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How Retail Credit and Debit Card Processing Works

  1. First the merchant slides a customer’s credit or debit card through the credit card terminal and enters in the amount of the sales. The terminal will then dial a toll-free number or use the internet to connect to a processor for authorization. Once connected, the terminal will send the credit card information and amount of the purchase to the processor.
  2. The processor will then pass that information onto the bank that issued the credit card. The issuing bank will then check the validity of the card and see if the requested amount is available. If it is the bank will set aside the amount of the purchase for the merchant.
  3. The card issuing bank will send back either an approval number or a decline message back to the processor.
  4. In approximately 12-15 seconds the information will be sent back to the credit card terminal which, if the transaction was approved will print a receipt for the customer to sign.
  5. The final step of this process takes place when the merchant “settles” (batches-out) the credit card terminal. This step takes place at the end of each business day and can be done either manually or automatically if the merchant chooses to have their terminal programmed to do so. Once the settlement process is initiated the funds will be transferred from the card issuing bank and Ballistic Merchant Services will electronically deposit them into the merchant's checking account. It will typically two business days from the time of the original transaction for the funds to reach the merchant's checking account.
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