Online Credit Card Payment with Third Party Authorization.

Third party is  company that gathers and verifies the payment of funds that flow from one party to another.  The buyer need to register itself with the third party company. 

Steps involved Online Credit Card Payment through Online Third Party Processor(OTTP).  It is very easy to purchase anything online.

• After filling all the fields of registration form accurately, Online Third Party Processor account number is given to buyer that relays to the processor, information about buyers profile who uses a credit card as their financial device.
• The buyer sends a request to seller regarding the online purchase by specifying Online Third Party Processor(OTTP) account number. There are two ways in which the purchase request is made.
• The buyer gives the access privileges to seller who can access his/her account number and produces the bill.
• The buyer himself can enter the account details.
• The seller then submit the buyer;s account number to Online Third Party Processor(OTTP) accounting server to make an Online Credit Card Payment.
• Accounting server after receiving the account details verifies if the account number specifies is accurate and does the account have sufficient amount for making an online credit card payment.
• The accounting server then sends an email or any electronic message to the buyer who can make the acceptance/reject it.
• If Online Third Party Processor(OTTP) server receives positive acknowledgement, a message is send to the seller who then allow the buyer to access the resources if its an online product.
• OTTP Server will store the buyer's account details unless it receives the acknowledgement about the completion of the purchase process.

Read More

Online Payment Processing System.

Online payment processing system can be classified into two types. They are


a) Token Based Payment System.
b) Credit-Card Based Payment System.

a) Token Based Payment System.

• E-cash: Its a form of digital cash which provides a high level of security.  It also reduces the overhead of paper cash.
• E-Check: E-check/E-Cheque is another form of electronic payment system(EPS).  These check are preferred when a customer is willing to make a payment without using paper currency. 
• Example of E-check are Net Cheque and Net Bill.
• Smart Cards: Smart cards are similar to Debit/Credit card but with enhanced features such as micro processor that have the ability to store massive amount of information which is 80 times thatn conventional, magnetic strip cards.
• Examples of smart cards are Mondex Electronic Currency card.

b) Credit-Card Based Payment System.

The different types of credit card based payment systems are.

• Plain Credit Card Payment System: The credit card transaction is provided without using any encryption techniques.  It is one of the simplest form of payment system.
• Encrypted Credit Card Payment System: As the name says, the credit card is encrypted before performing any transaction using various encryption schemes like 
• Privacy Enhanced Mail(PEM).
• Pretty Good Proivacy(PGP).
• On-line Third Party Credit Card Payment System: Security  and verification can be provided using third party, which is a company that gathers and verifies the payment of funds that flow from one party to a another. eg., Paypal.

Read More

Meaning of Revolving Credit

What is Revolving Credit?


The caveat in credit card spending is never to have any bills outstanding.  If a customer does not pay the total outstanding amount by the due date, the Card Issuing Bank will charge a very high interest rate( even up to 44% per annum) on the outstanding amount and probably another service charge on top of that.  This is where the Card Issuing Bank make extra money.  In fact, Card Issuing Bank actually encourage customers to revolve credit by offering appropriate schemes like Balance Transfer and payment by Equated Monthly Installment(EMI). 

Credit Card Complete Transaction Cycle

Read More

Credit Card Complete Transaction Cycle

How does the credit card transaction takes place, with complete transaction process cycle?


Lets understand the complete cycle with an example.  Let's assume that you make an purchase of an good for $/Rs.xxx.  You pay with your Bank Credit Card.  The Merchant establishment accepts your card, swipes it on a console and enters the billed amount.  When the swipe is done, the information contained in the magnetic strip of the card is captured by the machine.  This is matched against the central database at the Service Provider's end.  The checks are done to verify the authenticity of the card, and the transaction amount is approved if it is withing the approved credit limit.  A bill is generated and when the customer signs on the bill, he accepts to pay the transaction amount at a future date when the bill is presented to him by the Card Issuing Bank.


Credit Card bills are generated once every month.  This statement contains the list of purchases made by the customer till a particular date.  Depending on when the purchases are made, the customer can enjoy an interest free credit, typically up to 50-55days.


The onus of collecting the money from the customer rests with the Card Issuing Bank.  The Merchant Establishment is assured of his payment from the Card Issuing Bank the moment the card is swiped.  The Card Issuing Bank usually charges a transaction fee of 2.5% from the Merchant Establishment for the service.  This is shared between the Card Issuing Bank and the Service Provider( A large part would be retained with the Card Issuing Bank as it takes the risk associated with non-payment from the customer). 


The customer is charged a joining fee and a recurring annual fee fro the usage of the card.  The competition in the credit card industry has forced many Card Issuing Bank's to waive many charges.  Also the customers can redeem the points they earn by virtue of their spending against the renewal fee.  High spenders also get other benefits based on their spending levels.


Gist:
Persons Involved in the transaction: Customer, Card Issuing Bank, Merchant Establishment, Service Providers.
Risk and Return: Card Issuing Bank risk is high, so as return compared to Service Establishment.

More about Revolving Credit Click Here, 

Read More