Types of Transaction
All credit card
processing is done within transactions. To a Web site
owner, the most important type of transaction is a sale
transaction. The other types of transactions are preauth,
postauth, credit, and chargeback.
Sale: A sale is when the card hold purchases a product
or service from a merchant, and the money is transferred to the
merchant's account.
Preauth: A preauth is a transaction where no money is
transferred. Typically, a preauth is done to check that a credit
card is valid, and the usual amount for a preauth is $1.00.
Postauth: A postauth involves purchasing something
before it is shipped. The customer can preorder something, and
the amount is deducted from the customer's credit limit. No
money is transferred, but the card hold is maintained on the
customer's card. When the merchant fulfills (typically, ships
the product), the merchant can perform a postauth to transfer
the money and remove the card hold from the customer's card.
Credit: A credit is the opposite of a sale. A merchant
transfers money from its account into a customer's account.
Chargeback: A chargeback occurs after a customer
disputes a charge made to his or her card. Charge backs are
expensive and time-consuming to deal with. When a customer
disputes a billing, the bank withdraws the amount from the
merchant account and deposits it temporarily back into the
customer's account. The merchant then has a certain number of
days to justify the billing. If the merchant justifies the
billing to the bank's satisfaction, the money is again
transferred from the customer's account into the merchant's
account. The bank then also bills the merchant some amount per
chargeback. Chargeback fees are specific to the merchant's bank.