Card processing

Credit Card Processing: Authorization, Capture, Settlement, and Funding

Credit card processing is the sequence that lets a business accept a card payment, receive approval, submit the transaction, and reconcile funded deposits.

AuthorizeCaptureBatchSettleReconcile

The card-processing sequence

StepWhat Happens
AuthorizationThe terminal or checkout asks the issuer whether the card can be approved.
CaptureThe approved transaction is marked for settlement.
BatchTransactions are grouped and submitted to the processor.
SettlementFunds move through the card network and banking system.
FundingThe business receives deposits, less applicable fees, reserves, or adjustments.

Processing questions to ask

QuestionWhy It Matters
How are transactions keyed, dipped, tapped, or swiped?Entry method can affect cost and fraud risk.
When does batching occur?Batch timing affects settlement and reconciliation.
How are refunds handled?Refund rules affect customer service and reporting.
What reports match deposits?Reconciliation depends on clear transaction and funding reports.

Frequently asked questions

What is authorization?

Authorization is the approval request for a card transaction.

What is settlement?

Settlement is the process that moves funds after transactions are submitted.

Why do deposits differ from sales?

Fees, refunds, chargebacks, reserves, tips, batching, and timing can create differences.