What are the steps in the credit card transaction?

Every credit card payment, whether in person, online, or by phone, follows three main steps: Authorization & Authentication, Clearing & Settlement, and Funding.

1. Authorization & Authentication

• The customer provides their card details either in store, online, by phone, mail, or in an app.
• The payment processor sends the transaction details to the card network (Visa, Mastercard, etc.).
• The card network forwards the request to the card issuer for verification and approval.
• The issuer checks the account, confirms available credit, and responds with an approval or decline. If approved, funds are reserved.
• The response is sent back through the network to the processor and finally to the merchant, completing the loop.

2. Clearing & Settlement

• At the end of the day, the merchant sends a batch of approved transactions to the processor.
• The processor forwards them to the acquirer, then to the card networks and issuing banks.
• Issuers charge the cardholder, deduct fees, and send the remaining funds to the acquirer via the card network.

3. Funding

• The acquirer deposits funds into the merchant’s account, usually within 24–48 hours.
• In a PayFac model, funds go to PayFac first, then to sub-merchants.
• Fees may be deducted immediately or billed monthly, depending on your agreement.