How the Credit Card Process Works


    In the 21st century, accepting electronic payments is a must for any business. The modern consumer is well aware of how convenient, secure, and seamless credit card transactions are. And as a result, they prefer the form of payment over any other. So, if you are still asking for cash, it’s time to reconsider your business’ payment infrastructure.

    Whether your business is accepting payment online or in-store, it’s essential to include credit card processing systems. And to do so, you must have a provider that can securely facilitate these transactions for you.

    However, as typical as credit card payments are, not everyone is familiar with how the process completes from start to finish. The below guide will help you understand how credit card processing works.

    What is Credit Card Processing?

    The credit card process starts when a client’s card information processes at a POS terminal or online via a virtual terminal. A merchant provider, such as Payment Savvy, channels the payment to the cardholder’s issuing bank. The latter approves or declines the transaction and sends the result back to the processor, and ultimately, the merchant. As complex as the process may seem, all the above occurs in a matter of seconds.

    Entities Involved in Credit Card Processing

    For this process to occur, the following five parties need to be involved:

    • Cardholder
    • Merchant
    • Payment Processor
    • Card Brands
    • Issuing Bank

    How Credit Card Processing Works

    The entire payment process is divided into three stages:

    Payment Authorization Stage

    The first and most important step in credit card processing is the payment. Regarding online credit card processing, payments can be made via a website or mobile app. In physical stores, payments are swiped, inserted, or tapped. Customers may also use digital wallets linked to their credit cards of choice.

    Irrespective of the payment mode, once a client authorizes a transaction, the card details are securely obtained and sent to the store’s payment processor. The payment processor forwards the details to the relevant card network and ultimately passes them to the issuing bank for authentication.

    Payment Authentication

    After the issuing bank receives payment, authentication occurs next. The issuing bank confirms the customer’s available balance and approves or declines a request. Also, security measures in place authenticate the cardholder’s details and evaluate for signs of fraudulent activities.

    If all lines up, the payment is approved, and the transaction is sent back to the payment processor and, ultimately, back to the merchant.

    Payment Clearing

    The final step including sending the payment details to both the merchant and the customer. Funds are withdrawn from the cardholder and transferred to the merchant for payment of goods and services. Payment details also come in the form of bank statements on the consumer side and processing statements for the merchant.

    Processing statements details daily payment totals and disclose appropriate monthly transaction fees. Some of the payment costs include card brand and interchange fees. With programs such as Payment Savvy’s compliant Fee-Free Payments solution, some businesses may qualify for low to no-cost payment processing. We also offer next-day funding to get access to your funds quickly.

    In conclusion, the above details the three key stages the credit card process takes. By understanding the process, merchants can realize how adding credit card processing is an essential platform for business growth. If you have any questions on how you can add the perfect payment acceptance for your business – give Payment Savvy a shout. Since 2010, our innovative and custom payment solutions have helped numerous merchants realize success and profit.

    Chad is a serial entrepreneur and founded Payment Savvy in 2011 armed with the goal of providing high-risk establishments with a pioneering and tailored payment processing solution that allows them to flourish. Having decades of knowledge in the financial services and debt recovery industries, he ensures every client receives the same level of expertise, resourcefulness, and strategic vision no matter the size of the organization. Always willing to push the envelope, Chad’s forward-thinking and leadership skills are responsible for Payment Savvy being on the map as an industry-leading payment processor.


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