Credit card processing refers to the procedure of electronically processing a credit card payment. This process is typically completed in three main steps: authorization, batching, and settlement. Here is everything you need to know about credit card processing:
Authorization: When a customer uses their credit card to make a purchase, the merchant's point of sale (POS) system will send a request to the credit card network to authorize the transaction. The credit card network will then send a response back to the merchant's POS system indicating whether the transaction was approved or declined.
Batching: Throughout the day, the merchant will accumulate authorized transactions, which are typically batched and submitted to the credit card processor at the end of the day.
Settlement: Once the batch of transactions is submitted, the credit card processor will begin the settlement process. This involves transferring funds from the customer's credit card account to the merchant's bank account.
Fees: Credit card processing fees vary depending on the processor and the type of card being used. Generally, the fees are comprised of two parts: a percentage of the transaction amount and a flat fee per transaction. These fees are typically deducted from the funds transferred to the merchant's bank account during settlement.
Security: Credit card processing systems must be secure to protect against fraud and other types of unauthorized transactions. This is typically accomplished through the use of encryption and other security measures.
