What Does Payment Processed Mean?

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Someone holding a credit card machine and a card in it - What Does Payment Processed Mean?

When dealing with the entire process of credit card payments there may be some terms that just don’t make any sense to you. Or that you want to have a clear understanding of before you get too deep into the entire process. One of these may be the term payment processed. It may seem like a pretty straight forward term but there are a few things you should know about it. First, though, let’s look at the whole credit card processing procedure. This will help you truly understand the term.

What Does the Payment Process Look Like?

The whole processing procedure takes a stroll through three distinct stages. Each stage is as important as the last. The last stage is where you will often hear the term payment processed.

Here is the process:


  • Authorization:


This is the first step and is when the bank that issues the card receives the request for authorization from the merchant. The bank makes sure all the info is correct and then decides whether to approve or decline. This is then sent back to the merchant via the POS for finalization of the transaction after the next step.


  • Authentication:


This part of the process is when the bank uses its fraud tools to make sure that the card and the user are who they say they are. Then once this process is done, they will either send the merchant an authorization code. This signals to the merchant and the issuing bank that they can place a hold on the funds and begin the next part where the payment is cleared and settled. This is done through the POS and if it is approved then the receipt will print.


  • Clearing & Settlement:


The first two stages take little to no time, but this stage can last for on average 24 to 48 hours depending on the issuing bank. The part of the process is usually beginning at the end of the business day for the merchant. The collected authorized transactions are batch-processed and sent to the bank or processor. The appropriate fees removed from the end transaction amount including the “interchange fee” and the acquirer fees. Once this is done then the remainder is transferred to the merchant’s account and then the payment has been processed.

So, as you can see payment processed means that the entire credit card transaction processed has been completed and the funds have been allocated to all respective parties. This process as stated above can take a total of anywhere from one to two days to finish out.

Final Thoughts

Understanding every process, you will be faced with as a merchant may seem stressful and daunting but hopefully, with the breakdown of this process you know have a clear understanding of what payment processed means for you and your business. By having a good grasp on the whole process, you will be able to know when and how all that money ends up in your merchant account.


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