How Does Credit Card Processing Work?

How Does Processing Work

How Does Credit Card Processing Work?

A General Overview

You don’t need to understand the inner workings of credit card processing to get a good rate and great service. But, a general understanding of how it works can help you avoid unnecessary fees.

Credit card transactions happen in a two-stage process consisting of authorization and settlement. This is important because different fees are incurred at each stage, and a failure (or partial failure) in either step can result in increased costs and/or credit card sales not being deposited.

Let’s take a look at the basic elements of what happens when you process a credit card:


Step 1: Authorization

The networks that transmit billions of transactions between merchants, processors and banks are truly incredible.

1. As soon as a customer’s card is dipped/swiped/entered, your terminal passes transaction information to your credit card processor. If the customer’s card is equipped with EMV chip technology, that sensitive data is replaced with “tokens” that change with every transaction, protecting consumers from identity fraud.

2. From there, your customer’s card network transmits information to their bank for approval. The customer’s bank then sends an authorization back through the card network to your processor before the authorization finally ends up back at your terminal or software. This all happens in a matter of seconds!

As involved as the system sounds, obtaining an authorization for a transaction is just the first step. Authorizations must be settled before sales can be deposited into your business’s bank account. Now, let’s talk about . . .


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Step 2: Settlement

1. You, the merchant, send authorized transaction info to your processor. This is typically done once a day, at close of business, and is called a batch. Transactions that batch after the next day actually cost merchants more in processing fees.

2. The processor sends approved transaction amounts to sponsor bank.

3. The sponsor bank deposits funds in the merchant’s bank account. Funds are typically accessible within 48 hours of batch completion.

4. The sponsor bank collects the funds from the cardholder’s bank. This is when the customer sees the funds taken out of their account. The cardholder’s bank bills the purchase on the cardholder’s next statement.


What Does This Mean for You?

Not all credit card processing is created equal. Now that we’ve taken a deep dive into the process, let’s look at a few questions you, the merchant, should think about when choosing a credit card processor.

– Can your processor supply you with the point-of-sale (POS) system that’s right for your business – not a one-size-fits-all solution?

– Can their processing be integrated within the POS systems you already use, and marry payments with all of your other business system needs?

– Does your processor provide excellent customer service? Will they be easy to reach in your moment of need?

For more information, check out these 5 Things to Look for When Choosing a Credit Card Processor for Your Business.

BASYS Processing as a business partner 

Does your current processor understand the unique struggles of your industry? Do they provide great rates and personal customer service? Are they offering solutions to grow your business and being proactive about helping you reduce risk and increase your savings? 

Contact BASYS today to learn more about innovative payment solutions that will save you time and money. We make accepting debit cards and credit cards convenient, safe and affordable. 

BASYS Processing features: 

• A friendly, live voice will answer the phone when you call; no automated phone systems 
• In-house PCI Compliance team to walk you through the process step-by-step, improving security and reducing costs
• Accept payments in person, over the phone or online
• Next-day funding options 

About BASYS Processing 

BASYS Processing provides credit card and debit card processing services, plus solutions that include terminals, virtual terminals, e-commerce, mobile, and point-of-sale, customized to fit any need.  Banks, associations, and software partners depend on us to strengthen their reputations and relationships with their customers by providing remarkable service paired with ultimate flexibility and pricing. Merchants depend on us to make accepting credit cards and debit cards convenient, safe & affordable. BASYS was founded in 2002 on one philosophy: to take care of our merchants, partners, and employees so they never want to leave. We are dedicated to working one-on-one with our customers to design the perfect solution. BASYS is Personal Payment Processing. 

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