How long does a merchant have to process a credit card transaction? (2024)
If you’re a business owner, you’re concerned with two main things: ensuring you provide your customers with a great experience with products and services they want and the bottom line. And though you’d love to only worry about the former, you know that you’ve got to keep an eye on the latter even more closely.
So, you’re probably curious how long you have to process a credit card transaction. Moreover, your customer is definitely curious since it’s their card getting charged. Here, we’ll take a look at how long you (the merchant) have to process a credit card transaction, why it can vary, and some ways you can possibly speed things up.
Credit Card Processing
Before we dive in, a quick primer on credit card processing. Your customer comes into your store, browses, and decides to buy three widgets. They swipe their card at your point-of-sale terminal. Your payment gateway contacts their bank and says, “Hey there, Steve is trying to buy three widgets for $100 - this cool?” and their bank will either say, “Yep, go for it” or “No way.”
Assuming the transaction goes through, you’ll get an authorization message, and Steve will take his widgets home with him.
To boil it down, your merchant account - the one you set up to handle your payments - and the customer’s bank account will reconcile the transaction, and money will exchange hands. Let’s get specific for a second; you can break this process into two parts; at the shop and behind the scenes
At the Shop
The steps below occur in a matter of seconds, generally before the customer removes their card from your POS.
Initiation - The customer initiates a purchase by providing their credit card details to the merchant.
Authorization - The merchant's POS system or online payment gateway sends an authorization request to the acquiring bank (the bank that processes the merchant's credit card transactions).
Acquiring Bank's Approval - The acquiring bank forwards the authorization request to the credit card network (such as Visa, MasterCard, etc.) and routes it to the customer’s bank.
Issuing Bank's Response - The issuing bank evaluates the authorization request and sends an approval or denial response back through the credit card network to the acquiring bank.
Authorization Response to Merchant - The acquiring bank relays the authorization response to the merchant's POS system or payment gateway and if approved, the funds are set aside in the customer's credit card account.
Behind the Scenes
These items occur in the moments after the transaction is approved and as long as days after the initial transaction took place.
Batching - Throughout the day, the merchant accumulates authorized transactions and submits them to the acquiring bank in a batch.
Clearing - The acquiring bank forwards the batched transactions to the credit card network for clearing.
Note, this is different then the approval above - it actually processes the entire transaction and will include tips, additional fees, etc.
Credit Card Network Processing - The credit card network processes the transactions, deducts fees, and routes the funds to the acquiring bank.
Funding - The acquiring bank deposits the funds into the merchant's account.
So how long?
Well, the “At the Store’ items take place almost immediately, while the Behind the Scenes items generally take anywhere from a few hours to a day or two. There are a few factors that can make things take a bit longer:
International: If the customer presents a credit card from another country, the transaction process can be longer as the payment network deals with transaction fees, exchange rates and more.
Large batches: If it’s a high volume business or at a very busy time of year, like during the holiday season, batching may take longer.
Service interruption: Just like anything else, if the internet is down somewhere along the line, things can take longer.
Generally speaking, credit card issuers don’t have a time limit for charging a customer’s credit card. The issuing banks, however, will often impose a limit on merchants for charging. These limits can range anywhere from three to 30 days.
Other time limits
There are some other key time limits that merchants need to be aware of, like when you need to batch your charges (often by the next day) and when you can expect money in your account (anywhere from 3-7 business days). One of these limits that merchants would rather not deal with is the time limit dealing with chargebacks. Most credit cards offer the customer’s the opportunity to process a chargeback if they did not receive a product or service or it is substantially different than what they expected. The time limit can vary depending on the credit card. With Mastercard, for example, merchants have 45 days at each stage of the chargeback process to respond. This means that when a customer processes a chargeback, a business has 45 days to present evidence that the charge is valid. American Express only allows 20 days and customers have 120 days in which they can file a chargeback.
Chargebacks are expensive to defend against both in time and fees - its best to avoid them all together by processing your transactions quickly.
Is there a law?
Not really. Best practice says that you should process your transactions quickly. Waiting increases the risk of a chargeback or returned merchandise. Further, it’s your own money you’re leaving on the table - the longer you wait to process transactions, the longer you’re waiting to get paid.
Confused?
