How credit card payments move from checkout to your bank

Whether you are just starting out or are growing your online business, you need the right tools to power your eCommerce growth. While it is important to build a high-quality website and offer the right products, you also need to spend time creating your payment acceptance strategy – and ensuring it aligns with your operational needs. 

In particular, it is important to understand when and how you will receive funds from your online sales – from the time a customer enters their card information into your online checkout process to when you see those funds hit your business checking account. Many business owners don’t realize how long credit card payments take to authorize, settle and fund -- even though a sale takes a few seconds, in certain arrangements, it can take days or even weeks for that money to appear in your account.  

To get revenue from your customers to your bank account is quite a process. The right payments processing partner can help you understand this process – helping you plan your cash flow, avoid confusion and optimize payments solutions.  

In this article, we’ll break down what happens during payment processing and how long it takes to reach your bank account.  

What is credit card processing? 

Credit card processing is a system that lets businesses safely accept and handle credit card payments and payment card information. You can think of credit card processing as a relay race. Multiple team players must hand off their “baton” to finish the race.  

The entire process requires all players to participate, or the system wouldn’t be secure or efficient, which increases the risk of fraud and data breach events. 

When a customer swipes, taps or enters their card information online, the payment data must go through several steps. Without credit card processing, your customers cannot pay the way they want. This means you could lose both the sale and the trust of your customer.  

Who participates in a credit card transaction? 

Each participant plays a distinct part in processing credit cards to guarantee successful, quick and safe payment transactions. Once you understand each participant in the process, your business can prevent delays, manage payments efficiently and keep customer data secure.  

Here are the various participants and their roles:  

• Cardholder: The customer who makes a purchase using a credit or debit card. 
• Credit Card: A credit card is a payment method used by consumers to purchase products or services. Most cards contain a tiny chip that helps authenticate the payment card and the payment transaction authorization.  
• Merchant: A business that accepts credit card payments as a form of payment for the goods and services they sell. 
• Card Network: Connects banks and processors like Visa, Mastercard, or Discover. The Card Networks assist in the settlement of a payment transaction between the card issuing banks and the payment acquiring banks.  
• Issuing Bank: The bank that gives the customer their credit card and line of credit and will provide the authorization for payments made by the cardholder. 
• Merchant Bank: The bank that works with the business's payment processor to handle transactions. It collects payment information from the point-of-sale system, sends it through the card network and settles the funds from accepted card payments into the business’s depository bank account. 
• Payment Processor: The company that contracts with the Merchant business to provide the card payment settlement services. 
• Payment Gateway: A system that moves payment information securely from the merchant’s point of sale to their payment processor.  

How Credit Card Processing Works

When a customer pays with a credit card, there’s more that happens behind the scenes. 

The process begins as soon as your customer swipes, taps or inserts their card.  

There are three main steps involved in the process, which include: 

Authorization

The instant check that confirms a card is valid and has enough available funds before a sale completes. This process only takes a couple of seconds. 

1. The customer swipes, taps or enters their card information into the merchant’s card reader or POS. 
2. The merchant’s bank or payment processor obtains the card info. 
3. That bank/processor sends the card info to the appropriate card network, like Visa, Mastercard or Discover.  
4. The card network forwards the request to the customer’s bank (the card issuing bank). 
5. The issuing bank verifies the card information, the account status and the amount of credit or money available.  
6. The issuing bank sends back an approval or a decline to the card network. 
7. The merchant’s bank or payment processor receives the approval or rejection from the card network.  
8. The approval or decline indicates a successful or unsuccessful sale, according to the merchant’s card reader or point of sale system.  

If a sale is online or an ecommerce card transaction, the process may require a payment gateway as well as a payment processor. 

Clearing

How the card network communicates payment information. To complete the payment, banks exchange transaction details.  

1. The merchant will forward all authorized transactions to their bank, usually at the end of the day.  
2. The customer’s bank receives the information from the merchant’s bank via the card network.  
3. The customer’s bank removes the hold on the account and processes the actual charge the card issuing bank authorized. 
4. The customer’s credit card statement then shows the charge paid to the merchant. 

Settlement

Typically, on the following day, the customer’s bank sends the approved payment information to the merchant’s bank. Then, the merchant receives the money. Depending on the merchant’s payment processor determines how quickly they receive the funds.  

1. The card network reconciles how much money each bank owes or receives.  
2. After that, the card issuing bank releases the funds to the merchant acquiring bank.  
3. If the payment involves different currencies, currency exchange occurs during this step.
4. The payment card networks oversee and coordinate the routing of transactions to ensure they reach the correct destination.  
5. Then, the payment reaches the merchant acquiring bank and the payment processor which settle the particular transaction payment(s) to the merchant’s depository account.  

How long does a credit card payment take to process? 

Knowing how long each step of credit card processing takes can help you plan ahead. Authorization happens almost instantaneously. Settlement typically occurs on either the same day as the transaction or overnight.  

Funding usually happens 1-3 business days after the sale but depending on the issuing bank and the payment processor, funding could take longer.  

Small businesses or restaurants, for instance, might receive funds in 1-2 business days, but high-risk merchants or online companies might have to wait up to 3-5 business days.   

For faster cash flow, you need a processer that provides same-day or next-day funding options. 

Why processing times can vary

Processing times can vary depending on several factors. Some payments may take a few more days to process, while others appear the following day.   

These are the different factors that could potentially delay processing times:    

• A merchant’s enterprise, such as retail, restaurant, service, etc 
• The merchant’s depository bank’s funds available policies
• Accepted payment methods
• Inaccurate payment information
• Weekends or bank holidays
• Batching schedule
• Chargebacks
• Fraud checks 

Can you speed up credit card processing? 

You can expedite credit card processing by following these strategies:  

• Choose a trusted processor that provides fast funding options 
• Close out batches daily
• Update account details regularly
• Set up auto-pay to reduce manual errors or late payments 
• Use secure terminals and PCI-DSS-compliant POS systems to lower fraudulent risks (Read more about Elavon’s PCI-DSS compliance here.)
• Accept contactless or digital wallet payments for faster authorizations

Faster processing means you receive payments sooner, maintain a steady cash flow and spend less time waiting for deposits. Our faster funding solutions can help you strengthen your operations. 

Why does understanding credit card processing matter?

When you understand credit card processing, you can better predict when your money will reach your account. Instead of waiting days or even weeks to get your deposits, you can strategically plan your cash flows to meet your business needs. Maintaining stable cash flows ensures smooth experiences for your customers, builds trust with your vendors and minimizes business disruptions. 

Armed with the knowledge of how credit card processing works, you can choose a payment processor that aligns with your business needs. Take time to review your current payment setup, compare processors, and make sure your system supports both your customers and your business. Get started processing fast and secure payments.

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