theft

Don’t carry around large amounts of money or valuables. Even if you do not have a debit card, you can still carry only what you need for an hour-long shopping trip!

Never give out personal information like social security numbers, passwords, or birth dates unless you have been authorized to do so.

Transaction authorization

how does visa process transactions

When you place an order, your card is not actually charged until later, when the seller verifies that they have permission to charge your credit card that amount. This process is called transaction or pay approval processing.

Most vendors require both of these steps before their bank will approve the sale. They also run each vendor’s name through databases that tell them if there are any reports of fraud or other bad activity for that business.

Vendors also check whether you are within your spending limit and verify that you are a real person with a real address using all three pieces of information (name, address, and phone number) that you supply during checkout.

Some vendors ask for additional documentation, like proof of employment or residency, which can be verified via another source such as LinkedIn or public records.

Authorization to debit

how does visa process transactions

When you run out of money, you usually can’t simply take it from someone else’s account! This is called larceny-type theft or criminal appropriation.

In credit card systems, each party needs permission from another person to spend their money. In fact, this is what allows most people to enjoy spending money in the first place!

As mentioned before, when you run out of cash, there are several things you can do to get more money. You can ask family for help, go into debt relief services, find part time work, or even sell some belongings. All of these require authorization to draw on your savings so that nothing too dramatic happens to avoid bankruptcy.

Authorization to credit

When you place an order or create a new account, your card is authorized to spend money at that location for a specific amount of time. This authorization can be revoked at any time!

During this process, special software checks your financial information against databases of stolen cards and/or fraudulently-obtained personal info. If there’s no match, then the bank approves the transaction.

If there is a match, however, then it may block the purchase or limit how much you are allowed to buy. Sometimes, people who have their accounts hacked will be notified about a fraudulent buying attempt, allowing them to take action and prevent further spending.

There is also another person in the banking system called a “bouncer” who can approve or reject transactions. These individuals work for various banks and go through additional training to ensure that all purchases are legitimate.

The credit card

how does visa process transactions

Credit cards are ubiquitous these days. Everywhere you go, there’s usually someone that has access to an account with a major credit card company such as VISA or MASTERCARD.

Most people have at least one credit card, it's typically either a VISA or MASTERCARD due to their widespread use.

A lot of small businesses will ask for your credit card when doing business with them so they can process transactions more easily. It is very common to find yourself leaving home without your purse, only to be surprised upon returning by thieves who took out your credit card!

There are several components in how debit and credit cards work. Here we'll dive into the basics of what each part does. Then, let us review some differences between credit and debit cards.

Debit card

how does visa process transactions

A debit card is different from an ordinary credit card because it does not ask you to pay for things with money that you have in your account. It asks how much money you do not have!

You can use your debit card to buy items directly from vendors by transferring funds from your bank account or using a cash-on-file option.

If there are no transactions within a certain amount of time, the vendor will be notified off balance which is why it’s important to keep an eye on your cards.

By having both a credit card and debit card, you have some redundancy in case one gets stolen. However, only carry a minimum number on each so that someone cannot run up expensive bills without you knowing about it.

Online and mobile transactions

how does visa process transactions

Since the beginning of credit, people have used it to make purchases or get loans to run their lives. Credit cards are one of the most common ways to do this as they offer convenience!

A credit card is an electronic tool that allows you to spend money easily. When you use your credit card, a company lumps together all of your past due bills into a variable rate loan. This way, they can calculate how much money you owe them depending on what you buy and when.

With each purchase, there’s also usually a fee for using the card, which varies by merchant. These fees are typically separated between a transaction processing fee and additional finance charges.

The difference in cost depends on whether you are buying items online or offline, and if you use a plastic or paper version of the card. A lot of stores now let you pay with either type of card, so it doesn’t matter.

Tips for consumers

how does visa process transactions

Recent developments have brought into focus how credit card companies process transactions. With an ever-increasing amount of fraud occurring, vendors are taking action to protect your personal information and financial data.

Some of these changes include:

Increased scrutiny of which locations accept which cards for what purposes

Procedures that require more documentation to verify identity or confirm payment details

Higher minimum transaction thresholds to ensure adequate protection

In some cases, merchants are being asked to validate purchases by another party (usually through an app) before processing them as well

Consumers can now find themselves in a situation where they cannot make most checkout experiences due to vendor limitations or restrictions on use of specific cards. It is important to be aware of this so you do not incur additional fees!

At the same time, there are ways you can help prevent fraudulent activity. By keeping an eye out for warning signs, you will know who to contact if you experience a device malfunction or concern about your debit or credit card usage.

This article will go over some basic tips to stay safe online shopping and keep your wallet full.