Credit Card Processing Example

Problem description

A credit card account is opened on a specific date with a 16-digit account number and a credit limit. The first digit of the account number must match the type of the card: "4" for Visa, "5" for MasterCard, and "6" for Discover. Each credit card account belongs to a party. A party may be a corporation, a person, or a joint account between two people. A party has a billing address and telephone number. Several plastic cards may be issued for one account, but some corporate accounts do not have cards. Each account has a number of current transactions, with each transaction consisting of a date, dollar amount, and merchant.

Two steps are needed when a card is used for a purchase:

1. An authorization request is sent to the cardholder's bank to verify that the account number is valid and in good standing, to check that the card has not expired, to check that the account has sufficient available credit, and to check for fraud. Authorization requests may optionally contain parts of the cardholder's name, address, and telephone number; if any part of this information does not match the cardholder's record, the authorization will be declined. Once payment has been authorized, the merchant is given an authorization code, and the authorized amount of money becomes reserved and cannot be used for other purchases. The cardholder is not actually charged yet.
2. Up to three days later, the merchant may settle a batch of several authorized transactions that are identified by authorization codes. Settlement causes money to be transfered into the merchant's bank and each transaction to be added to the appropriate credit card account's current transactions. If the transaction is not settled in three days, it will be canceled. Within 60 days of a transaction, the cardholder may "reverse" the transaction and money will be transfered from the merchant back to the cardholder's account. After 60 days, a transaction is finalized and will never be changed.

A larger amount of money may be authorized than is actually settled.

On the final day of that account's billing cycle, interest is computed based on the account's previous balance and interest rate. If the balance ever goes over the credit limit, if payment is more than 60 days overdue, or if a card for that account has been reported stolen, then it is no longer in good standing. "Recent" accounts that have had good standing for 30 days or less have an additional constraint that only half their credit limit may be used. Accounts may also be canceled by the cardholder's bank at any time for any reason.

Use case 1: Out-of-town purchase.

1. A customer buying gas at a pay-at-the-pump system dips in his or her card.
2. Since the gas station ZIP code does not match the customer's billing address ZIP, the terminal asks the customer for a ZIP code
3. The customer enters a ZIP code
4. The user pumps less than $100 of gas and then replaces the nozzle
5. The system prints the receipt showing the exact amount of the transaction.

• Note: At first, the payment server will try to use the ZIP code of the gas station to authorize payment. Since the customer in this use case is an out-of-town visitor, that authorization will fail and the terminal ask the customer to enter their billing address ZIP code. This rule makes it easy for most users but also helps limit money the gas station would lose due to stolen cards.
• Note: The terminal just asks the merchants payment processing server for simple yes-or-no authorization without asking for any specific amount. The payment server always requests that the merchant bank authorize a payment of $100.