• Many consumers carry multiple credit cards.three credit cards image by Aleksandr Ugorenkov from Fotolia.com
  
  For merchants and customers, the ability to pay by credit card is a source of convenience and increased sales. Using a credit card also allows cardholders to manage their spending and enjoy the added security of not carrying cash. However, processing systems, which send payment data to credit card companies, face numerous issues that can make credit cards problematic to use.
  
  

Security

• Security is always a major issue whenever credit card information is involved. To process a credit card transaction, merchants use special software that encrypts the customer's personal data, including the credit card number, and sends it to the credit card company for authorization. Failure to use the right type of encryption can result in a failed authorization or the exposure of a customer's data to anyone with access to the system.
  
  

Transaction Types

• When a merchant processes a credit card payment, there are several options for the type of transaction. These include authorizations, which simply ensure that the credit account has sufficient balance to cover a purchase; captures, which actually send the payment to the merchant; refunds (known as credits); and voids, which cancel a recent transaction. Merchants must request the right type of transaction for the system to process it correctly.
  
  

Holds

• Credit card processing holds can be a major source of frustration for cardholders who have their cards rejected despite having available credit. This can happen when merchants place holds prior to a transaction, to ensure that the customer will be able to afford a purchase. For example, when a customer uses a credit card at a gas station, the merchant may place a hold that reserves $50 on the credit card, regardless of how much the customer actually ends up spending. Numerous holds can cause a card to be rejected when the total of the holds reaches the credit limit, even if the total of the authorized charges does not.
  
  

Speed

• Credit card processing is generally a quick procedure. However, networks can slow down during periods of high usage or when a merchant's software or hardware experiences a glitch. This can slow credit card processing times to the point of negating the convenient advantage of using a credit card as opposed to paying with cash.
  
  

Cost

• For merchants, being able to process credit cards is a costly proposition. Credit card companies often charge an initial fee for the processing software and hardware, while also adding a charge to each transaction the merchant processes. This can hurt profitability and may even encourage some merchants to return to a cash-based payment system if credit card processing fees rise sharply during a period of limited revenue growth.