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Credit card processing: what does it entail, and how does it work?

Accepting credit or debit card payments from clients for goods or services is known as credit card processing. From the moment a consumer swipes their card until the money is transferred into the merchant’s bank account, there are several processes involved.

The procedure begins when clients swipe or insert their credit card to present the retailer with their card information. Then, the secure payment gateway platform handles credit card transactions, receives this data from the retailer and processes it. Next is the payment gateway validation of the client’s credit card details which determines whether the client has enough money to finish the transaction.

If the payment is accepted, the gateway will return an authorisation code to the merchant. The business can then finish the deal and provide the goods or services to the client. The payment gateway deducts any transaction processing costs before transferring the money to the merchant’s bank account. The entire operation only takes a few seconds.

The process of credit card processing in 3 main steps:


Authorisation is the initial stage of credit card processing. The merchant sends a client’s credit card data to the payment gateway when the customer hands it to them. To ensure sufficient funds are in the account to complete the transaction, the payment gateway gets in touch with the customer’s bank. After the transaction is approved, the payment gateway gives the merchant an authorisation code.


The next phase is batching. The retailer gathers several daily transactions and delivers them in a batch to their payment processor. The payment processor verifies each transaction before being forwarded to the right banks for settlement.


Settlement is the last stage of credit card processing. The payment processor deducts any processing costs from the monies from the batch of transactions before transferring them to the merchant’s bank account. Usually, it takes a few business days to complete this.

How does debit card processing work?

Although there are some significant distinctions, debit card processing functions similarly to credit card processing. When a customer uses a debit card to make a transaction, money is immediately taken out of their bank account. The payment processor receives the transaction information from the merchant and validates it before sending it to the customer’s bank for authorisation. The monies are sent from the customer’s bank account to the merchant’s account once the transaction has been confirmed or approved.

Credit card transactions entail borrowing money from the credit card issuer, a significant distinction between credit card processing and debit card processing. Debit card transactions, however, require using the customer’s money.

Processing of credit cards

Credit card processing: Who’s involved?

Multiple parties are involved in credit card processing. Each party is essential to safely and efficiently completing credit card transactions. By being aware of the process involved in credit card processing, you have an adequate understanding of how credit card payments operate and what occurs when you make a transaction using your credit card.

Below are the four parties that engaged in credit card processing:

The issuing bank

The issuing bank is the financial institution responsible for providing credit or debit cards to customers. They verify that the customer has sufficient funds to cover the purchase and authorise the transaction.

The acquiring bank

This financial institution processes the merchant’s credit card transactions and deposits the funds into their account. The acquiring bank is responsible for verifying the transaction details, checking for fraud, and ensuring the merchant has sufficient funds to cover the transaction.

The merchant services provider

The merchant is the business that accepts credit card payments from customers. They use a point-of-sale system or payment gateway to process transactions and receive payment for their goods or services.

The payment gateway

The payment gateway is the company that handles the technical aspects of credit card processing. They receive authorisation requests from the merchant and transmit them to the appropriate credit card network for processing.

It is worth knowing that each party plays a crucial role in ensuring that credit card transactions are completed smoothly and securely. By understanding who is involved in credit card processing, you can better understand how credit card payments work.

How to set up credit card processing for your small business

As a small business owner, you know that accepting credit card payments can be a game-changer for your business. It can increase sales, improve customer satisfaction, and make your business look more professional. But it can only be very comforting if you’re sure how to set up credit card processing. Thanks to affordable and convenient card machines for small businesses at myPOS, setting up credit card processing is easier than ever. Our customer service representatives are always available to respond to all enquiries if there are issues.

Gone are the days when only big businesses could afford to accept credit card payments. Many options are available for small businesses to process credit card payments. You can choose from traditional merchant accounts, payment gateways, or mobile card readers. Each option has pros and cons, so it’s important to research before choosing the one that’s right for your business.

Another option for small businesses is a payment gateway. A payment gateway is an online service a business owner needs to enable you to receive credit card payments through your website. When customers purchase on your website, they enter their credit card information into a form processed by the payment gateway. The payment gateway then sends the payment to your merchant account.

You’ll need to choose a provider and create an account to set up a payment gateway. Then, you’ll need to integrate the payment gateway into your website. This may require technical knowledge, but many payment gateway providers offer support and resources to help you set up.

What is a credit card machine?

A credit card machine is a device used to process credit card payments. It can be a physical device that requires it to be connected to a computer or mobile device. When a customer purchases using a credit card, the credit card machine reads the information on the card and sends it to the payment processor for authorisation. Once the payment is authorised, the funds are transferred to the merchant’s account.

Start processing credit card payments today

Credit card payments have become the norm. You do your business more harm by not accepting credit card payments, thereby making your business miss out on potential sales and customers. With the ease and security of credit card payments, there’s no reason not to start processing credit card payments right away.

Keep your business from falling behind and take advantage of this essential tool and watch your sales grow. We understand the importance of growth for business owners, and therefore, we offer all the necessary tools to facilitate payment acceptance and sales in-store, online, and beyond.

Learn more about card payments and card machines

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