How Credit & Debit Card Payment Processing Works

How Does Credit or Debit Card Payment Processing Work?


Today’s business owners also have to be savvy consumers. This is because they routinely evaluate the products and services required to keep their businesses running smoothly. Accepting credit or debit cards, for instance, enables store owners to get paid instantly.

But are you aware of the steps involved?

For seamless day-to-day debit and credit card processing, it’s imperative to select the right card processing merchant, as card processors are an integral part of any business.

However, this choice doesn’t require a special degree. If, as a business owner, you understand how credit/debit card payment processing works, it will be easier for you to choose a payment service provider.

In order to better understand the process, let’s look into the different steps involved in card processing.

Different Actors & Their Roles in Debit/Credit Card Processing 

In this pandemic scenario, studies have revealed that the future of credit card payment processing in Canada looks optimistic. Credit or debit card processing works in three different steps:

  1. Authorization
  2. Settlement
  3. Funding

The authorization process goes like this:

  • The cardholder pays the merchant with their card. This request will either originate from a card terminal or a POS system in a store, or through an e-commerce website through an app.
  • The merchant then sends a request for payment authorization to the payment processor.
  • The payment processor then submits the transaction to the fitting card association, which eventually reaches the issuing bank.
  • Authorization requests are then made to the issuing bank with parameters like AVS, CVV, and the expiration date.
  • The issuing bank then approves the transaction or rejects it in case of insufficient funds or available credit. It can also be rejected if the cardholder’s account is expired or closed.
  • The issuing bank sends the payment approval or a denial status back to the merchant.

Now, let’s take a look at the settlement process:

  • The merchant sends across different batches of the authorized transaction to the payment processor.
  • Then, the payment processor sends the transaction details to the card company and communicates the appropriate debits with the issuing banks in their network.
  • The issuing bank then charges the cardholder’s account for the exact amount of their transaction.
  • The issuing bank transfers the funds for the transaction to the merchant bank.
  • Finally, the merchant’s bank deposits the money into their account.

Payment authorization only takes a few seconds, while the settlement and funding processes usually take a day or two, depending upon the payment processors.

However, the real role here is of the payment processing company that charges a fee to authorize the cardholder’s money and settle the payment process. For businesses, therefore, choosing an affordable payment processing company is vital.

How Can Soft Tech Payment Help?

Even though the checkout process associated with credit and debit cards is straightforward, there are a lot of steps involved when it comes to card-related payments. That’s why selecting the right payment processor is important. However, choosing the most affordable card processing company can be quite a task. Soft Tech Payment can help.

By offering the tools you need to accept card payments seamlessly, we can be your most suitable merchant service provider. We offer the right POS solution or card payment gateway for your e-commerce business at affordable rates, which allows you to accept and process card payments seamlessly.

Soft Tech Payment simplifies your payment processing, so you can grow your business at your own pace without worrying about your budget. To learn more about our processes and receive assistance from one of our professionals, get in touch with us today.