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ACCEPTING CREDIT CARDS - A TYPICAL CREDIT CARD TRANSACTION
Once a visitor has submitted a secure web form with
his/her credit card details, a chain of events unfolds.
Here's what's happening with the transaction, step-by-step:
- The customer enters his/her credit card into a secure form.
The contents is sent via SSL (so, the URL starts with https:// )
to your web site.
- After the credit card information received,
your web site submits an electronic "request
for authorization" in order to capture funds from the cardholder's
credit card account in the amount of the purchase.
This request is send via the processor company
to the relevant credit card processing network.
The request is processed right away to validate
credit card account and check the availability of funds.
If this step is successful, the processing network
sends back an
authorization code (typically, a
The authorization code is your
authorization to capture funds
from the cardholder's credit card account.
Several transaction are commonly grouped in a
Most small web site will have
only one "batch" per day.
- After receiveing the authorization code you need to issue the
customer a "receipt".
In most cases, a receipt is simply an e-mail specifying the
details of the transaction.
You may also show a receipt web page to your customer.
- To get the actual money to your bank account you need to
capture the funds for which you've just received authorisation.
When the shipment of product occurs (or immediately after the transaction
for content/service sites), you may go
to the web site of processor company and mark the transaction as
In the interface you would have transactions grouped by batch.
For every credit card transaction, you will have detailed information
as well as information about the transaction's "risk".
Risk is calculated
based on the credit card usage pattern and other transaction details.
For example, if a computer
from which credit card number was entered is outside of US
(as determined by its IP address) or the entered credit card billing address
does not match one in the bank records, the "risk factor" increases.
At this step you can also choose to
mark some transaction in the batch as cancelled - for example, if you
deem the risk too high.
settle the batch command
what mean to
capture the funds for
all transactions (except cancelled) in the batch.
- Within 2 to 3 business days, the funds associated with the
batch you "settled" are deposited electronically into your
- Hopefully, that's when
the transaction ends.
However, a possibility we'd like to mention concerns
If your visitor has used a stolen credit card or if your customer is
legitimate, but was
not satisfied with goods or service he/she received (or didn't receive),
the credit card owner may contact the issuer and dispute a transaction.
A chargeback occurs when a customer contacts a
credit card-issuing bank to initiate a refund for a purchase
they made on a credit card.
The best tools to avoid chargbacks,
a signed receipt or manual imprint of the credit card unfortunately
are not available to online merchants.
As a merchant, your position in disputing a transaction is rather weak.
You'll definitely be better off verifying the transaction before approving it,
especially if it was marked as "higher risk" by the processor.
Many merchants who ship actual goods or have substantial
volume of transactions have dedicated personnel who contact credit card owners
in order to verify suspicious transactions.
Merchants who do not ship any goods (e.g. classified advertisement sites, etc), do not perform
such verification of every transaction and often "just live with it".
Your bank may increase your fees if the percentage of chargebacks
goes about a certain threshold.