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Summary: when a merchant accept credit cards online, several steps take place at lightning speeds to complete the transaction.

Whether you use a credit card or a debit card to pay for a purchase that you made online, there are much happening behind the scene. The online payment processing is happening at lightning speed, you don’t even see or feel that it goes through many steps to complete the process. The process is taking place in two steps; getting approval which is known as authorization and transfer of funds which is known as settlement.

Authorization process

When you choose a product to purchase, your next step is to place the order. When you hit “place the order” or “go to checkout” button, the payment process start immediately. Many merchants use a payment gateway service such as Payment Solutions, Inc. to process your transaction.

Authorization request

When you choose a product to purchase, your next step is to place the order. When you hit “place the order” or “go to checkout” button, the payment process start immediately with a merchant credit card processing. It starts the process by creating an authorization request and sends that to the payment processor.

Payment processor

There are many that provide payment processing services. Among them (with over 300,000 merchants), PayPal (widely used and processed over $4 billion in payments in 2011), Google Checkout (Google’s answer to PayPal), and Amazon Payments top the list. Payment Solutions, Inc. is a reliable payment processor with a proven payment gateway. Yahoo uses First Data Merchant Services. The payment processor collects data such as credit card number, expiration date, billing address, the amount and any other data and sends them to the issuing bank or to the credit card association.

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Issuing bank or the credit card association

Validates the card number, the expiration date and billing address, check the amount against the available credit balance, and reserve the amount from the available balance.

Authorization response

Once the issuing bank completes its check as indicated above, it generates an authorization response and sends it back to the merchant credit card processing. If the request is denied it sends a denial back to the payment processor.

Run checks

Once the authorization response received by the payment processor, it adds its own risk tools to the request and store data for future uses at a secured medium. Once this is done it issues a confirmation or denial instruction in case of a denial.

Issue instructions or confirmation

Once the transaction is complete, the buyer will be taken to an order confirmation page.

Settlement process

Settlement process somewhat vary according to the payment processor. Some immediately capture funds while others allow additional time to review issues related to the purchase and accept credit cards before capturing funds.

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Founder and chief editor of Blogger, Affiliate Marketer, Tech and SEO geek. Started this blog in 2011 to help others learn how to work from home, make money online or anything related to business and finances. You can contact me at

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