The Flow of a Card Transaction: From Authorization to Settlement
If you've already read How Credit Card Processing Works, you know the basics: a customer pays, a bank approves, and you get funded. But behind the scenes, every card transaction moves through a few key stages — each with its own timing, purpose, and impact on your cash flow.
Here's a closer look at the actual flow of a card transaction, from real-time approval to final deposit in your account.
1. Authorization (Instant)
This is the real-time decision made by the customer's bank. It happens within seconds after the card is entered or tapped. During authorization:
- The funds are verified but not yet transferred.
- The transaction is approved or declined based on balance, fraud rules, and card status.
- The amount is placed on hold by the bank.
Tip from Pepper Pay: At this stage, the transaction is not yet finalized — it's simply reserved
2. Capture (End-of-Day)
Transactions that have been authorized are temporarily stored. To move forward, they must be captured — this happens when your POS or gateway closes the batch.
- Capture marks the transaction as final and ready to be funded.
- You can't edit or void a transaction after it's captured.
- This is the point where interchange fees are officially incurred.
Most merchants schedule batches close for end-of-day, but Pepper Pay gives you the flexibility to adjust based on your business hours.
3. Settlement (Processing Nightly)
Once your batch is submitted, Pepper Pay processes your transactions for settlement. During this stage:
- Card networks (Visa, Mastercard, etc.) coordinate the movement of funds from your customers' banks.
- Those funds are sent to our acquiring bank, where they're reconciled and prepared for deposit.
- This process runs overnight for most businesses and is fully automated.
4. Funding (Next Day or Same Day)
Once settlement is complete, Pepper Pay initiates the deposit to your business bank account.
- Next-Day Funding is our standard — all merchants are set to this by default.
- Same-Day Funding is available for eligible merchants upon request.
Funding cut-off times matter. If you batch after the same-day deadline, it rolls into the next funding cycle.
5. Reconciliation (Anytime)
You'll receive a detailed batch report and funding confirmation, available in your Pepper Pay dashboard.
This report shows:
- All transactions in the batch
- Time and date of funding
- Total fees deducted
Pepper Pay provides real-time reporting to help you tie out your daily sales to deposits — no spreadsheets needed (unless you want them).
Final Note from Pepper Pay
While payment processing happens in seconds, the financial flow behind it follows a series of checkpoints. Understanding this flow helps you track cash more confidently, spot delays, and make better business decisions.
If you're ever unsure about what stage a transaction is in — our support team is here to help you trace it from authorization to funding.
support@pepperpay.com; 786-358-9338 option 3