The Stages of Credit Card Processing

Stage 1.) Credit card processing starts the moment the credit card is keyed into the processing terminal.

Stage 2.) The movement of funds begins when the customer gives the merchant their credit/debit information.  Initially the funds are authorized but are not placed into the merchant’s account until the end of the day. Funds are moved between the customer’s bank and then to the merchant’s bank that does the processing.

Stage 3.) The authorization in Stage 2 occurs after the customer’s information, i.e. name, account number, is sent to the merchant’s processing bank by the debit/credit card companies who are: Visa, Master Card, Discover and American Express. These ‘gateways’ handle the process for using these cards.

Stage 4.) The merchant decides if they want to handle American Express and Discover; all of American Expresses and Discover’s  applications,are handled by them individually which entails banking relationships with merchants etc., The companies issues their own cards, processing set-up and all systems related to the transaction(s) is developed and managed by them.

Stage 5.) The merchant decides if they want to handle Visa and Master Card, it is then automatically set up when the merchant decides that they want to accept these cards.

Stage 6.) Transactions initiated at the merchant’s terminal has all the customer’s information and is handled by a 800 number or by the internet to the bank that handles the processing for the merchant.

Stage 7.) At the moment of transaction the merchant knows within a minute of it if it has been accepted or declined. Before midnight, on the day of the transaction, all transactions are placed together or ”batched”. The merchant, by this batching has to pay a “batch fee.”

Stage 8.)  The funds arrive in the merchant’s account no later than 48 hours of the initial transaction. More often it occurs within 24 hours.

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