The Credit Card Charging Process

The credit card charging process consists of four stages: authorization, draft capture, settlement, and deposit.

Authorization is where we ask the card issuer to tell us if there is enough “open to buy” credit limit on the card to make the purchase. The action of authorization lowers the card’s “open to buy” limit, but not the card’s available credit. This “open to buy” reduction will be restored if there is no subsequent deposit for that authorization number. The time it takes for the “open to buy” to be restored is usually around five days, but can be longer depending on the card issuer.

Draft capture is where we mark a transaction for subsequent settlement and deposit. This action isn’t actually the deposit itself, but it will cause the transaction to be included in the settlement batch. This is analogous to creating a paper draft for inclusion in the deposit. You can still void the transaction, which would be similar to destroying the paper draft.

A “sale” is actually these first two steps combined into one request whereas the “pre-auth” and “completion” requests are each implementing one step.

Settlement is the process where all of the transactions marked for draft capture are collected and marked for deposit. You could think of this as the process of bundling all of your paper drafts together and dropping them off at the bank. 

Deposit is where we add up all of the transactions in the settlement, calculate the total owed to the merchant, subtract any merchant fees and send the balance to the merchant’s bank.