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The 5-Step Path of Credit Card Transactions

Knowing the steps of a credit card processing transaction can increase your leverage in communicating and negotiating with credit card processing vendors.

Your customer dips or swipes his/her credit card, and moments later, the payment begins. What happens next are a series of crucial communications between your business, your credit card processing vendor, and the card issuer.

When you know the steps of this process, you can increase your leverage in communications and negotiations with these parties.

Steps in a Credit Card Processing Transaction

  1. The customer begins the checkout process by using his or her credit card to pay.
  2. A virtual payment request is sent by your credit card terminal to the acquiring bank 1
  3. The acquiring bank sends a payment request to the card issuer 2 to approve the transaction.
  4. If the customer has sufficient credit, an authorization code is sent to the acquiring bank, and the bank authorizes the transaction.
  5. The payment is processed and your business gets paid.

Each payment processed is essentially a loan from the acquiring bank. Like any loan, there are risks involved for the lender, which are offset by certain processing fees. A tiered fee program can make it easier to see the fees associated with different transactions. 


1 The acquiring bank, or processing vendor, accepts the merchant’s transactions and passes them to the issuing bank.

2 The issuing bank issues the credit card to the consumer on behalf of the credit card network. The issuing bank also may be referred to as the credit card company.

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