How to Avoid Chargebacks

Chargebacks can cause a great deal of trouble for a business, especially when merchant accounts initiate fees for them. Credit card processing has a wealth of benefits, but it also has complications such as consumer chargebacks. Consumers initiate chargebacks for a wide variety of reasons including fraud, attempted theft, honest mistakes and discontent. Every business […]

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Building Your Small Business

Accepting credit cards is a necessity for small businesses because it allows them to remain competitive, offer convenient payment methods to buyers and not forego a sale in the event customers come up short of cash. Understanding the world of credit card processing can seem daunting at first, but these 3 key principles help address […]

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Reading Reviews Before Selecting Your Merchant Account Provider

When looking to select a company to use as a credit card processor, it’s wise to choose one that offers all the right services at a good price. However, one should take it further, and here are three things to look at when reading reviews for a merchant services provider. Speed: Without a doubt, if […]

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All About Flagship Merchant Services

Flagship Merchant Services has been helping merchants conduct transactions online for many years. As a leader in credit card processing and merchant accounts services, Flagship Merchant Services has remained focused on giving business owners of all size the solutions they need to effectively do business completely online. How does credit card processing work? There are […]

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All About

Without a doubt, when looking to get credit cards processed, one should go with a solid, reliable and trustworthy company. When doing so, it’s easy to avoid mistakes that others suffer from. While true, one should know where to look, and is a great place to go, and here are three reasons why. Provide […]

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What is the Bankruptcy Notification Service?

Without a service, it’s hard for people to know when someone went bankrupt, and this is often a problem when dealing with merchant accounts or other financial services. For this reason, the two major worldwide credit card companies, Visa and MasterCard, have developed a service to help people track bankruptcies. With this, people can see […]

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In credit card processing, authorization is the term that refers to the request being made to charge a customer’s credit card. It is important to note that authorization does not actually charge the customer at that point in the sale process, but it is the request before funds are captured.

Authorization is the first step in the process of using merchant accounts to collect payment from a customer when they are paying with a credit or debit card. Once the card is swiped at the terminal, the authorization request is sent to a payment gateway. The payment gateway for a retailer may or may not be affiliated with their specific merchant accounts since often a third-party gateway is used.

The authorization request can arrive at the gateway in two different ways: it can come from terminal or virtual terminal at the retailer’s point of sale station or it can come from a virtual shopping cart application attached to a retailer’s website. Once the authorization enters the payment gateway, it is sent to the card issuing bank to be determined whether the payment can be accepted by the retailer’s merchant account or it is denied based on insufficient funds or other account issues with the customer’s credit card.

The authorization process is also where a merchant will pay their first fee. The authorization fee is charged to send the information to the issuing bank and receive an answer on whether the specific amount of funds are available. Whether or not the request is accepted or denied by the issuing bank, the merchant account will still be charged the authorization request fee. If the charge to the customer’s card is approved, the merchant account will be charged the transaction fee for the transaction going through. These are just two types of fees is a wide range of possible fees that a merchant account will incur for using a merchant account service.

Since authorization is the first step in credit card processing, it is important to understand its place within the payment system and how it works for both merchant accounts and the customers.