How Clearing & Merchant Payments Work

How Clearing & Merchant Payments Work

The merchant sends a “lot” of approved payment requests through its payment gateway (usually at the end of the day).

Payment processor Processor
Payments receive bulk sent by merchants, arrange transactions, and forward them to the appropriate credit card network. Transactions from Visa card to Visa card, MasterCard transaction to MasterCard, etc.

Credit card network Network
credit card forwards the transaction details to the appropriate card issuer.

Issuing bank
The issuing bank then debits or charges the cardholder’s account, deducts the bank-issued conversion fee, and sends the remaining amount to the merchant’s payment processor. (This is why banks like you to carry a debit or credit card. They make a small amount of money every time you swipe your card.)

Payment Processor / Acquisition Bank
The payment processor then transfers the appropriate funds to the seller’s buying bank, which sends the funds, minus fees, to the merchant’s bank account. (And, depending on your contract, your payment processor may make their cut shortly after, or once a month.)

When Does Your Business Get Paid?

Unfortunately, that depends on your payment processor. Many seller service agreements will default to depositing funds into your account a few days later, which is why it’s important to carefully check your contract and negotiate a 1-day deposit if you maybe.

However, even settled credit card payments are not automatically set up. This is because your customers still have the right to dispute their card purchase, reverse the transaction, and potentially get their money back — in some cases up to 6 months to a year or more later. when the transaction takes place.

These required returns or refunds are often referred to as payment disputes or credit card chargebacks. Visit our guide to Credit Card Chargebacks to learn more.