Credit Card Processing 101

What you need to know to make the grade

You don’t need to be a straight-A student to appreciate the math: there are nearly 1.5 billion (billion!) credit cards in use in the U.S. alone, with debit cards nipping at their heels in a close second. When looking at numbers like these, it’s obvious that processing credit cards is a vital part of your business and its continued growth.

You know your customers want to pay with their credit or debit card, and you know that being able to accept those payments is crucial. So how do you start processing credit card payments, and how does the whole thing work?

Step one

The first thing you need to do is set up an Internet merchant account. Your merchant account will handle the online payment processing of credit cards, including MasterCard®, Visa®, American Express®, and Discover®. If you sign up with First ACH, we’ll set up your merchant account for you and serve as your payment processor.

Step two

Once your merchant account is set up, you’re ready to start processing credit cards and debit cards!

When a cardholder pays for a purchase with a credit card or debit card, the transaction information passes through our secure gateway. We’ll work on behalf of your merchant account to electronically submit the transaction to the appropriate card network (Visa, Mastercard, etc).

Step three

Next, the transaction is routed to the bank that issued the card to the consumer. The issuing bank approves or declines the transaction based on the cardholder’s available credit or funds, and passes the results back to the card network, which relays the results to us. Amazingly, the entire routing process takes mere minutes to complete.

Easy as A-B-C

First ACH stores all your authorized transactions in “batches,” which are sent to the card network at the end of the day. Each card network routes every transaction to the issuing bank and then sends the appropriate funds from all cardholders’ accounts into the merchant’s bank account.

It typically takes two to four business days from the original purchase date for the deposit, or settlement, to post to your merchant account.

If the purchase has been made using a debit card, the funds are debited from the consumer’s account when they are sent to the merchant’s bank. Until that time, the transaction places an “authorization hold” on the consumer’s account.

If that sounds complicated, don’t worry – First ACH makes processing credit cards and debit cards as easy as learning your ABCs. Once you sign up for an account, you won’t have to worry about the nuts and bolts of payment processing, because we’ll do the heavy lifting for you.

Now that you’ve been schooled, get started here.