How Do Credit Card Machines Work?

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Credit card machines work by transmitting information from a credit card along a telephone line for the value of the purchase. Money from the bank of record is deposited to the vendor for the goods or services purchased by the consumer. Learn more about credit cards with information from a registered financial consultant in this free video on credit cards.

Part of the Video Series: Money Management
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Video Transcript

This is financial adviser Patrick Munro, talking about, how do credit card machines work? Credit card machines are just that. They're electronic machines that will take a data input, from a credit card, and transmit it along a telephone line, for the value of the purchase, that you have just made. This information goes off to the bank of record, and the money gets deposited with the vendor, who you are buying the goods or services for. It's very convenient. Back in the day of course, individuals had credit cards that they would lay on a plate, called a knuckle buster, because you would have to move your hand across a metal plate, and make an imprint of the credit card slip, and then mail it off to the bank. It was very problematic. Nowadays, everything is electronic, and the credit card machines can also issue credits back, if someone cancels a purchase. That is the entire process I just mentioned to you earlier, in reverse, so it's a great tool for the merchant. It's a convenient service, for the credit card holder. This is Patrick Munro, talking about how credit card machines work.

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