We’re living in the age of overdraft fees. In fact, banks charged low-income Americans $12.4 billion in overdraft fees in 2020 alone. So, as an SMB owner, you’ll want to know how long a credit card payment takes to process.
Each customer’s payment posts at a different time, depending on their credit card company and how their payment is submitted. That’s why it’s so important to understand when you’ll be receiving payments in your bank account. It helps you manage your merchant account and protect your bottom line.
So, let’s take a look at all of the FAQs related to credit card processing times. We’ll also take a quick look at how credit card processing works, what factors affect it, government regulations around it, and more.
How Does Credit Card Processing Work?
There’s more than meets the eye with credit card transactions:
- Customers enter their card information at your point-of-sale or online store.
- Your bank then confirms with their bank that the funds or credit are available.
- If so, funds are then detracted from your customer’s account and posted to yours.
- Their available credit is then modified to reflect their payment to you.
Banks make around 1% to 7% of their total profits from overdraft fees. Late fees are another part of the equation. Financial institutions charge customers a hefty late fee when they don’t settle their credit card payments by the due date. However, with on-time payments, customers are only charged the interest rate in addition to the cost of their purchases.
Understanding the Players in Credit Card Payment Processing
A lot of different entities are involved every time a transaction is processed. Payment methods, and thus the pricing of payment processing, can vary. But these are the players involved in most card transactions:
- Issuing bank: Your customer’s bank.
- Acquiring bank: Your (merchant’s) bank.
- Credit card companies: Your customer’s credit card issuer(s) –– e.g., Mastercard, Visa, Amex, etc.
- Cardholder: Your customer.
- Payment processor: The solution provider that you pay to process your customers’ card transactions. You may rent or buy your payment processing hardware.
As an SMB owner, you’ll want to prevent chargebacks whenever possible. To prevent this, it’s important that your customers know their available credit limit or available funds on their debit card. By monitoring your credit card processing statement, you’ll be able to identify any repeat offenders.
How Credit Card Posting Works
Credit card posting is not the same thing as payment processing.
Credit card posting happens when a transaction is processed with a posting date or settlement date. It takes place every time customers use their cards to make a purchase. This can be at your POS station, mobile app, or online store.
Every transaction has a posting date and a transaction date, and the two are not the same. The posting date happens after the date on which the transaction takes place. It’s usually the next business day or up to three business days after the transaction date.
This issue is that sometimes the posting date occurs after a customer’s credit card bill is due. If the minimum payment isn’t posted in time, it results in a late fee. This can also negatively impact their credit score.
How Long Do Credit Card Payments Take To Process?
All credit card payments are not processed in equal timeframes. If a customer’s payment isn’t posted by the cutoff time in their billing cycle, they’ll be subject to overdraft fees. Because of this, it’s important for them to be aware of their credit card posting date.
The Truth in Lending Act stipulates that a customer’s credit card due date must occur at the same time each month. However, multiple factors can impact credit card processing times. These include where the transaction took place (online payments, in-person, etc.), the credit card company, and the banks involved.
Your customers should know when their payment will post to avoid a late fee on their credit card statement. Linked credit and checking accounts typically post bill payments the fastest, with same-day payment processing. A mailed payment, on the other hand, takes the longest amount of time to post.
With that said, here’s a quick look at the typical processing times for the top four payment types:
- Online payments: Like phone payments, online payments are processed in batches. They have a processing time of around 1-3 days.
- Phone payments: Phone payments are processed in batches overnight, with a 1-3 day process time.
- Mailed payments: Mailed payments can take from a few days to a few weeks to post to your account. They’re particularly unreliable during a pandemic when consumers are ordering online instead of shopping in person.
- Linked credit card and bank account payments: The fastest payment method uses your customer’s linked card or account number. Same-day payment processing is available for this type of payment.
