This may require manual processing or it may happen automatically depending on which processor you use. Batches of authorizations are sent to the processor at the end of the day or another preset time, though there are some processors that offer real-time processing that don’t need to be batched. Settlement and clearingĪt this point in the transaction, the customer’s part in the process is over. At the end of the day, the merchant will start the settlement and clearing process to complete the transaction. If the transaction is approved, the customer will see a hold on the purchase amount on their account, and at this stage, the transaction will be pending. That response is bounced back through the same channels and reaches the merchant.

Denials can be based on a lack of funds, if a card is expired, if the card has been reported stolen, or if there is fraud suspected. Then the bank approves or declines the request. Once the authorization request arrives at the issuing bank, they verify that the card number, billing address, and CVV match.

Optional: The billing address (as a part of the fraud-prevention Address Verification System (AVS)).

The CVV (Card Verification Value) security code (the 3-digit code on the back of the card.

Then, the credit card network sends an authorization request to the bank that issued the card. When a customer pays with a credit card (by inserting, swiping, or tapping on a terminal or using it online on a website or through a digital wallet like PayPal), the merchant’s payment processor reaches out to the issuing bank through a credit card network. Let’s break it down into three main parts: authorization, authentication, settlement, and clearing. But there’s actually quite a bit of complexity involved in credit card transactions.

The process seems pretty simple on the surface: a customer swipes their card and then you get your money.

Accept ach credit and debit cards