Credit Card Processing 101: How does it work?

On the surface, the credit card transaction process seems simple: Customers swipe, dip, or tap their cards, and before they know it, the transaction is complete. Behind every swipe, however, there is much more than meets the eye. Inserting the card and signing the receipt are only the first and final steps of an intricate procedure. And the whole process, though it happens in the blink of an eye, involves multiple stages and entities working together behind the scenes.

So, who are the key players working during those few seconds?

The cardholder: anyone who has a debit or credit card (customer). 

The merchant: a business owner who accepts debit or credit card transactions as a form of payment for their goods and services. 

The processor: An institution that oversees credit card transactions and payment processing.

The issuer: A bank that issues the credit card to a cardholder.

Card association: Cards like Discover, Mastercard, American Express, and Visa. All of which require merchants to use a payment processor in order to accept debit/credit card payments.

Now that we’re all gurus in processing terminology, let’s look at how it all goes down. 

Step 1: Cardholder pays with a debit or credit card.

Step 2: Merchant processes card through one of the following:

• Terminal or POS (point-of-sale) system 
• Online gateway
• Mobile app

Step 3:  The transaction goes through the issuing bank for approval. 

Step 4: The payment processor (e3ePay) transfers over data to the credit card issuer. 

Step 5: The issuer will send approval to the payment processor.

Step 6: The processor receives the funds from the issuer.

Step 7: The merchant receives the funds (payment) typically within 24-48 hours.

If you’re looking for a processor who takes pride in supporting locally owned businesses through the integrity and transparency of their services, look no further. e3ePay offers simplistic payment solutions starting as low as $25 a month. Be sure to check out our website for additional information, and as always, remember to look local first!