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How Does ACH Credit Card Processing Work?

Even though it takes just seconds after swiping a customer’s card to get approval from her bank on a sales transaction, what’s happening behind the scenes is actually pretty complex and involves multiple organizations.

And while you sign up with in-store or ecommerce ACH credit card processing services so that you don’t have to worry about how all this happens, it’s a wise idea to have a basic understanding of how ACH credit card processing works.

It all starts when you sign up with a merchant service provider. Once you select the best ACH credit card processing company for your business’ needs, you will give your business’ bank account information to the company so that transactions you complete using customers’ debit or credit cards will be automatically deposited to your account.

Beginning the Journey

Now let’s move to an actual transaction to better understand how ACH credit card processing works.

A customer makes a $50 purchase in your store. You swipe her credit card on your wireless credit card terminal and input the sale amount of $50. Once you hit the green button, the transaction then moves via the Internet through what’s known as a payment gateway.

Consider this the portal that gets you to the right door for the next step. The payment gateway will shave off a small amount of the transaction in exchange for taking your transaction where it needs to go.

Your transaction for the $50 purchase is then taken to the payment processor. This is the company that you’ve signed up with to provide you with ACH credit card processing services. The processor, which takes its own piece of the $50, pings the customer’s bank to make sure the card number is valid and that there are sufficient funds for the transaction.

If everything looks good, the processor sends your physical or ecommerce ACH credit card processing an authorization code that signifies that yes, the customer has enough money for the transaction. If anything should go wrong with the transaction, this authorization code comes in handy.

You print the receipt, which the customer signs (assuming it was a credit card you processed, rather than a debit, which requires the input of the customer’s PIN), and she’s done with the transaction. As for you, there’s one more step before you can get paid.

Final Step

At the end of your business day, you will do what’s called settle the batch of transactions you completed for the day. If you have a physical terminal, you’ll need to do this manually (your merchant services provider can give you specific directions on how), but many cloud-based and virtual terminal credit card software programs will automatically settle the day’s transactions with no effort from you.

Approximately 48 to 72 hours later, the funds from that purchase and any others you made that day will be deposited to your business bank account, minus the fees incurred with the transactions.

You’ll also receive a monthly statement of all transactions from your merchant services provider. These statements can be useful when you need to track a particular payment or process a return, so store them where you can access them easily (or opt for online delivery of your statements so they’re readily available on your computer).

Knowing a little more about how ACH credit card processing and debit card payments can help you when performing a merchant account comparison.

Different companies may charge more or less, and offer a different set of payment solutions, so arm yourself with a basic understanding of how the process works so that you can ask intelligent questions as you narrow down the list to choosing the best payment gateway for your business’ needs.

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About Gene

Gene is a 12 year veteran of the electronic payments industry and has consulted with countless companies of all sizes. He has overseen large underwriting portfolios, directed IT staff, and currently serves as the Director of Business Development. Gene has appeared before the U.S. Congress to provide expert opinions regarding developing technology and transaction risks towards solutions for the payroll industry. You can find him on Google + or contact Gene here.
  • Kathleen Winfrey

    Thanks for sharing this! Now, I understand how my payments for credit cards go.