Credit card processing is the process of authorizing and settling credit card transactions. The process begins with a merchant swiping or inserting a customer’s credit card into a point-of-sale (POS) terminal or virtual terminal. The POS terminal or virtual terminal then communicates with the customer’s credit card issuer to obtain an authorization code. Once the authorization code is obtained, the POS terminal or virtual terminal forwards the transaction information, along with the authorization code, to the acquirer (i.e the bank that issued the merchant account).
The acquirer then forwards the transaction information to the card association (e.g. Visa, MasterCard, American Express, etc.). The card association verifies that the customer’s credit card is in good standing and that the authorized amount is available for withdrawal. Once verified, the card association approves the transaction and sends an approval code back to the acquirer. The acquirer then forwards the approval code to the merchant. At this point, the transaction is complete and funds are transferred from the customer’s credit card account to the merchant’s bank account. Merchant processors typically charge merchants a fee for each transaction, and may also charge monthly or annual fees. Merchant processors may be banks, independent sales organizations (ISOs), or payment service providers (PSPs).
What are the steps of a credit card process?
There are four main steps in the credit card processing cycle: authorization, capture, settlement, and funding.
- Authorization: This is the first step in the process, and it occurs when the cardholder’s bank approves the transaction.
- Capture: The second step is known as capture, and it happens when the merchant sends the transaction details to the acquirer.
- Settlement: Settlement is the third step, and it happens when the acquirer sends the payment to the card issuer.
- Funding: The final step is known as funding, and it occurs when the card issuer deposits the funds into the merchant’s account.
What are the three stages of card processing in order?
Authorization
The first stage of card processing is an authorization. This is when the cardholder’s bank approves the purchase. The approval is based on the cardholder’s credit limit and whether or not they have the funds to cover the purchase.
Clearing
The second stage of card processing is clearing. This is when the merchant sends the purchase information to their bank for payment. The bank then sends the information to the cardholder’s bank for approval. Once both banks have approved the purchase, the funds are transferred from the cardholder’s account to the merchant’s account.
Settlement
The third stage of card processing is a settlement. This is when the purchase information is sent to a credit card processor for payment. The processor then pays the merchant for the purchase minus any fees that may be owed.
What is credit card verification and processing?
When you make a purchase with a credit card, the merchant will usually run your card through a credit card processor. This processor will verify that your credit card is valid and that you have enough funds available to cover the purchase. The processor will then submit the transaction to the credit card issuer for approval.
Once the issuer approves the transaction, the funds are transferred from your credit card account to the merchant’s account. The whole process usually takes just a few seconds. If you are making an online purchase, the process is similar but happens entirely behind the scenes. The merchant will send your information to their payment gateway, which will then contact the processor to get authorization for the transaction.
How much is the credit card processing fee?
Credit card processing fees are the fees charged by banks and other financial institutions for the privilege of using their credit card services. These fees can be either a flat fee or a percentage of the total transaction amount, and they are typically around 2-4% for most transactions. However, there are a few things that can affect this rate, including the type of credit card being used, the merchant category code (MCC), and whether or not the transaction is considered a cash advance.
The benefits of credit card processing
- When you process credit cards, you open up a world of possibilities for your business. You can sell to anyone, anywhere in the world. You can accept payments 24/7. And you can get paid faster.
- Plus, credit card processing can help you manage your cash flow and keep track of your expenses. And when you use a service like PayPal, you can even get protection from fraud.
- Credit card processing is essential for any business that wants to compete in today’s market. So if you’re not already processing cards, now is the time to start.