Credit Card Processing Times at Leading Card Providers
The credit card provider your customers use will also play a role in how long their credit card payments take to process. Here are the credit card processing times for the most popular card brands in the US:
- Amex: American Express processes payments within 24-36 hours. The caveat? The payments may not be deducted from your customer’s account balance for up to 5 business days.
- Discover: Discover processes credit card payments the same day, provided they’re made before 5 pm EST. Otherwise, they’re processed the next business day.
- Citi: As long as payments are received before midnight, Citi processes them the same business day. However, it may still take up to 2 business days before they’re posted to the customer’s account. Or up to a week for mailed payments.
- Bank of America: Bank of America payments are processed into customers’ accounts the same day, provided they’re made before 12 am EST. However, similar to Amex, it still takes a few days to post to your customer’s account after that.
- Capital One: Capital One payments are processed to/from your customer’s account the same day, as long as they happen before 8 pm EST. But Capital One processes payments made over the weekend on the following Monday.
- Chase: Chase also processes transactions the same business day, provided they’re swiped before 8 pm PST. The cool thing about Chase, however, is that payments post to your customer’s account the same day.
- Wells Fargo: Wells Fargo payments take about 2 business days to post to your customer’s account as long as they’re submitted by 2 pm PST.
Choosing The Best Payment Processor for Your Small Business
The payments space can be confusing. With layers of red tape to navigate through and a million hidden caveats, it’s easy to become disillusioned. That’s why it’s so important to find a transparent, highly-rated payment processor that can demystify the payments process.
Payment Depot has no hidden fees and no cancellation fees. We help retailers like you save 40% or more each month on payment processing. So, you can pass those savings on to your customers and level up with your SMB. Talk to our award-winning customer service team today to learn more!
Quick FAQs about Credit Card Payment Processing
Q: How long does it take for a credit card payment to process?
Credit card payments generally take between one to three business days to process. The exact time can vary depending on the payment method, the credit card issuer, and the banks involved in the transaction.
Q: What are the main steps involved in credit card payment processing?
The main steps include: the customer entering their card information, your bank confirming the availability of funds with the customer’s bank, the funds being deducted from the customer’s account and posted to your account, and the customer’s available credit being updated to reflect the payment.
Q: What factors affect the processing time of a credit card payment?
Several factors can impact the processing time, including the type of payment method used (online, phone, mailed, linked accounts), the credit card company, and the specific banks involved in the transaction.
Q: How does the posting date differ from the transaction date?
The transaction date is when the purchase is made, while the posting date is when the transaction is processed and reflected in the account. The posting date typically occurs one to three business days after the transaction date.
Q: Can the processing time vary for different credit card companies?
Yes, processing times can vary. For example, American Express usually processes payments within 24-36 hours, while Discover processes payments the same day if made before 5 pm EST. Each credit card company has its own timeline for processing payments.
Q: What are the typical processing times for different payment methods?
Online and phone payments typically take 1-3 days to process. Mailed payments can take from a few days to several weeks, while linked credit card and bank account payments usually offer same-day processing.
Q: How can businesses prevent chargebacks related to credit card payments?
Businesses can prevent chargebacks by ensuring customers are aware of their available credit limits or debit card funds. Monitoring credit card processing statements can help identify repeat offenders and address issues proactively.
Q: What regulations affect credit card processing times?
The Truth in Lending Act requires that a customer’s credit card due date occurs at the same time each month. However, processing times can still be influenced by other factors such as the method of payment and the specific banks involved.
Q: Why is it important for customers to know their credit card posting date?
Knowing the posting date helps customers avoid late fees and overdraft fees. If a payment isn’t posted by the cutoff time in their billing cycle, they may incur additional charges and negatively impact their credit score.
Q: What should businesses look for in a payment processor to ensure efficient credit card processing?
Businesses should look for a transparent, highly-rated payment processor with no hidden fees or cancellation fees. A good payment processor will help demystify the payments process and provide reliable customer service.
