When your business accepts credit cards, you make buying from your establishment much easier for customers. However, unlike being paid in cash, receiving payments through a credit or debit card may take some time. For businesses on a tight margin or startups without steady or copious sales income, a slight delay in accessing sales revenue can cause cash flow problems. It may even make a difference in whether they make payroll or pay their bills on time. For these reasons, small businesses must understand how long it will take to process card payments and gain access to those funds.
Most businesses evaluate processing rates and fees when choosing a credit card processor. However, you should also consider the time it takes to access your credit card sales revenue. Even if your business is established and has healthy profit margins, doing business with a processor that holds your money can be problematic.
What is credit card processing?
Credit card processing includes everything that happens from the time a customer presents a credit card to make a purchase to when the business receives the money from that purchase in its bank account. Merchants use a third party called a credit card processor to act as an intermediary between them and the customer’s card-issuing bank in a multistep process. Here’s what the process looks like:
- The customer makes a purchase and presents a credit card for payment via the merchant’s credit card reader; alternatively, the merchant can manually enter card information into a virtual terminal or input it online.
- The credit card processor’s software transmits the customer’s card data, payment amount and merchant information to the card network.
- The card network sends this information to the issuing bank (the bank that issued the customer’s credit card).
- The issuing bank checks to see if the customer’s account has enough credit or funds available and either approves or declines the charge. It also ensures the card is legitimate by verifying the security code, ZIP code and other information.
- If the transaction is approved, the issuing bank starts the process of releasing those funds from the customer’s account. If the transaction is declined, it transmits that information back to the merchant’s system.
- The credit card processor receives the funds, deducts processing fees and transfers the balance into the merchant’s bank account.
- The issuing bank posts the transaction to the customer’s account.
How long does credit card processing take?
Although the entire payment process is electronic, it usually takes several days to complete. This time frame is primarily because the issuing bank handles payment transactions in batches. On average, it takes between two and four business days for the merchant to receive a sale’s funds. The process can take six days if a weekend is involved – more if there’s a bank holiday like Memorial Day – because batches are processed on business days only. The transaction may take another day or two to fully post to the customer’s account.
What affects how long it takes for a credit card to process a payment?
Many factors can affect the credit card processing time frame, including the following:
- Payment type: Debit card transactions with a PIN are generally processed in one day, while credit card and digital wallet payments like Apple Pay take a little longer.
- Issuing bank: Some issuing banks process transactions quicker than others. For example, American Express takes between 24 and 36 hours, while Wells Fargo takes two business days. Other issuing banks, including Citibank, Discover and Bank of America, process transactions on the same day if they’re made before a specific cutoff time. Different banks have different cutoff times, ranging from 5 p.m. to midnight.
- How the payment was made: Online and phone payments take one to three business days to process because they are batched on the payment processor’s side before being sent to the card network. In-person transactions through a credit card reader are usually faster because they’re sent directly.
- When the payment was made: If the transaction occurred on a weekend or holiday, it will not be processed until the next business day. Likewise, if a transaction occurs at night after the bank’s cutoff time, it will be processed the following business day.
- Transaction amount: Larger transactions can take longer because they are subject to additional security checks to ensure their legitimacy.
- High-transaction-volume periods: During busy shopping times, such as Black Friday, payment processor systems can become overwhelmed, slowing the processing speed.
- Additional verification requirements: Sometimes, card issuers require extra verification to prevent fraud or comply with specific regulations, such as anti-money laundering laws. Additional verification takes time because card issuers may need to obtain information like the customer’s billing address. In other situations, the card issuer will manually review a transaction or take other internal measures before approving it.
- International payments: Transactions in which the customer is from a different country than the merchant can take longer because the currency conversion takes some time.
- Payment processor time frames: Some payment processors simply take longer to make funds available to the merchant.
Best credit card payment processors
The best credit card payment processors tend to pay out credit card sale funds promptly. Here are a few highly regarded companies to consider:
Clover
Clover is a reliable, well-known payment processor, primarily because of its ubiquitous point-of-sale (POS) hardware. In addition to its sleek and durable hardware – which is also compatible with other payment processors – Clover offers in-house payment processing. On average, you will have access to your funds within 24 to 72 hours. If you need cash sooner, you can use the vendor’s Rapid Deposit service, which gives you instant access to the money for a fee of 1.5 percent.
Stax
Stax charges merchants a monthly subscription price of between $99 and $199 plus a transaction fee of $0.08 to $0.15, depending on how you accept the payment. Unlike most payment processors, Stax does not charge a percentage of the overall amount of your credit card sales. You can access your credit card sales revenue the next day or the same day for an additional fee.
Merchant One
Merchant One accepts 98 percent of merchants that apply for an account and tailors each merchant’s pricing to its needs and risk profile. Once approved, businesses can start processing credit cards within 24 hours. While Merchant One does not have proprietary hardware, it sells and is compatible with Clover credit card readers and POS systems. Payouts are available within two business days of the sale.
Payment Depot
Payment Depot combines Stax’s subscription model with Merchant One’s pricing flexibility. Monthly charges range from $59 to $99, and new merchants can receive free credit card processing equipment. Payment Depot integrates with many e-commerce platforms, including WooCommerce, BigCommerce and Magento. Funds are available to merchants within two business days.
Chase
Chase is one of the rare payment processors that is also an issuing bank. Due to the incredible number of people who have a Chase-issued credit or debit card, payouts for those customers can be made on the same day for no additional fee. For customers without a Chase card, you can expect to receive your money within two business days.