
Processing Date
A processing date is the date (month, day and year) when a merchant’s bank processes a credit or debit card transaction that has been authorized between a merchant and a customer. For each transaction, the processing bank makes sure the right amount of money gets exchanged between the issuing bank (the consumer’s bank) and the acquiring bank (the merchant’s bank). At some point during the day, perhaps after the close of business, the merchant will electronically send all of its credit card transactions together in a batch to its bank, called the merchant bank or acquiring bank. ” The whole process is automated and takes only seconds. Next, for a purchase transaction, the settlement bank receives funds from the customer’s bank, then sends those funds to the acquirer (the opposite occurs if the merchant is issuing the customer a refund). A processing date is the date (month, day and year) when a merchant’s bank processes a credit or debit card transaction that has been authorized between a merchant and a customer.
DEFINITION of Processing Date
A processing date is the date (month, day and year) when a merchant’s bank processes a credit or debit card transaction that has been authorized between a merchant and a customer. Processing is a broad term that describes the multi-step process of transferring funds from a customer to a merchant whenever a debit or credit card is involved in a transaction. Interbank clearing and settlement occur on the processing date.
BREAKING DOWN Processing Date
Credit card acceptance is the first step in a credit card transaction. The merchant accepts the physical card or the card number a customer provides online or by phone. Authorization and authentication are the next steps. An electronic system sends information about the transaction to the cardholder’s bank, called the issuing bank, to make sure the cardholder has enough money available to complete the purchase. The system also makes sure the card is valid and not lost, stolen, fake or expired. The transaction is then approved or declined.
Necessary Steps Leading to the Processing Date
At some point during the day, perhaps after the close of business, the merchant will electronically send all of its credit card transactions together in a batch to its bank, called the merchant bank or acquiring bank. The acquiring bank sends the details of all these transactions to a settlement bank, also called a processing bank. The settlement “bank” is usually a payment technology company like MasterCard or Visa Inc.
For each transaction, the processing bank makes sure the right amount of money gets exchanged between the issuing bank (the consumer’s bank) and the acquiring bank (the merchant’s bank). This process is called “interbank clearing and settlement.” Interbank means that more than one bank is involved. The information-gathering step is called “clearing,” and the money-exchange step is called “settlement.” The whole process is automated and takes only seconds.
Next, for a purchase transaction, the settlement bank receives funds from the customer’s bank, then sends those funds to the acquirer (the opposite occurs if the merchant is issuing the customer a refund). The acquirer then transmits the funds to the merchant (or returns them to the customer), and the transaction is posted to the cardholder’s account.
The merchant pays various fees to accept credit cards from customers because of all the behind-the-scenes steps involved in processing the payments. The issuing bank – the customer’s credit card company – assumes the risk that the customer won’t pay for the transaction.
Related terms:
Acquirer
An acquirer is a company that acquires rights to another company or business relationship through a deal. read more
Bank Identification Number (BIN)
A bank identification number (BIN) is the initial set of four to six numbers on a credit card that identifies the institution. read more
Credit Card
Issued by a financial company giving the holder an option to borrow funds, credit cards charge interest and are primarily used for short-term financing. read more
Debit Card
A debit card lets consumers pay for purchases by deducting money from their checking account. Learn how debit cards work, their fees, and pros and cons. read more
Foreign Transaction Fee
A foreign transaction fee is a 1%–3% charge for transactions made using a domestic payment card in a foreign country. read more
Mastercard
A Mastercard is any electronic payment card that uses the Mastercard network for processing transaction communications. read more
Merchant Bank
A merchant bank conducts underwriting, loan services, financial advising, and fundraising services for large corporations and high-net-worth individuals. read more
Payment Gateway
A payment gateway is the front-end technology that reads payment cards and sends customer information to the merchant acquiring bank for processing. read more
Post Date
The post date is the day, month, and year when a card issuer posts a transaction and adds it to the cardholder’s account balance. read more
Private Label Store Credit Card Defined
A private label credit card is a store-branded credit card that is intended for use at a specific store. It offers credit and sometimes special benefits at those stores. read more