How Credit Card Processing Works
At Pepper Pay, we believe that when you understand how credit card processing works, you're better equipped to run — and grow — your business. Whether you're just getting started or scaling fast, we want you to feel confident in how your money moves and where your fees go.
So, what actually happens when your customer swipes, taps, or enters their card?
Here's a simple breakdown of the full process — from the first tap to when the funds land in your bank.
Step 1: Payment Initiation
A card transaction begins when your customer provides their payment details—whether that's dipping a chip card, tapping a contactless device, swiping a magstripe, or entering card information online. Once the card is presented, your terminal or integrated system sends the transaction request to Pepper Pay for processing.
Step 2: Authorization & Risk Checks
Pepper Pay immediately forwards the transaction through the appropriate card network (Visa, Mastercard, etc.) to the customer's issuing bank. That bank evaluates the transaction by checking for sufficient funds, credit availability, and potential fraud indicators. The bank either approves or declines the transaction and sends the response back through the network to Pepper Pay and your point-of-sale system.
This step takes place in real-time, typically within 1-2 seconds.
Step 3: Batch Submission
Approved transactions are stored throughout the day by your POS system, payment terminal, or payment gateway. At the close of business—or based on a schedule you define—these systems submit a batch of finalized transactions to Pepper Pay.
This batch submission is what triggers settlement. Once received, we begin the process of moving funds from your customers' banks to your business account.
Step 4: Settlement & Funding
Once Pepper Pay receives your batched transactions, we transmit them through the card networks for settlement. The funds are withdrawn from your customers' issuing banks, routed through the networks, and deposited into our acquiring bank. From there, the net amount (after fees) is transferred to your business account.
At Pepper Pay, next-day funding is our standard — all merchants are automatically set up to receive deposits the next business day after batch submission.
For businesses that need faster access to funds, same-day funding is available upon request and may be granted based on eligibility criteria. Our team can walk you through the approval process if this option is right for your business.
Step 5: Fee Reconciliation
As part of the settlement process, standard processing fees are applied. These include:
- Interchange fees: Fixed rates set by the card networks and paid to the customer's bank.
- Network fees: Small charges from Visa, Mastercard, etc.
- Pepper Pay's processing fees: Your agreed-upon rate or markup, depending on your pricing model (e.g., Interchange Plus, flat rate).
Pepper Pay ensures transparent reporting, so you can clearly see how each fee type contributes to your overall cost per transaction.
Who's Involved in a Single Payment?
| Player | Role |
|---|---|
| You (Merchant) | Accept the payment from your customer |
| Pepper Pay | Routes and settles the transaction securely |
| Card Network | Moves data between the banks (Visa, Mastercard, etc.) |
| Issuing Bank | The customer's bank that approves or denies the transaction |
| Acquiring Bank | The bank that receives funds on your behalf |
Final Thoughts from Pepper Pay
Card payments may happen in seconds, but there's a powerful network working behind the scenes to move those funds safely and securely — and Pepper Pay is your guide through it all.
From transparent pricing to fast deposits and reliable support, our mission is to make payments simple, predictable, and built for growth.
Have a question about a transaction, fee, or funding schedule? Reach out anytime — we're here to help, not just process.
support@pepperpay.com; 786-358-9338 option 3