Processing

In the context of credit cards, processing refers to the series of steps involved in facilitating and completing an electronic payment transaction. This encompasses credit cards, debit cards, mobile wallets – essentially, any payment a merchant takes that doesn’t involve  cash or a check.

Processing is central to the smooth and secure transfer of funds through various payment channels. It covers everything from verifying and  authorizing transactions to settling funds between the payer and the payee.

It starts when buyer details are verified for accuracy during processing, and authorization is obtained from the bank stating the availability of funds. This all happens in real-time.

Once authorized, the transactions are settled and funding takes place, meaning the money is transferred from the payer's account to the payee's account. This can take a couple of days.

Third-party processing providers are usually the ones who handle all of this (for a price, of course). They are also expected to adhere to high industry standards for data security. Credit card processing involves a variety of transaction fees. Select fees include:

• Payment processing fees and interchange fees, which are usually structured as a percentage of the transaction amount plus a fixed fee (e.g. 2.9% + $0.30)
• Monthly fees or acquirer handling fees, which banks assess to cover the cost of handling a merchant’s account
• Card assessment fees, which are charged by card network and depend on the merchant’s monthly transaction volume