Credit card processor is another term used to describe the entity that actually processes the transaction when an order is conducted. The credit card processor gathers the information provided (either via website, phone or retail swipe terminal) and performs a series of security checks. These checks make sure there is enough funds available in the cardholder’s account, makes sure the credit card is not reported as lost/stolen, verifies the billing address the customer provided at the time of the order with the credit card number provided, checks to confirm the correct cardholder name and expiration date were given, and can even verify the correct security code (CVC or CVV) on the back of the credit card should one have been entered during the ordering process.
After the information is processed by the credit card processor, the funds are then deducted out of the cardholder’s account and placed into the merchant’s business checking account. Should the cardholder request a refund, the processor does the exact opposite by taking the funds out of the merchant’s account and placing it back into the cardholder’s account within a few business days.
Funds deposited into the merchant’s business checking account is usually 2-3 business days after the transaction.
If your Internet-based business uses a recurring billing feature, the funds are automatically processed and deposited into the merchant’s account based on the duration you have set (weekly or monthly for example).
For more information on merchant accounts visit our 3-part merchant account guide.