How Online Credit Card Processing Works

At the end of the day, we’re all in business to make money.

And while this may be common knowledge, what isn’t so well-known is the actual process in which payments are communicated over the internet. Having a better understanding of how online credit card processing works will help you paint a clearer picture of this ever-important, well, process.

Beyond explaining the flow of payment information on the information superhighway, stay tuned to the end of the video, where you’ll get some of my bonus tips when looking into an online credit card processing provider.



Here’s the transcript if you’d like to follow along:

Hi, everybody! My name’s Matt, and I’m the Marketing Communications Manager here at Volusion. Welcome to Two Minute Tuesdays, where we give you two minutes of ecommerce advice to bolster your online success.

Whether you’re new to ecommerce or just looking to accept payment directly on your site for the first time, it’s helpful for you to understand how the credit card processing process takes place. So sit tight, because today I’m going to explain it and give you some bonus tips at the very end to make sure you’re getting started on the right foot.

Step one, and this seems pretty self-explanatory, when a customer comes to your ecommerce site, they pick out the product they want to purchase and enter their credit card information. This is where the transaction begins.

Secondly, once the order is placed, your payment gateway encrypts the data and sends it to your credit card processor. By encrypt, I mean that your gateway turns all that credit card information into a bunch of jumbled characters, numbers and symbols that your credit card processor will be able to decode, but hackers won’t be able to see. Then it gets to your credit card processor, and they take it from there.

Step three, the credit card network, which is Visa, MasterCard and Discover, start talking to your customer’s bank. What are they asking your customer’s bank? They’re checking to see that they have sufficient funds in their account to cover the amount of the order they just placed. Once the credit card network knows, they’ll approve or deny the order.

Number four on our list, and the final step, once your customer’s bank comes back with the information the order has been approved, you fulfill that order. Once that order is fulfilled, the funds are then deposited into your bank account, and everyone is a happy camper.

All right, number five on our list, now that you know how everything works, here are some bonus tips to help you get started on the right foot. First off, we talked about an integrated gateway earlier, and so make sure that your gateway is as fully compatible with your ecommerce software as possible. Secondly, you’ll also want to be aware of and understand all of the fees that are associated with online credit card processing, so be sure to check those out. And finally, look into the application process and figure out the specifics, like how much information is required, what the application turnaround time is and things of that sort.

Now that you know how online credit card processing works, and have some bonus tips to get started, what are you waiting for? It’s time to dive in! Go ahead and submit that application, and start accepting payment on your site.

If you have any questions, I’m always happy to help. Just leave me a comment in the box below, I’ll get right back to you. From me to you, happy selling.


Matt Winn is Volusion’s Senior Brand Manager, where he helps oversee the organization’s branding and communications efforts. Matt has created hundreds of articles, videos and seminars on all things ecommerce, ranging from online marketing to web design and customer experience. Beyond being a certified nerd, Matt is an avid college football fan, enthusiastic home cook and a self-admitted reality TV junkie.

3 Responses to “How Online Credit Card Processing Works”

  1. Avis Rosenlund

    I have been talking with Meagan Dollins about my trial site. Since I have been taking credit cards via credit card machine at shows, I already have a CC account. they told me that the gateway they use is Is that compatible with Volusion if I go with you. I currently am hosted thru a company that uses Shopsite Manager……not sure about that as I am on a 7 day trial with them; seems like support is off shore. Please let me know. Also, I have a logo that was designed for me when I started business and I would like it incorporated into my website. (I am a glass artist) Thanks!

    • Gracelyn Tan

      Hi Avis,

      Meagan will be reaching out to you to answer your questions. Thanks so much for reading!

  2. Mark D

    This is a fine video for folks getting started but I would love to see a real in depth webinar on the subject. There are several parties involved in the process and I’m not clear on their roles. I also think it would be helpful to have a better understanding of the various charges that get levied when processing cards.


Leave a Reply