What Is Credit Card Processing and How It Works

Credit card processing is the behind the scenes system that moves a payment from you to the store.

It usually happens in three stages: authorization, clearing, and settlement.

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Who’s Involved in a Card Payment?

A card payment usually involves:

• You (the cardholder)

• The merchant (the store or website)

• The merchant’s payment processor (helps send the transaction)

• The card network (like Mastercard or Visa)

• Your card issuer (the bank that issued your card)

How Credit Card Processing Works

1) Authorization

This is the “Can we approve this?” step.

• The merchant sends the purchase details through the network to your card issuer.

• Your issuer checks if you have enough credit or funds and either approves or declines.

If approved, you might see the charge as pending.

2) Clearing

This is when the payment details are confirmed and exchanged between the banks involved.

3) Settlement

This is when the money actually moves from the issuer side to the merchant side.

Many card payments settle in about 1 to 3 business days (timing can vary).

Why Some Transactions Show as “Pending”

A pending transaction is usually an authorization hold.

The merchant has “reserved” the amount, but the final charge has not fully settled yet.