Without getting too detailed and caught up in all the possible exceptions, here’s what happens when a credit card is processed:
1. Merchant processes card with a point of sale unit or via software if online.
2. Data is transmitted (card info, sales amount) to the “acquiring” bank.
3. Acquiring bank requests authorization from the “card-issuing” bank.
4. If accepted, acquiring bank processes the transaction and sends approval back to the merchant.
5. The merchant reviews the transactions and transmits confirmation to acquiring bank for deposit.
6. Acquiring bank then requests and receives funds from the card-issuing bank.
7. Acquiring bank then deposits funds into the merchant’s account.