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Payment Processing 101

Accepting credit cards online can be complicated, so in this article, we'll focus on the basics of the industry. Curious about Braintree's specific offerings? Take a look at Braintree 101.

​​What do I need?

To accept credit card payments, you'll need a merchant account and payment gateway, both of which Braintree can provide. Merchant accounts require an underwriting process; gateways do not.

A merchant account allows you to accept credit and debit cards as a form of payment while the gateway is the software that connects to the processing networks. Sometimes they're bundled and sometimes they're sold separately. Most gateways have both an API for web transactions as well as a web based interface for phone, mail, or fax orders.

You'll also need to have a bank account under your business's name, but you're on your own for that one! It doesn't matter who you bank with for your business's account, so the choice is yours. Keep in mind that a merchant account is not a bank account. Just like a direct deposit paycheck, we'll dump your funds from your merchant account in your business bank account automagically.

How do I receive money?

For US merchant accounts, payment taken with a Visa, MasterCard or Discover will typically be deposited into the designated bank account within 2-3 business days of settlement. American Express typically takes 5 business days. If you are an international merchant this might be a little different. Contact us for more details.

Funds that were collected using Pay with PayPal will be disbursed to your bank account according to your settings within your PayPal Business Account. You can adjust these settings at For more information, check out our PayPal Setup Guide support article.

What types of payment methods can I accept?

Braintree's US merchant accounts will bundle Visa, MasterCard, Discover, JCB and sometimes American Express as the default accepted payment types. Most of our international merchant accounts will bundle Visa and MasterCard as the default accepted payment types. American Express isn't always a default, but it can be added. You'll need to indicate your interest on the application. For online credit card processing, there is no difference in processing a credit or debit card that bears a major credit card association logo. Please keep in mind that these debit cards will be run as credit, as there is no online acceptance of PIN required debit cards.

Most Braintree accounts can also accept PayPal. For more information, check out our Pay with PayPal support article.

Fun Fact: Visa cards represent roughly 65% of all transaction volume, MasterCard 20%, American Express 10% and Discover 5%.

What happens after my customer submits their order?

A bunch of stuff! The credit card information needs to travel through a lot of different channels before it hits your bank account. Some people call it magic and like to leave it at that. If you want to know what really goes on, keep reading. 

Your transactions will go through a lot of changes before they land in your merchant account, just like puberty! While Piaget calls them developmental stages, in the payment industry, your transactions will go through the following transaction statuses:

The first step is to ask the customer's bank if the customer's card is legitimate and has sufficient funds to pay for your product or service. The bank lets us know if they authorize the charge to go through. Here is how we communicate with the bank:

If the cardholder's bank doesn't want the transaction to go through, the card is processor declined. If the cardholder's bank says yes, the card is authorized. This puts a hold on the funds, meaning the customer isn't able to spend that money, but it doesn't take any funds out just yet. Eventually, authorizations will expire and you'll never receive your hard earned dollars. In order to collect funds, you need to make sure that you submit for settlement. This is enabled by default in the Control Panel, but you have to specify whether you want to submit for settlement on creation in the API. In most cases, you'll want to submit a transaction for settlement at the same time that you authorize the card. Usually merchants that ship physical goods wait to submit for settlement until after the product has shipped in order to prevent chargebacks. You can read more about extended authorizations in this article.

Eventually, all of the transactions that are Submitted for Settlement will be grouped together in a Settlement Batch and sent along their way. This is when the money moves from your customer's bank to your merchant account and eventually your own bank account. Typically this happens at the end of each day, but there are exceptions. To find out your batch settlement time, shoot us an email at and we'll let you know.

We'll send those batched transactions to the credit card processors, who will ask the customer's bank for the funds. While the processors and the banks are talking to each other, the transaction will be Settling. From there, the bank will transfer the money into your merchant account. When the money hits your merchant account, the transaction reaches the end of its journey, and is Settled. After a couple of days, you'll see it in your bank account.

Thoughts or suggestions about this article? Let us know!

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