A card payment looks instant from behind the counter — tap, approved, done. Underneath, several companies coordinate to check the card, move the transaction, and fund your account. Here is what happens, in plain English, from a small-business point of view.
When a customer pays your business with a credit card, the transaction does not travel directly from their wallet to your bank. It passes through a chain of parties that each do one specific job:
Every approved sale is really a short conversation among these five. Understanding who does what makes the rest of card processing — and the cost of it — far easier to follow.
The first stage happens in the seconds while your customer waits. It is called authorization, and its job is to answer one question: is this card good for this amount right now?
Authorization is fast, but it is not the same as getting paid. At the end of this stage you have a promise, not the funds.
The second stage is where the money actually moves. It is called settlement, and unlike authorization it does not happen at the register — it happens later, usually after your business day ends.
So the full picture is two stages: authorization confirms the card at the moment of sale, and settlement moves the money into your hands a day or two later. As for why a small slice of each sale is kept along the way — that is the cost of running this chain. Every party carries some risk and expense, so a percentage of the transaction is shared among the issuing bank, the card networks, and the processor. RMO Merchant Services is RMO’s division for accepting card payments and can walk a small business through how that works in practice.
Five parties take part in a typical card payment: the cardholder who pays, the merchant who is paid, the payment processor or acquirer that moves the transaction, the card networks that set the rules, and the card-issuing bank that gave the cardholder their card. Each plays a defined role in approving and funding the sale.
Authorization happens at the moment of sale: the card is checked and the amount is placed on hold against the cardholder’s credit. Settlement happens later, when the day’s transactions are batched and the money actually moves into the merchant’s account, typically a business day or two after the sale.
For most small businesses, funds from a day’s card sales land in the merchant’s account about one to two business days after the transactions are batched and settled. The exact timing depends on the processor, the batch cutoff time, and weekends or holidays.
Accepting cards involves several parties that each carry cost and risk — the issuing bank, the card networks, and the processor — so a small percentage of each sale is shared among them. RMO Merchant Services is RMO’s division for accepting card payments and can explain how those costs apply to your business.
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