How Stuff Works: What Happens When You Swipe Your Card at the Card Reader?



Learning what happens with all the things we usually take for granted can be exciting. It makes our mind get accustomed to slowing things down before analyzing them. Such habit is good to sharpen our mind.

In this writing, we are going to learn about what exactly happens when we swipe our card on the counter’s card reader. It will be revealed to you that the magic piece of plastic in your hand is more than what it seems. It is just a small part of a much bigger system that can astonish you.

When your card touches the card reader

Safe CardThe moment the cashier receives your credit card, there are three to four stakeholders at play: you, your bank, the store, and an optional card processor. Your card holds the information of the money you have, or the amount of money you are allowed to borrow, from your bank. The store, represented by the cashier, sells their item to you and is about to deduct the money from your account to theirs.

The main problem in the transaction is that the process of verification and approval of the card have their costs. Depending on the store regulation, the processing charge might be burdened to you or paid by the store. When it is on you, it is called as a surcharge. But it is not likely to happen because such a strategy impacts negatively on customer satisfaction.

ecommerce-2140603_1280Or, the store has hired a payment processing service whose task is to regulate the card approval. Handling many transactions at once increase the risk of financial errors to happen, and some high risk merchant processing companies specialize precisely in payment risk management. So the moment you swipe your card, your financial profile gets inspected by that company.

Imprinting your transaction to the card network

CardMasterCard and VISA are the two big names of the card network where all of the user information is stored. Your purchase will get through them before your card can get approved, and your purchase is successfully acknowledged.

An online transaction has the same process. The moment you fill in the credit card information for an online purchase, your financial information passes several institutions first before you can seal the deal.

The speed of it all

Now after you know how many stakeholders are involved in one transaction, have you noticed how long it usually takes for a card to get approved? In the past, before the Internet connection is as fast as today, account verification may take up to more than five minutes per transaction. Today, all can be achieved in just two seconds.

It is surprising how many people are involved in a two-second transaction, isn’t it?