Offshore High Risk Merchants
Domestic and International Merchant accounts

Credit Card Processing Guide

A lot of businesses accept credit card payments. But do you know how credit card processing works? There are a lot of things that need to be clarified about it. Moreover, these misconceptions might stop some businesses from accepting credit cards altogether.

If you are a small business, you should understand how the whole process works. And if you already accept credit cards, understanding how it is processed will help you understand the nuances better. If you do not accept credit cards, you might even change your mind after you know the benefits.

What Parties Are Involved in the Total Process

To better understand how credit card processing works, you must know all the parties involved. Understanding which parties are involved in the chain helps you to understand the role of each. 

Moreover, you will also be able to figure out what role you and your business should play in it. There are five total parties:

  • The cardholder
  • The business or Merchant
  • The Merchant’s or acquiring bank
  • Cardholder’s bank or issuing bank and 
  • Card associations


Basically, The cardholder is your customer trying to pay you with their credit card. In this transaction, they acquired their credit card from their issuing bank.


The Merchant is you and your business. Therefore, you will be considered a merchant in a credit card transaction cycle if you accept credit card transactions. However, you do not need to process the payment as the Merchant. When you hear the term merchant services, it essentially means services you receive for being a merchant.

Merchant’s Bank

The Merchant’s bank, also called the acquiring bank, is the bank you, the business, will work with. The bank should also be a registered cards association member like MasterCard or Visa. We will talk about card associations a bit later.

The acquiring bank, or Merchant’s bank, will provide you with all the necessary equipment to start accepting credit card payments. This bank will work with you to create a merchant account for you. In addition, the merchant bank will also be responsible for depositing the payments you receive via credit card to your merchant account.

Cardholder’s Bank

Then there is the cardholder’s bank, also known as the issuing bank. The issuing bank pays the Merchant bank (acquiring bank) for purchases the customer made if the customer used a credit card.

Therefore, the issuing bank must also be registered with the card associations. Moreover, the customer will need to pay their bank back since the issuing bank pays the sum of the purchase to the merchant bank.

Card Associations

Finally, there are the card associations. MasterCard, Visa, and similar organizations are card associations. They are not banks; their responsibility is to govern the registered members. They work to manage and ensure proper qualification guidelines and fees are in place.

Card associations also work with MSPs and ISOs to ensure everything works properly. There is increasing pressure on card associations like MasterCard and Visa to make a profit since they are public companies.

How Does Credit Card Processing Work?

The actual credit card processing involves three things. The three things are submission, authorization, and funding. At its core, these three are pretty simple concepts. Here is a more in-depth breakdown of what they are:


Let’s start with submission. This is where it all begins. The customer presents their card to the Merchant, in this case, you. They swipe their card and provide their details. The details are sent to your point-of-sale or PoS system.


Once the customer’s credit card information goes into the PoS, you will request payment authorization. The request is made to the credit card processor or PSP. The PSP or credit card processor then reaches out to the issuing bank and verifies it further.

Multiple checks happen at this stage. The issuing bank will check the credit limit of the customer’s account and check card details and address, also called CVV, which stands for card verification value.


After authorization, the data is sent back to the Merchant through the credit card network and the Merchant’s bank. If the authorization is successful, the funds are deposited in the Merchant’s, in this case, your bank account.

Benefits of Accepting Credit Cards

Accepting credit card payments makes it easier for your customer to pay for their purchases. In addition, some customers may exclusively pay for things using a credit card. As a result, you might lose out on a potential customer if you do not accept credit cards.

Credit card is also the payment form of choice. More and more people are choosing credit cards to pay. This means not accepting credit cards could lower your revenue. In addition, accepting credit cards also legitimizes your business.

You can display logos that you accept MasterCard, Visa, and more, promote seamless transactions, and increase customer trust. Another important thing to consider is your competitors are most likely accepting credit card payments. Therefore, to be competitive, you also need to accept credit card payments as well.

Why Consider Accepting Credit Cards?

Accepting credit cards has a ton of benefits, as we’ve already discussed. Moreover, credit card processing is relatively inexpensive these days. And you can also get offshore merchant accounts.

You will need to accept credit card payments to stay competitive. Moreover, it also makes your PoS experience much more seamless and can increase customer experience. There is simply no reason not to accept credit cards as a small business.

Wrapping Up

Credit card processing is simple if you understand the parties involved and their roles. Moreover, it becomes much easier to grasp the process once you know the steps and what happens when a customer swipes their card.

If you need help getting an offshore high-risk merchant account, contact us. We have years of expertise in the field and provide many services like international merchant accounts, pharmacy merchant services, and more.