Michael Turnbull

credit card depositsAre you merchant wondering how your customers’ money winds up in your bank account? Even if you have never given this much thought, it is essential that you understand how payment processing transactions and credit card deposits work in order to avoid any potential manual errors, and to monitor your flow of payments. Knowing what you expect to have deposited into your account, and understand time frame of which that money should arrive is important to managing your business and transaction volumes. A simple understanding of how deposit flows work, will better assist you in monitoring credit card deposits.

Credit cards are not processed the same way debit cards are processed. Credit card transactions travel through a central hub, enabling authorization in online and offline environments. If you are online, the transaction will be authorized through the issuing bank. The authorization request is sent to the issuer, and is then examined for approval and authorization. If the customer has enough on their card to support the transaction amount, the issuer approves the transaction by sending a message back to the acquirer relaying this information that it is authorized. If the card is unable to support the transaction, the issuer will send a message indicating that the request has been denied and the cardholder will be unable to make the purchase.  The customer cannot access this amount; therefore the transaction will not proceed.

 

Security


Credit card limits provide you with the ability to make purchases up to a certain amount, such as $5,000.00. However, credit card limits also provide you with a sense of security. But ensuring that your limit is within reason for your monthly purchases, if something were to happen, and your card got stolen, the limit that you set on your card will provide a ceiling in which any fraud may be done with your card. Having a very high limit may seem like a great idea, and it most likely means that you are good with your payments and have good credit etc, but set a limit that makes sense for your monthly expenses, not just to have a high limit.

 

Close Batch


The money from the transaction is held in a batch on the merchant’s account at their acquirer, but they are not deposited to the bank account until the batches are settled and closed at the end of the day through your payment processing terminal, whether desktop, wireless or virtual. After the batch is closed it is sent for processing. The transactions are sent to the issuer who then analyzes the transactions. Once everything is verified, the transactions are sent out for depositing. This can take a few hours, but should never take any longer than 72 hours.

If some transactions don’t match up while settling batches, they might be duplicates or reversals. These transactions will be added or deleted from the batch, and this could be the reason that your batch is unbalanced. The difference is usually the precise amount of one of the transactions in the batch. All you need to do is identify the transaction. Once you have identified the one you’re looking for, go ahead and refund it or process it again in order to balance all transactions.

 

Offline Transactions


On the other hand, offline transactions are when the merchant does not send transactions out for authorization. In doing this, the merchant assumes the risk that they will be approved. However, you can’t be sure until you actually send them in later on at the time of settlement. For most merchants, this is not ideal. The advantage of doing this is that it speeds up the process by not seeking authorization and approval at the point of purchase. By skipping the authorization stage of the transaction process, the speed of a transaction is sped up significantly. Merchants who need to process a high volume of transactions and low dollar amounts can handle this. The merchant would lose a very small, insignificant amount if a transaction declined. They aren’t risking much, and the quicker turnaround time is worth it. 

Understanding the processes involved with credit card transactions will help you address any issues in a timely manner if something does arise. 

 

 Merchant Services Survival Handbook: A How-to-Guide to Payment Processing

Michael Turnbull

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