How it Works

1.) Consumer/Cardholder

Every transaction starts with the consumer. Consumers present their card to merchants as payment for goods or services.

2.) Online or Brick & Mortar Shopping - The Merchant

The merchant accepts the consumers card as a form of payment for goods or services.

3.) Payment Processor

The payment processor captures the credit card transaction information and routes it through the appropriate card network to the cardholders issuing bank to be approved or declined.

4.) Card Network

Your customer’s card will operate on one of the major credit card networks. The most common are Visa and MasterCard. When the networks receive the payment information from the processor, they pass it on to your consumer’s bank.

5.) Credit Card Issuer

The cardholder’s issuing bank then receives the request for payment. They then verify that the transaction is valid, whether or not the cardholder has the funds or credit to complete their purchase and that the account is in good standing.

6.) Card Network

The card issuer send a response code back through the appropriate network to the acquiring bank or its processor.

7.) Merchant

The response code reaches the merchant’s terminal, software or gateway and is stored in a “batch file” awaiting settlement.

The merchant begins the settlement process by sending their batch of approved authorizations to their acquiring bank or its processor. Authorization batches are typically sent at the close of the business day.

8.) Payment Processor

The payment processor reconciles the daily transactions and transmits the batch of authorizations through interchange via the appropriate card associations network.

The payment processor also deposits funds from sales into the merchant’s account via the automated clearinghouse (ACH) and debits its merchant’s account for processing fees either monthly, daily or both depending on the merchant’s processing agreement.

9.) Card Network

The card association debits the issuing bank’s account and credits the payment processors account for the net amount of the authorized transactions.

10.) Credit Card Issuer

The card issuing bank pays the acquiring bank for the cardholder’s purchases.

11.) Consumer/Cardholder

The consumer is responsible for repaying his or her issuing bank for the purchase plus any accrued interest and fees associated with the credit card agreement.