DEFINITION of '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.

BREAKING DOWN 'Batch Credit Card Processing'

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.

Why Batch Credit Card Processing Is Implemented

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.

RELATED TERMS
  1. Authorized Transaction

    An authorized transaction is a debit or credit card purchase ...
  2. Merchant Agreement

    A merchant agreement is a contract governing the entire relationship ...
  3. Batch Processing

    Batch processing are transactions that are processed in a group ...
  4. Credit Card Authorization Key

    A code used in credit card transaction authorizations that confirms ...
  5. Merchant Account

    A merchant account is a type of business bank account that allows ...
  6. Credit Card

    A card issued by a financial company giving the holder an option ...
Related Articles
  1. Personal Finance

    3 New Types Of Credit Cards To Look For

    These three types of credit cards are becoming popular with customers looking to pay less fees and build up their credit scores.
  2. Personal Finance

    Credit, Debit and Charge: Sizing Up The Cards in Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.
  3. Personal Finance

    How Credit Cards Affect Your Credit Rating

    The average American household has four cards, but does that mean more is better?
  4. Small Business

    How to Use Small Business Credit Cards

    A small business credit card can be a convenient way to increase your company's purchasing power, but must be carefully managed.
  5. Personal Finance

    Credit Card or Cash?

    Credit cards are convenient to use, but not always the best choice. Here are five times you shouldn't pay with a credit card – and five times you should.
  6. Personal Finance

    How Many Credit Cards Should You Have?

    National stats indicate most consumers have three or more cards - are you one of them?
  7. Personal Finance

    How Is Cashback Profitable For Credit Card Companies?

    Cashback rewards are not as beneficial to the consumer as they might initially seem.
  8. Personal Finance

    Best Credit Cards For People With Poor Credit Scores

    There are still ways you can build credit with a credit card, even if you have bad credit.
  9. Personal Finance

    Does a Lost or Stolen Credit Card Hurt Your Credit Score?

    Learn the ways in which a lost or stolen credit card can hurt your credit, and understand the steps you can take to protect yourself if this happens.
  10. Personal Finance

    Take Control Of Your Credit Cards

    The plastic in your wallet doesn't have to hurt your finances. Learn how to manage it responsibly.
RELATED FAQS
  1. Why do credit card companies calculate revenue splits in terms of basis points?

    Discover how revenue splitting works and how credit card companies are able to utilize basis points in revenue splits to ... Read Answer >>
Trading Center