hand holding credit card

If you are new to the credit card processing world, it can seem like a complex and intimidating process. To address this common concern we outlined who the players are and the steps involved in the credit card transaction process to unravel the industry. Having the ability to accept credit cards as payment for your products or services is extremely beneficial as it increases sales, simplifies the payment process, speeds the collection time, and enhances the customer experience. 

Who’s Involved in the Credit Card Process?

In order to begin to understand how payment processing operates, you need to understand the players involved in the process. Although a payment takes seconds at the register, it actually involves a number of financial institutions between the customer and merchant.

1. The Customer

The customer is the person purchasing the product(s) or service(s).

2. The Merchant Bank/Acquiring Bank

The merchant or acquiring bank works with the business by holding their funds and providing the necessary equipment for swiping/dipping cards, accepting the cards, and depositing funds into the merchant’s account once the credit card sales go through.

4. The Credit Card Processor 

The credit card processor and the merchant are tasked with making sure the payment data is secure during the transaction. They are also the step between the merchant’s bank and the customer’s bank.

5. The Credit Card Network 

The card network functions hand-in-hand with the credit card processor. The credit card network performs the processing, interchange (processing rates), and assessment fees to ensure the expenses are in alignment with the contracts and everything comes together for credit card processing. 

6. The Consumer/Issuing Bank 

The customer’s bank is the bank that has issued the customer their credit card, commonly called the issuing bank. Once the transaction has made the entire electronic circle, the customer’s bank or credit card account needs to approve there are enough funds or credit available in the customer’s account and if so, either releasing the funds or applying the change to their account to complete the transaction.


The Simple Steps of the Credit Card Process

Now that you know who is all involved in the credit card processing system, the next step is to understand the step-by-step process. In the grand scheme, the main objective of the credit card journey is to ensure the necessary funds are available at each step and the transaction is completed as well as making certain the correct anti-fraud steps are being monitored.

Step 1: The Consumer Chooses What To Purchase 

The consumer finds a product or service they would like to purchase and the cardholder uses their card to complete the payment via card dipping, card chip, or by phone.

Step 2: Transaction with the Merchant

The customer’s credit card is officially swiped or entered.

Step 3: Data is Transmitted

This is where the credit card information is transmitted for approval from the issuing bank to the merchant’s bank and the processing network.

Step 4: Card is Approved or Declined

Once the data is transmitted, the customer’s bank will approve or decline the purchase based on available funds or the transaction.

Step 5: Completion of the Transaction

If the card is declined, the cardholder can try the process again or use a different payment method. 

If the card is approved, the merchant will receive an approved message from the POS (point of service) or Virtual Terminal system and the merchant/store will complete the transaction. 

A quick note on why cards can be denied. While a card can be denied for insufficient funds, it can also be triggered based on the type of purchase being made or if the purchase is flagged as an unusual spending habit or mismatched address verification. For example, if a customer rarely uses their card and then uses their card multiple times in a day or is used outside of the country, this behavior can be considered suspicious by the network and therefore the card is denied to prevent fraud.

Step 6: Batch Closure Submission

For the customer/consumer this is the end of the process; however, the merchant/store must complete a batch closure at the end of their sales day when all the transactions have been finalized. The processors acquiring the bank will collect the funds from the credit card issuers.

Step 7: Funds are Deposited

The last step for the merchant is to deposit the funds. This happens when the merchants bank deposits the funds into the merchant’s business account. 


Credit card processing requires multiple players and steps in order to complete a seemingly simple purchase. Yet credit card processing is extremely important to grow a business, get easier access to cash, and streamline payments. Each step is a critical component to ensure the transaction is completed, and all within seconds! Cash is king and getting it into the business owners’ accounts is the primary goal.

If you have additional questions or would like to discuss credit card processing further, please get in touch with Evolve Payments! We will gladly walk through the process and steps with you.