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Credit card processing is the process of collecting payment from customers for goods and services via their credit or debit cards.
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What Is Credit Card Processing & How Does It Work? Credit card processing is the process of collecting payment from customers for goods and services via their credit or debit cards. It involves several steps, including authorization, capturing, settling, and reconciling payments.
Authorization happens when a customer swipes or inserts their credit or debit card into a POS system (point of sale) terminal. The terminal sends information to the credit card processor, which contacts the customer's bank to request authorization for payment. The bank then approves or declines the payment and returns a response with details about the transaction.
Capturing is when the merchant collects and stores the credit card number and other information from customers during an authorized transaction. This helps merchants verify that the transaction was successful and allows them to track customer spending. Settling is when the credit card processing closes out the day's transactions and sends this information to the merchant's bank. This helps merchants receive their funds as quickly as possible.
Finally, reconciliation occurs after payments have been settled and funds are deposited into a merchant's account. During reconciliation, the merchant matches the transaction data from their bank to the information they collected during authorization and capturing. This helps them ensure that all transactions were processed correctly. Credit card processing is an important part of doing business today as it enables customers to easily make purchases in-store and online. It also helps businesses protect themselves from fraudulent activity and manage their finances effectively.
