Swiping your card on your shopping trips is a no-brainer, and online shopping isn’t a tricky affair either. But do you know how your credit card actually works?

There are various steps and a number of key players involved in ensuring that the payment gets processed successfully. Here we take an in-depth look at how a credit card transaction comes to completion right from the moment you swipe your card or make an online purchase.

Who are the parties involved?

  • Cardholder – That’s you!
  • Merchant – The merchant is the physical store or e-commerce website that you would buy merchandise from. A merchant in this context, would have a merchant account with an acquiring bank, through which all credit card payment transactions are settled.
  • Acquiring bank – This is the bank that provides the POS machine or e-commerce payment software to the merchant, and is also known as the merchant’s bank. For example, ADIB, NBAD, Mashreq, CBD and Network International are the registered acquiring banks for Visa cards in the UAE.
  • Issuing bank – This is the bank that issues the credit card to the cardholder, and is also known as the cardholder’s bank. The issuing bank’s role here is to pay the acquiring bank every time you make a purchase using the card.
  • Card network – These are the companies that actually process credit card payments and act as a gateway between the acquiring bank and the merchant. Visa, MasterCard and American Express are the primary card networks globally.

[Related: Guide to credit cards]

What goes on behind the scenes when you swipe your card?

Let’s take your average shopping trip to explain how this works. So you’re grocery shopping at your neighborhood store and as your turn comes to pay at the billing counter, you give your credit card to the cashier who then swipes it in one swift motion. Here’s what happens from that point on:


  1. After the merchant swipes your card using the POS machine and you punch in your card PIN, the transaction data is submitted to the acquiring bank.
  2. The acquiring bank forwards the payment request to the card network for validation.
  3. The card network – Visa or MasterCard, further sends a request for approval to the issuing bank.
  4. The issuing bank will check your card validity, credit limit and other such criteria, and based on these approve or decline the transaction and send this response to the card network.
  5. The card network will forward this response back to the acquiring bank.
  6. Assuming that the transaction is approved, the merchant will be notified as the acquiring bank processes the payment.
  7. A receipt will be generated with two copies, one for the merchant and one for you.


  1. At the close of the day, the merchant sends the entire batch of sale transactions to the acquiring bank to receive payment.
  2. The acquiring bank sends this transaction data to the card network.
  3. The card network routes the transactions to specific issuing banks and issues a debit to them for settling the payment. At the same time it also issues a credit to the acquiring bank which can then reimburse the merchant.
  4. The issuing bank now posts a debit in your credit card account. You will be able to see this in your credit card statement, and can then pay your credit card bill as and when it falls due.

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How is the process different when you shop online?

What’s different about an online credit card payment, is the fact that now there’s no POS machine involved. Instead, there’s an online payment gateway to process the e-commerce transaction.

For online payment transactions, you’re required to enter your credit card details – card number, card expiry date and CVV number. As an added cyber-security measure, banks in the UAE also use the ‘3D Secure’ feature which generates an authentication code or one-time password (OTP) sent to your mobile number and email address. You’re required to enter this OTP online and the transaction will be successfully processed only if the details entered are accurate.

[Related: 67% of credit cards are for salaries under AED 10,000]