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Credit card processing for businesses

Credit card processing lets your business take credit card payments on your website or in your brick-and-mortar store. While the process is straightforward for your customers, it involves a number of parties and steps behind the scenes. If you're a small business owner, it's crucial to understand what's happening at every stage to ensure a smooth, secure process for you and your customers.

Here's what you need to know about how credit card processing works and how to manage it in your business.

What is credit card processing?

Credit card processing is the system that allows your business to accept credit card payments. The process involves banks, credit card companies, payment processors and integrated software. It's one of several digital payment processing options for businesses.

How does credit card processing work?

Credit card processing works by sending a payment request to the bank that issued the credit card, which then approves the payment and releases the funds to your business account. For the customer, the process only takes a few seconds, but there is more going on under the hood.

Here's how it works:

  • The cardholder presents their credit card or enters their details online.

  • Your business sends a request to the payment processor.

  • The payment processor sends the transaction to the issuing bank.

  • The bank approves or declines the request.

  • If the payment is approved, the funds are sent to your account - this may take a few days.

Why is it important to understand credit card processing?

It's important for a business owner to understand credit card processing for several reasons. The process involves your customers' financial and personal information as well as your finances, so you’ve got a responsibility to oversee and understand the process. The better you know the steps and parties involved, the easier it is to spot and address issues and errors as they occur.

Important things to consider when choosing a payment processor

When you're choosing a payment processor, there are a few vital points to consider. Every payment processing business has its fees, terms and conditions, and systems, so look for the one that best suits your business needs. For example, you may (or may not) need a payment processor that provides you with physical point-of-sale terminals.

Other considerations include:

Security and compliance

The Payment Card Industry Data Security Standard (PCI DSS) international standards helps protect and secure cardholder data and reduce the risk of card fraud. The payment processor you choose must comply with these standards. 

Pricing structure

Flat fees, monthly subscription costs or transaction fees – the way pricing is structured and managed can make a big difference to your ongoing costs, particularly as you grow.

Ease of use 

If you sell online does the payment processor integrate with your ecommerce software? Does it accept a range of credit cards and offer other payment options for your customers? Is it easy to set up and manage? You don't want your payment processing to complicate things for you or your customers.


Depending on the needs of your business, you may need to consider whether the payment processor offers additional features, such as processing international payments, recurring bills, subscriptions and more. 


If you run into an issue with a transaction, can you access support services easily?

What fees are associated with credit card processing?

Credit card processing adds a cost to your business - although the specifics depend on your payment provider.

Setup fees

Some payment processors charge a setup fee, including equipment fees if they supply your business physical point-of-sale terminals. Many also charge a minimum monthly fee, while others take a small commission on each transaction.

Transaction fees

Transaction fees for merchants range from around 1.3% to 3.5% of the value of a transaction, according to the card type. The total fee is made up of three costs:

  1. Interchange fees go to the bank that issues the credit card and vary depending on the risk of the individual transaction. For example, online credit card payments have a higher interchange fee than in-person payments with a PIN.

  2. Assessment fees go to the credit card company and are usually a tiny fraction of the overall transaction fee.

  3. Payment processing fees go to the payment processor to pay for the cost of managing payment technology, equipment and security.

Tips for minimising credit card transaction fees

Here are some simple ways for business owners to minimise their transaction fees:


Many businesses pass the cost on to the customer through a small surcharge on credit card payments.

Gather more details

Asking customers for additional information such as their billing address at ecommerce checkout or during phone-based transactions can help cut interchange fees. 

Take in-person payments

Credit card payments processed in person, where your customer presents their physical card for processing, attract lower transaction fees, so prioritise these transactions if you can.


Many payment processors will negotiate interchange fee levels and other costs when you sign up – it's worth asking to ensure you're getting the best rates.

What parties are involved in a credit card transaction?

The parties involved in a credit card transaction include the cardholder or customer, the merchant (you), the payment processing company and the issuing bank.


Your customer – the person who holds a credit card issued by their bank or financial institution.


Your business, or any business taking credit card payments in exchange for goods or services.

Payment processor

Connecting the dots between a merchant and the issuing bank to make payments happen.

