A lot of people don’t carry cash anymore. You’d probably
prefer it if people bought your products or services in cash because you’d be
paid immediately. Many people shopping at your small business, however, will
probably use a debit or credit card. Keep reading to learn more about how
you’ll get paid when someone swipes their card.
How does accepting a credit card work?
When a customer swipes or inserts their credit card in your
point-of-sale system, a few things happen very quickly:
card information is sent to the processing network.
issuing bank (like Wells Fargo or Chase) checks to ensure there’s enough credit
available for the transaction. For debit cards, the bank will check that
there’s enough cash available in the customer’s account.
credit card association (Visa, MasterCard, Discover, or American Express) runs
there’s enough money on the card and it’s not a fraudulent charge, the purchase
You’ll likely submit your receipts to your credit card
processor at the end of each day. They’ll pay interchange rates and take out
their fees. Then, they’ll send the funds to your merchant account. It will
probably take a few days for the money to appear in your account.
Your credit card processor will send the money to your
merchant account. It’s a bank account that allows you to accept debit and
credit cards. Without one, you would never get paid after a credit card or
debit card transaction.
After the funds have been deposited into your merchant
account, they’ll be transferred into your business bank account. This transfer
is usually on a set schedule, like weekly, bi-weekly, or monthly. Read your
contract with the credit card processor carefully to ensure you know when
they’ll release your funds and to learn what their fees are.
At the end of the year, you’ll likely receive Form 1099-K from your credit card processor. Learn more about Form 1099-K.