Don’t be! Credit card processing, chargebacks and time limits can be difficult to manage. After all, there are a whole host of rules and regulations that you need to keep track of and all you want to do is run your business. That’s why Swipesum is here to help. Our suite of tools and experts can help ensure your business is set up for success from the first card swipe to your hard earned profits hitting your bank accounts. If you want help understanding the time limits involved with your customers, need a better grasp on your statements or just want someone to bounce some ideas off of, we’re here to help.
Generally speaking, credit card issuers don't have a time limit for charging a customer's credit card. The issuing banks, however, will often impose a limit on merchants for charging. These limits can range anywhere from three to 30 days.
How Long Do Pending Authorizations Take? A credit card authorization can last between 1-30 days, depending on the type of merchant and whether they remove the hold before it expires.
Settlement timeframes in credit card processing vary depending on various factors. The specific timeframe for settlement is typically agreed upon between the merchant and the payment processor and is usually outlined in the merchant agreement. Generally, settlement periods range from one to three business days.
A charge can be pending on your account for up to five days. There are several factors that affect how long a pending charge will appear on your credit card. These include when you made the transaction and how long it takes the merchant to process it. Card pre-authorizations may also show on your account for longer.
How long does a credit card payment take to process? Generally, it takes two to four business days for payments to be processed from the customer's card, through the bank and to your account. This means if you process a payment on Friday, you'll receive the funds on Tuesday.
Generally speaking, credit card issuers don't have a time limit for charging a customer's credit card. The issuing banks, however, will often impose a limit on merchants for charging.These limits can range anywhere from three to 30 days.
If a merchant cancels the payment, the transaction will remain pending for a few days. Then the money will be returned to your account once processed. In either case, you don't need to do anything — the money will be automatically returned to your account.
How long do pending transactions take to clear? Many pending charges disappear in around 5 days or less. Though some institutions may have a longer period. It ultimately depends on the type of transaction, the processor settings for the credit card program, and what's stated in your agreement.
Each network has different chargeback dispute rules and timeframes, but the deadline is typically 20 to 45 days after the merchant is notified. The entire chargeback process can take up to 120 days.
Within 120 days of the last date, the cardholder expects to receive the goods or services (not to exceed 540 calendar days from transaction). Within 120 days of the date, the cardholder was informed that the goods/services would not be provided (not to exceed 540 calendar days from transaction).
Got a pending transaction overstaying its welcome? This could be due to a merchant who hasn't finished processing it, or a hold (such as a security deposit). If it's been more than 7 days, contact the merchant or your bank.
Most credit card companies fulfill the authorization hold time limit and credit payments within 24 to 48 hours. You should contact your credit card company if the hold continues past the second day. Credit card companies can legally put holds on your payments that last longer than two days.
Since transactions go through the settlement process before you get paid, it's important to understand how long it takes. In most cases, you can expect to receive the money from sales within one to two business days from the time of the transaction. “Day 0” refers to when a transaction is authorized and captured.
Though this depends on the issuer, some payments are processed only on weekdays. That means a payment made over the weekend — or at 4:59 p.m. on a Friday — may take longer to process. Making your credit card payment early in the week will help you avoid a weekend processing delay. Ensure funds are available.
Credit card transactions typically take 48 hours to settle. An authorization is issued immediately; however, it takes 48 hours for the money to be moved.
The “Statute of Limitations” for credit card debt is a law limiting the amount of time lenders and collection agencies have to sue consumers for nonpayment. That time frame is set by each state and varies from just three years (in 13 states) to 10 years (two states) with the other 25 states somewhere in between.
Each card network and issuing bank sets its own time limits for filing a chargeback, but U.S. law sets a minimum time limit of 60 days. Most banks give cardholders 120 days to dispute a charge.
Your settlement timing is based on your accounts' agreed reserve requirements and the payment method. For major card schemes (e.g. Visa & Mastercard), this settlement should take 3 - 5 days. For example T+4 day settlement means that you will receive your funds (less Airwallex fees) into your wallet by Day 5.
Credit and debit card transactions are often processed instantly, but funds can take a few days to clear. ACH or Direct Debit transactions typically take 1-3 business days, while wire transfers are usually processed the same day. These timelines can impact weekends, holidays, and specific bank policies.
Introduction: My name is Patricia Veum II, I am a vast, combative, smiling, famous, inexpensive, zealous, sparkling person who loves writing and wants to share my knowledge and understanding with you.
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