Batch Credit Card Processing

Batch credit card processing is the practice of a merchant processing all of its authorized credit card transactions for the day after the close of business or at a time determined by the credit card processor. Credit card batch processing is the merchant’s second step toward getting paid for its customers’ credit card transactions. The merchant sends the authorization codes for every credit card transaction to its payment processor, and the processor categorizes the transactions by the bank that issued each customer’s credit card. Each of those banks then remits the payments to the merchant in a step called settlement.

The merchant’s first step towards getting paid for a customer’s credit card purchase is the authorization step. Authorization occurs at the time of purchase, when the customer’s credit card information and transaction amount gets sent to the card issuer to verify that the card is legitimate, has not been reported as stolen, and has enough available credit to make the purchase. After the close of business, the merchant transmits the day’s worth of credit card transactions to the bank.

The bank subtracts a fee for its role in the process, makes sure the merchant gets paid for the transactions in that batch, and lets each customer’s credit card issuer know that the merchant has been paid so the issuer can post the transaction to the cardholder's account. The same process applies when a merchant issues a consumer a refund for a previous credit card transaction. It may take two to three days for the merchant to actually receive the funds for a batch, and it may take the same amount of time for the transactions to post to consumers’ accounts.

A merchant can set up credit card batching to happen automatically at the same time each day. Credit card batching can be done more often than once a day, but there is a fee for each batching request, so merchants tend to process batches once a day to minimize their fees. Due to the fees that credit card processors charge, sending the entirety of the day’s transactions in one batch eliminates the individual charges that would be applied if each transaction was sent separately.

There are tradeoffs in using batch credit card processing. Given that this is part of a two-step process, with the clearing message for the transaction is not sent until the batch is transmitted. With real-time processing, the information to clear the transaction, including the final payment amount, is sent in one message.