Issuing bank

The bank or financial institution that provides the customer with a credit card.

Card association

The credit card provider – for example, Mastercard, Visa, or Amex.

Example of a credit card transaction

Credit card transactions involve three main processes: authorisation, settlement and funding.

Here’s an example of how a transaction could go:

1. The cardholder buys a pair of shoes on your website using a Visa credit card issued by ANZ. 

2. Your website sends an automatic request for payment to your payment processor.

3. The payment processor submits the transaction to Visa and ANZ, including card details and customer information.

4. ANZ approves the transaction and then sends the outcome back to your business. This completes the authorisation step.

5. Your business completes the sale process and starts the shipping process.

6. At the end of the business day, you submit all your approved transactions for the day in one batch to your payment processor for settlement.

7. The payment processor works with the issuing bank to transfer funds, minus transaction processing fees, to your bank. This completes the settlement step.

8.  Your bank then transfers the funds to your account. This can take a few days. The funding stage is now complete. 

9. The issuing bank adds the transaction to the cardholder's account, and they pay their credit card bill.

10. The customer receives the shoes.

Credit card processing best practices

Best practices for credit card processing focus on minimising fraud, giving customers plenty of options, and monitoring transactions closely to identify potential problems.

Here’s how to keep processing running smoothly: 

Implement fraud prevention measures

Fraud is always a risk with credit card payments, so it's vital to put prevention measures in place. For in-store transactions, invest in chip and pin payment terminals to keep customers payment information secure and reduce the risk of fraudulent transactions.  

With online sales, you can use methods like AVS (Address Verification Service), CVV (Card Verification Value) and 2FA (Two-factor authentication) to minimise the risk of a fraudster using stolen details. Issuing banks, credit card companies and payment processors will usually have their own set of fraud prevention strategies.

Offer more than one payment option

It’s always smart to give your customers multiple payment options if you can. 

Some of these options are:

  • Credit and debit cards (in-store or online)

  • Digital wallets like PayPal, Apple Pay, or Google Pay

  • Bank transfers

Monitor transactions regularly

Keeping a close eye on transactions lets you identify dubious payments and unusual patterns so you can spot potential issues and alert your processor. It also ensures you're keeping an eye on fees charged to you. Most payment processors will have a dashboard or automated system that helps you monitor your transactions.

Implement clear and concise refund and return policies

It's crucial to have clear, simple refund and return policies listed on your website. If customers know there are a set number of days to return a product or claim a refund, they're less likely to turn to their credit card company to seek a chargeback.

Credit card processing FAQs

How long does it take for a credit card to be processed?

Credit card transactions are authorised or declined within a few seconds, but the payment can take longer to process. Most are completed and in your account within 1-5 business days from you returning your batch payments to your payment processor.

What does it mean when a credit card is processed?

When a credit card transaction shows as ‘processing’ on your statement, it means the transaction is waiting for approval from the issuing bank before the money comes through to your bank, and then to your business account.

Who pays for credit card processing?

Your business pays for credit card processing through payment processing and transaction fees. However, many businesses choose to pass this cost on to their customers through credit card surcharges.

How do I take credit card payments on my website?

Taking credit card payments on your website involves several steps. You need a payment gateway that secures your customer’s credit card information at checkout. This gateway then sends those details to a payment processor who checks with the credit card network and issuing banks that the person has the funds to complete the transaction. The payment processor then approves or declines the transaction via the payment gateway.  

Many online stores provide integrated and secure payment processing with your account, making it easy for you to accept payments. Once payments are coming through, it’s important to also keep an eye on transactions to minimise the risk of fraud or payment errors.

Fast, simple credit card payments with MYOB

The easier it is for your clients to pay you, the more likely they’ll pay promptly. That's why credit card payments are so helpful – they give your customers a simple, immediate way to pay for purchases or services.

With MYOB, you can offer online payments on your invoices that include Amex, Visa, MasterCard, Apple Pay, Google Pay, Bpay and PayPal, giving customers a quick, easy way to pay what they owe. Cutting-edge security technology protects you and your customers, minimising the risk of fraud or payment errors.

Want to change the way you manage payments? Take a look at MYOB now.

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