A dollar doesn’t go as far as it used to, but it sure travels faster.
Lately, we’ve been giving a lot of money to the oil industry. Usually we pay with a debit card. It’s no longer safe to carry enough cash to fill up our tank. We’re always amazed at how quickly the money flees from our bank account in Chicago to a corporate treasury in Houston. Exxon no longer has to wait three business days before spending it on lobbyists.
To find out how cash moves at the speed of light, we called MasterCard. We owe them money. And we like that their headquarters are in Purchase, N.Y.
We’d always assumed that debit cards worked like gift cards from Target: The money in our account is recorded on the magnetic strip and reduced with every purchase.
They’re a lot more complicated, said Patricia Preston, group head of debit product management at MasterCard. The strip contains an account number, an expiration date and your name. When you stick your card into the pump, your financial info flashes over the wires to the gas station’s bank, which kicks it to the MasterCard Network in St. Louis. The roundhouse of America’s petty purchases, it’s capable of processing 140 million transactions a day.
MasterCard then asks your bank for authorization. But you haven’t started pumping gas yet. How does the bank know whether you’ll be able to cover this major purchase?
“Gas stations do an authorization for a larger amount” than you’re likely to spend, Preston said. “If you have $30 in your account, you may not be approved in the transaction. Car rental agencies do the same thing. They may go out and get an authorization for $300.”
If you have enough money, the message travels back along the line, until it appears in digitized letters on the pump: authorized.
MasterCard calls this circuit the Four-Party System. It’s traveled again later that day, during the “clearing” process, when the purchase amount is frozen in your account, and yet again when your bank pays the gas station. Every time, MasterCard is the middleman. And it always passes along the info in 12/100ths of a second. Which is why it’s so easy to spend money so fast.
