If a caveman came back and made his way to a store offering Point of Sale (PoS) payment mode, he would be baffled by the ease at which Homo sapiens do their own version of hunting. In truth, the simple act of swapping a small card into a terminal to effect a transaction would bewilder the uninitiated, and not necessary the early man.

What happens?

How the payment is finally processed?

These are just some of the questions that even some card holders don’t bother to ask, either to themselves or anyone (it is a possibility that some store workers don’t fully understand it as well), so you are not alone.

Here are some quick hints.

Every time one uses a credit card to purchase something, several industry players offering different services then come forward to complete the transaction.

Once the card is swiped across a PoS terminal, the terminal electronically reads the cards holder information and then through a phone line, it asks for an authorization to complete the transaction from the processing network which is responsible for translating the information given at the PoS sale point.

The data is then sent to the issuing bank to check whether the account is valid and that the transaction is within the allowed credit limits. The network is then triggered to send an approval code to the PoS terminal. The details are then saved at the PoS which are then sent to the processing bank at the end of the day which then pays funds into the merchant’s account.

Today it’s referred as the old plastic but all credit card buffs know that the first credit cards were not made of plastic but cellulose and metal plates. Encyclopedia Britannica documents that, the use of credit cards originated in the United States during the 1920s, when individual firms, such as oil companies and hotel chains, began issuing them to customers. Also, in the 1920′s, stylish stores in the United States issued them to their favorite customers.

So at that time they were highly localized in acceptance. So if you lived in Los Angeles you couldn’t use your credit card in Chicago. But credit cards gained nationwide usage after the likes of Henry Ford gave the world mass produced automobiles. The ability to travel across America had the unintended consequence of popularizing the credit card usage. The 1950’s saw the founding of the Diners Club, which now is one of the biggest credit card companies worldwide. Its founder, Mr. Frank McNamara probably was surprised the way his start up turned out to be.

The card was first intended to enable Diners customers to have their meals without paying for them, and Diners club would foot the bill. The customers then would repay Diners Club. In 1951, Bank of America, encouraged by Diners success, started a card that is now called VISA. And other California banks started their card which later became MasterCard. The American Express made its debut in 1958. At that time, the banks realized that the card business was a mass market business, and they later began mailing anyone with address (some of them dead) offering the new found craze.