Credit Card Processing Companies Rules for PIN-Based Transactions

PIN-based transactions at the point of sale (POS) or the ATM are usually authorized and cleared (posted) by credit card processing companies at the same time and using a single message. Settlement is done from this one message at pre-determined cut-off times throughout the day. This is known as an online debit transaction. The following sequence of actions illustrate the payment processing steps for PIN-based POS and ATM transactions.

Credit Card Processing Companies Rules for Authorization, Clearing and Settlement

1. The cardholder offers a card to pay for a purchase.
2. The retailer or cardholder swipes her card through the POS card reader, pushes her card into a chip-reading terminal, or waves it by a contactless reader. The retailer then enters the payment amount. The consumer enters the PIN. An authorization request is routed on to the acquiring bank.
3. The acquirer makes a determination on the network to which the payment should be sent.
   
   For Interlink, for instance, credit card processing companies transmit the authorization request to VisaNet. All other payments are transmitted to the appropriate network.
4. The network passes on the authorization request to the issuer who facilitates the settlement.
5. The issuer responds to the request and posts the transaction to its customer's account. Before approving a payment, the issuer checks to make sure that the account has sufficient funds or credit available, then checks for all accounts that are reported as lost, stolen, and counterfeit and validates the PIN.
6. The network forwards the issuer's authorization response on to the processor.
7. The processor forwards the response on to the retailer.
8. The retailer obtains the authorization response and finalizes the transaction accordingly.

All retailers are required to follow the basic card acceptance rules for all bank card transactions. Consistent adherence to these rules will help retailers to improve customer satisfaction and operate their business more efficiently.

Any tax that the retailer is required to collect on each sale must be included in the total sale's amount. Taxes should never be collected separately in cash. Additionally, cards should never be used to refinance existing debts or as a form of payment for a debt considered as uncollectible.

Be advised that credit card processing companies prohibit the depositing of transactions for another business that does not have set up a valid merchant account with the acquirer. This is known as laundering and is not allowed. It represents a type of fraud that is associated with higher chargeback rates and the probability for accommodating illegal activity.