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Credit card processing in 8 simple steps

Editorial Team

3 min read

  1. Making the purchase
  2. Entering the transaction
  3. Transmitting the data
  4. Authorizing the transaction
  5. Responding to processor and merchant
  6. Completing the transaction
  7. Submitting batch closure
  8. Depositing the funds

New to the world of credit card processing? It may seem complex, but once you understand how credit card processing works, you’ll see that the ability to accept card payments is simple and beneficial for your business. Credit card merchants can reach more customers, see an increase in sales, and benefit from advanced security technology.

Read below to learn how the processing of credit cards works for merchants in eight simple steps.

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1. Making the purchase

The customer finds a product that he or she likes and decides to make the purchase. The customer can use a credit card to pay for the item in the store, through an online payment gateway, by phone, or by mail.

2. Entering the transaction

The credit card is swiped or dipped using a secure credit card reader, or the card and transaction information is manually entered using a virtual terminal. For eCommerce transactions, the cardholder keys in the payment details on a hosted payment form on the website.

3. Transmitting the data

The credit card data is encrypted and transmitted for approval as the terminal, POS system, or secure payment gateway is connected to the processing network. Point-to-point encryption (P2PE) can help protect the sensitive payment information from the moment the card is swiped or dipped all the way through to authorization and approval. This security method can help maintain compliance with PCI security standards.

4. Authorizing the transaction

Once the data is transmitted, the credit card issuer can approve or decline the transaction. This is based on the validity of the card, the amount of the transaction, as well as the cardholder’s available funds.

5. Responding to processor and merchant

If the transaction is approved, the processor and the merchant receive an authorization response.

6. Completing the transaction

The merchant completes the transaction by issuing a receipt to the customer. For eCommerce orders, the merchant then prepares to ship the items to the customer.

7. Submitting a batch closure

The merchant completes the credit card payment process with a batch closure. This closes out the transactions that have been processed on that day. The processor’s acquiring bank then collects the funds from the credit card issuers.

8. Depositing the funds

The processor’s acquiring bank then deposits the funds into the merchant’s business account. This typically takes up to 48 hours.

Want to learn more about accepting credit cards?

As a business owner, accepting credit card payments makes it convenient for your customers to pay for goods and services, which can help improve your cash flow and boost profitability. Today, merchants have more options than ever to help make the payment acceptance process as simple as they can for their customers.

Most of the newer card readers now offer the ability to accept traditional swiped cards, dipped chip cards, and contactless NFC-enabled cards or mobile wallets, such as Apple Pay® or Google Pay™. These solutions can help save shoppers time, speed up the credit transaction process, and offer more security.

Check out these other resources:

If you’re looking to accept credit cards and other electronic payments, connect with a Clover Business Consultant today.

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Editorial Team

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