How to Receive Credit Card Payments

A lot has changed since Diner’s Club first introduced credit card payments in 1950. Worldwide, payment by credit card has become the norm, and businesses that don’t accept payments by credit card are definitely at a disadvantage.

Despite the very complicated behind the scenes intricacies of each credit card payment, the process involved to receive credit card payments is really straightforward. The most important thing for business owners is that they choose a reputable merchant card service provider or processor.

The six steps Involved in credit card payments

There are six steps involved in each credit card payment. Each step is involved in passing the customer’s card payment information along a sensitive communication line to have the transaction approved or declined. It takes just seconds to complete the whole cycle, and the payment is either processed successfully or cancelled. These are the six steps:

  1. Customer: the customer initiates the process by swiping or dipping their card (card present), or by providing the card details (card not present) to the merchant.
  2. Merchant: the merchant then accepts the card information via a processing device, or online via an online gateway.
  3. Processor: the processor is responsible for receiving the information and routing the data across the next stages and facilitating communication between all parties involved in the card network.
  4. Card network: the card networks include Amex, MasterCard and Visa. The payment data is relayed to the relative card network that has issued the customer’s card.
  5. Customer bank: the bank that holds the customer’s account is prompted to verify if there are adequate funds available. Simultaneously the customer bank runs security checks to validate the credit card details to eliminate fraud. If the card is validated and there are sufficient funds, the transaction approval is relayed back via the card network. Declined transactions are relayed in the same manner.
  6. Merchant: the merchant is prompted that the payment has been approved or declined via the same channels that initiated the payment request.

But the funds are still not available?

It is important to note that funds are not released immediately after a card payment transaction has been authorized. The authorization of a credit card payment transaction sets in motion a separate process that can take several days to complete. Transferring the funds from the customer’s bank account to the merchant’s bank account involves the same role payers mentioned previously, and communication similarly takes place. The final processes involved are:

  • Merchant bank: the merchant’s bank is where the merchant’s funds will be deposited.
  • Credit Card Processor: the processor continues to receive and route the transaction information between parties involved across the card network.
  • Card Network: the card networks relay data between the issuing banks and the merchant.
  • Customer Bank: the customer’s bank releases the funds for transfer to the merchant’s bank account.

Both the customer and the merchant have nothing else to do once a credit card payment has been approved at the time of purchase or service. For more information about what is traditionally involved to receive credit card payments or to sign up for a merchant account, please call (888) 924-2743 or go to


Leave a Comment