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All about Credit Card Transactions
Background
Processing credit card transactions is a two-step process. When you perform a sale
transaction, the credit card's limit to buy is reduced. The processing company authorizes
the transfer of that amount of funds from the cardholder's account to your account.
However, the funds are not actually moved to your bank account at that time. Any
transactions you've processed throughout the day need to be re-transmitted to the
processing company as a batch. Depending on whether your processing company is
terminal based or host based, this re-transmission process is called settlement or closure.
Terminal based systems have batches that are settled, and host based systems have
batches that are closed.
• Settlement -- On a terminal based system, the information needed for re-transmission
is stored on your computer system. You manually settle your batch, usually at the end
of each business day.
• Closure -- With a host based system, the information needed for re-transmission is
stored on your processing company's computer system. With a host based system
you can be set up in one of two ways.
1. You can be set up for Auto (Time Initiated) Close. At a certain time during the
day (varies by processing company), host based systems looks for any
transactions you may have transmitted to them. If you have transactions waiting
for batch closure, they will automatically be closed.
2. You can be set up for Manual Close. This setup is basically equivalent to being
Terminal Based. You, the merchant, are responsible for closing your batch.
Essentially: individual transactions are authorized (you plan to transfer the funds), but
batches are settled/closed (you actually initiate the transfer of the funds).
WARNING: Unless you settle or close your batch (or your processing
company does it for you), you will not receive your money. We recommend that
you settle or close your batch daily.
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Note: Even after settlement, your money will not immediately be transferred to
your account. The transfer process will often take one to three business days,
depending on your bank and processor.
Transaction Types
There are several types of credit card transactions. The different types of transactions are
also known as actions. Here is a list of the various transaction types with general
descriptions:
Sale -- This action decreases the cardholder's limit to buy. It authorizes a transfer of funds
from the cardholder's account to your account.
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