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With one swipe of a credit card, money transfers from consumers’ accounts to merchant accounts. As a consumer watches the touchscreen, it takes literally seconds for the “Waiting” display to finally flash “Approved” for any random transaction. Many times during credit card processing, however, consumers see the term “Authorization” in progress. This vague term actually encompasses a highly intricate set of processes that safely move money from one account to another.


One of the simplest portions of the credit card authorization process is authentication. After swiping the card, the information flows to the merchant’s financial account holder. The merchant accounts are verified and the consumer’s information is acknowledged. It swiftly moves to the next credit card processing step.

Validation And Routing

Credit card information moves from authentication to validation. The consumer’s credit card company performs several checks in a matter of seconds. Unusual transactions are typically stopped at this juncture, such as a $5,000 charge for a high-end stereo system. The card is looking for any fraudulent behavior on the part of the consumer. If the transaction is relatively normal for that particular account, the credit card company sends the information to the financial entity backing the card.


Once receiving the charge information, the credit card company verifies that there are enough funds in the account and quickly holds the money for payment. An authorization approval code is quickly sent out to the merchant. An “Approved” indicator flashes on the credit card terminal, allowing the transaction to be completed. The held money is eventually transferred to the merchant’s account in the matter of a day or two, depending on the card and bank.

Declined Cards

Authorization fails for two common reasons, including fraudulent behavior or insufficient funds. If a customer is on vacation, for example, and does not notify the bank, an authorization may be declined if the system believes that the card is stolen. Insufficient funds is another decline reason that must be sorted out before the transaction can successfully be completed. Merchants do not get an explanation of declined cards. It is up to the consumer to call the bank and verify the issue. They have the power to allow the authorization if consumers confirm their identity with sufficient funds in the account.

Credit card processing has an intricate web of steps to keep the merchant and consumer safe from fraud. The next time the authorization display remains lit for more than a few seconds, think about this complicated process and its effect on the modern world.