How Debit Or Credit Card Payment Processing Works

In the digital world, a business needs to embrace the latest technologies. By embracing the latest technologies, all businesses can have a good position in the market. They can keep pace with innovation.

With this, they also gain the ability to beat the competition and stand out from the crowd. For every business to survive, you need customers. If you can woo your customers and keep them happy with your services, the world is yours. Attracting the right customers will help your business to grow and generate revenue. If customers are not satisfied with your services, your business will shut down within a short period.

One of the best ways to increase customer convenience is to accept payment through credit cards and debit cards.

For accepting credit card and debit card payments, your business needs to fulfill a few requirements. Only after fulfilling the criteria, you will have an authentic merchant account. The merchant account is for managing all the credit cards and debit card payments.

You should also understand the working of the credit card processes. While understanding the credit card or debit card payment processing, initially understand the basics and then move to the complicated process.

First, we will know the key players of the credit card and debit card payment processing system.

A cardholder

It refers to the person who is the actual owner of the credit card or debit card. This person gets a credit card or debit card from an issuing bank. The individual uses the credit card or debit card bank account for making payments for goods or services.

A merchant

Merchant refers to the specific type of business/store that willingly accepts different modes of online payment. It is helpful for the buying and selling of business products/services.

The payment can be through credit card, debit card, or QR scanning. Having a merchant account for the business helps in improving business sales. It is considered a great way to retain old customers and attract new customers.

A merchant bank

The merchant bank is the bank that helps in establishing the merchant account. Through the merchant account, you can maintain all the online transactions. Merchant banks are a great support system that allows merchants to accept payment from customers in different modes.

  • The payment can be through a credit card or debit card.
  • The merchant bank manages the deposits from credit and debit card payments.

Payment processor

Payment processors refer to the companies involved in managing the processes of debit card and credit card transactions. The payment processors are directly connected to the merchant bank, merchant accounts, merchants, and the card network. The connection is well-established and helps in making the payment process smooth.

Issuing banks

The issuing banks are financial institutes. They can be banks and credit unions. The financial institutes issue credit cards and debit cards to the cardholders. They contact the card association for issuing the cards to the individual. You must have a bank account in the respective banks from where you want to be issued the credit card or debit card.

Card associations

The card association refers to the network including Visa, Mastercard, Discover, and American Express. The card association is the regulatory body that is responsible for setting interchange rates. They also define the qualification guidelines. The card association is like the intermediate between issuing banks and acquiring banks.

Now, let’s understand the process involved in credit card and debit card payments.

#1 For purchasing the goods and services, the cardholder will provide his card to the merchant. The card can be a credit card or debit card. You will observe that the credit card or debit card terminal raises the connection request. Requests can be followed up by the physical store or eCommerce website and any application.

#2 The merchant of the business will send a request for authorizing the payment. This request is sent to the payment processor.

#3 As the request reaches the payment processor, the processor submits the details of the transaction to the card association. This request and details reach the issuing bank.

#4 The issuing bank will review the request and authorize it based on the card details. Depending on the details, the issuing bank can approve or decline the transaction process. If the transaction is approved, a status will be sent to the merchant via card association.


This is how credit card and debit card processing takes place. Understanding the system and working of the credit card transaction is essential for the merchants. It is also crucial for the customer so that no fraud issues can happen. Credit card and debit card payments involve complex processes. Thus, making it a highly secure way to a transaction.

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