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How The Credit Card Transaction Process Works

Updated: Apr 11

At Loyent, we believe having knowledge of how the credit card transaction process works is extremely important for small business owners since payment processing represents one of the biggest costs that merchants must confront. Below, we provide the process that takes place with every swipe.

payment processing

The Credit Card Transaction Process


Step 1: The customer pays with a credit card

The customer purchases goods/services from a merchant. The transaction is ran through the credit card terminal.

Step 2: Authentication Stage

The merchant’s payment terminal captures the customer’s account information and securely sends it to the acquiring bank. The acquiring bank is the financial institution the merchant obtained their merchant account through.

Step 3: The transaction is submitted

The merchant’s acquirer asks the credit card network (Visa, Mastercard, etc.) to get an authorization from the customer’s issuing bank. The issuing bank is the financial institution the customer obtained their credit card through.

Step 4: Authorization is requested

The credit card network submits the transaction to the issuer for authorization.

Step 5: Authorization response

The issuing bank authorizes the transaction and routes an approval code back to the merchant.

Step 6: Merchant payment

The issuing bank routes the payment to the merchant’s acquirer who deposits the payment into the merchant’s account.


This entire cycle takes place within two to three seconds. That’s pretty impressive if you ask us.


To learn more about how credit card processing works, connect with one of our payment advisors. We’re always happy to answer any questions you may have.


source: https://www.mastercard.ca/en-ca/merchants/start-accepting/payment-process.html

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