How Credit Card Processing Works

 

In today’s digital economy, credit cards are now a necessary part of conducting business. For new entrepreneurs and established businesses alike, understanding how credit card processing works is an important part of success. Let us help you understand the basics of credit card processing so you can get your business up and running in no time.

The Process of Credit Card Processing

Credit card processing happens in four steps. The first step is authorization, which is when the merchant submits the transaction data to the payment processor and receives approval or denial from the customer’s financial institution. Once approved, the merchant moves on to the second step, which is batching. This is when all approved transactions are grouped together into “batches” before they are submitted for settlement. The third step is the settlement, which is when all approved transactions are sent for a final review and payment by the customer's bank or financial institution. Finally, after being processed and settled, merchants receive their funds from the financial institution in a process called funding.

What You Need for Credit Card Processing

To start accepting payments via credit cards, you will need three things: a merchant account, a payment gateway, and a payment processor. A merchant account store information about customers and their purchases; it also processes payment from the customers’ banks or financial institutions. A payment gateway securely transmits transaction data between merchants and payment processors while also providing additional security features such as fraud protection services. Lastly, a payment processor acts as an intermediary between merchants/payment gateways and financial institutions by handling authorization requests and settling payments made with credit cards.

Understanding how credit card processing works helps business owners make informed decisions about how they accept payments from customers. While there may be some upfront costs associated with setting up your own merchant account, payment gateway, and payment processor—the benefits far outweigh any costs associated with utilizing these services since they help secure customer data while increasing sales potential for businesses large and small. With this knowledge in hand, you can now confidently use credit cards as an accepted form of payment for your business!

 

Gulf Coast Merchant Services has been a leading provider of Point of Sale & Merchant Services in Pensacola, Florida, and across the U.S. since 2005. The team at Gulf Coast Merchant Services is dedicated to bringing you superior service and the best-in-class POS Solutions & Payment Processing. 

Gulf Coast Merchant Services LLC 
180 E. Burgess Rd. Suite D 
Pensacola, FL 32503 
(850) 995-4414 
https://gulfcoastmerchantservices.com/