Keep in mind this all takes ~2 seconds for an online
transaction and about 15 seconds for a dialup transaction:
1. Cardholder presents the card (or the card number,
expiration date and security code) to the merchant.
2. The Merchant communicates the card data to their Merchant
Account Provider. They use either a credit card terminal, a
POS system communicating over the internet or, in the case of
an online transaction, a payment gateway, to communicate that
3. The Merchant Account Provider communicates the card
information to the VISA or Mastercard network. Usually this is
done via an intermediary, a larger Payment Processor.
4. Mastercard or VISA asks the cardholder's bank (these days
usually a credit-card specialist) if the funds are available.
If the funds are available, the transaction is authorized and
the money placed on hold in the shopper's account (i.e. their
available credit is reduced by the amount).
5. The issuing bank tells VISA / Mastercard what the result of
the transaction was (either Authorized or Declined).
6. VISA / MC communicate the result back to the Merchant
7-8. The Merchant gets the result and exchanges goods with the