[notification type=”alert-info” close=”false” class=”.col-lg-8″]Are you wondering about how does the Credit Card Machine charge you the money and how does your bank get informed that so and so money must be debited from your account? And that too when you are at the other end of the world? Check this article to know about how does a Credit Card Machine deduct money from your account.[/notification]

This was only a few years ago. May be just 2 decades of years back. You used to have big pockets for some of your pants and women used to have special big purses. Now these big pocket pants and big purses were meant to be taken only when you were to do some big shopping and if you did not have a cheque book (well, accounts with cheque book facilities demanded a bigger minimum balance) your pockets would get filled up with the loads of money, giving you the rich man’s look. That was a trouble, though. You were not able to sit straight at the table in the restaurant and often, your hips would start paining along with the burning inside from the hot and spicy curry you just ate!

Your pockets would get filled up with the loads of money, giving you the rich man’s look

Not any more. The concept of plastic money began with not plastic notes, but with plastic cards with magnetic tapes and chips which represent all of your money, no matter how much money you wanted to carry and whether you wanted to buy a eraser or you wanted to buy a new home, it is always the same plastic bank card which gets swiped on a card terminal, called as the POS terminal or many a times, simply, POS. While getting my card swiped, I always wondered, how does this POS terminal take my money? In my quest to know, I found out how it works and I present it in this article.

So, how does a Credit Card machine look like?

A Credit Card machine looks like a long box with a place for a roll of Thermal paper on the top, a LED screen, a keypad which shows the various functions, a slit on the right side and a slit below the keypad. The slit on the right side reads the magnetic tape on the credit card and the slit below the keypad reads the chip on the credit card.

In what ways can a Credit Card Machine accept money?

A credit card machine can accept money by either inserting a chip card through the slit below the keypad or by swiping the magnetic tape through the slit on the right side. Credit card machines can also accept payments from the card even if the chip or the magnetic tape would not be working. This function is called as Manual card payment and can be done when proper authentication and passwords are available.

What are the other functions of the Credit Card Machine?

The latest models of a a Credit card terminal, can also handle gift cards, checks (cheques) and many other functions. One can also accept Pre-Authorized payments or one can block a credit card for a certain amount.

What types of cards can be accepted on a Credit Card Machine?

Major cards like American Express, Diners club, Master Cards, Visa cards are accepted all around the world. When a card is a Credit card, it is readily accepted in any country. If the card is a Debit card, then it may not have

Any electronic payment can be done through POS machine

complete support in other countries over a POS machine, but you can withdraw cash from the account at a ATM machine.
Further, cards like Visa Electron, Cirrus, Maestro are generally accepted only in the country of the bank.

How does a POS terminal get connected to the Bank?

Point of Sales machines get connected in many ways. They can get connected through:

  • Telephone line
  • Wired Internet Connection
  • Wireless Internet Connection
  • Wireless Telephone line
  • Cache Transactions

While the previous ones are easily understood, Cache Transactions can store the transaction data and the transaction gets completed when a connection is available and the transaction gets processed and completed. Some POS terminals have facilities to work over Satelite networks.

How does my bank account get deducted from a Credit Card Terminal?

Below is listed the step by step sequence of how a transaction takes place on your Bank card at a POS terminal and how your Bank account gets deducted.

  1. Upon completing your shopping, you come at the Payment counter.
  2. The cashier counts your shopping and calculates the total amount that has to be accepted from you. You check, agree and give your bank card to make the payment.
  3. Depending on how your card is, the cashier either swipes or inserts your card in to the Credit card swipe machine.
  4. The Credit card machine now through its programme, collects the following information.
    • The name on which the bank card is.
    • the number of the bank card
    • the date on which the card will mature

    The machine understands this information as is mentioned on the magnetic tape or the chip and it has nothing to do with what is embossed on the card, although most of the time, the information embossed on the card is the same.

  5. The machine will also record the location of itself (so the merchant which includes the shop name, the date, time of making the transaction).
  6. This information is passed on to a pre-authorised gateway through the Credit Card Machine software program and the machine gets connected to the processing networks.
  7. This gateway now gets connected to your Bank’s network through a series of authorized keys (which are again a software program) in high secure encryption and your details, the merchant’s details and the bank details are co-related, and requisite information is transferred from your Bank account to the Merchant’s Bank account.
  8. After the currency information is transferred and a successful transaction happens, the information is transferred to the Credit Card Machine which then prints out a Transaction receipt on which you have to sig
  9. This signature is then matched to your signature on the back side of your card. When the signature matches, the merchant prints the second copy and hands it over to you.

Some important notes: You should preserve the transaction receipts that you get from the client. If you are paying education fees then you should preserve these receipts until the end of education, as you may require these to verify the fees from time to time. If you are doing a commodity payment or a bill payment, then you may need to

Preserve all Credit Card Machine slips until verified on bills

preserve these for 1 month or more. These help to verify your Monthly statements about whether they are correct or not. Since these receipts are on thermal paper, the ink tends to fade out after a few days. If you are keen on preserving them, then you may start keeping them in plastic folders and kept very neatly so that they are least exposed to air and water, or you may think of scanning them and printing them together on a A4 paper.

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