As a consumer, you’ve no doubt seen the front end of credit card processing. But what happens after a card is presented for payment? The process is one with which you should become familiar if you’re going to join the ranks of merchants and restaurateurs that take credit and debit cards.

When a card is swiped through an electronic POS terminal, an electronic request is submitted to the processing network for authorization. Upon receiving the request, the network electronically determines whether the cardholder’s account is valid and if funds are available to cover the transaction. If so, an authorization code, guaranteeing your access to the funds, is transmitted to you. Your POS terminal or computer prints a receipt for the customer to sign and return to you.

At the end of each business day, you initiate a process called “settlement”, wherein you electronically submit a final request to the processing network to capture funds for all authorized transactions completed on that day. Once the settlement has been approved, a response is sent to your POS system or computer. Funds associated with each batch settled are electronically deposited into your business bank account, usually within 48 to 82 hours.

At the end of every month, your transaction rate and any fees paid to the merchant account provider are deducted from your account. The merchant account provider then issues you a monthly statement that lists your credit card activity for that month and the associated fees you have been charged.

Of course, the process is slightly different for Internet and e-commerce merchants, which rely on specialized software programs to capture and process credit card information on their Web sites instead of through a POS terminal. One such program is a shopping cart, or secure series of scripts or coding that track items a visitor chooses to purchase from a Web site until the consumer proceeds to the checkout function. The credit card number, billing address, authorization number and card expiration date are collected on the checkout screen. The other program is a payment gateway, to which information collected in the shopping cart is transferred for authorization once an online shopper is ready to finalize the transaction. For mail and telephone orders (MOTO), touch-tone processing or an automated response unit allows for credit card authorization and processing over the telephone.

For more information on how to set up your particular operation for credit card processing, contact pcAmerica.