A few people/entities are involved in each credit card transaction:
The customer (you) presents the credit card for payment. The merchant sells you goods or services. The merchant’s bank sends credit card transactions for approval. The credit card payment network is a liaison between the merchant bank and the credit card issuer. The credit card issuer approves and pays transactions.
Most credit cards now come with microchip technology. These so-called “smart cards,” or “EMV cards” (Europay, Mastercard, and Visa) embed a microchip on the front of the card that contains information pertaining to the account associated with the card, similar to what is contained in the magnetic stripe on the back of the card. Rather than swiping your card, it is inserted into the card reader. Introduced in the United States in 2015, smart cards are considered more secure and less vulnerable to fraud. American Express and Discover are the payment network and the credit card issuer, so they approve credit card transactions themselves. Visa and Mastercard, however, do not issue credit cards and must contact the credit card issuer. The credit card issuer sends back an authorization response for the transaction. If your credit card is declined, you won’t get a reason at the point of sale, just a message telling you that the card was declined. You’ll have to contact your card issuer directly to find out why. The store’s bank sends their communications electronically either through the phone line or through the internet. Before the widespread use of WiFi (Wireless Fidelity), you may have been to a store or restaurant and heard the screeching and static from the credit card terminal using a dial-up connection to communicate with the merchant bank. Now you know what all the noise was about. When you leave the store with your purchase, your credit card has only been authorized for the payment. The merchant hasn’t actually been paid, and your credit card hasn’t been charged. If you check your credit card online right after you’ve made a purchase, the credit card issuer may show authorized transactions and may have reduced your available credit by the amount of your recent purchase.
