Credit Card Lifecycle

Modified on Mon, 30 Mar at 4:51 PM

Content

Use this guide to understand general information about Credit Card lifecycle.

1. Credit Card lifecycle overview

2. Key considerations

2.1. Key concepts

3. Credit Card payment lifecycle

4. Key characteristics

5. Credit Card processors and cutoff times

6. Void and refunds

2.1. Chargebacks handling

7. Additional related resources

1. Credit Card Overview

Credit card transactions are electronic payment instructions initiated by a cardholder through a merchant, processed via the card networks (e.g., Visa, Mastercard, American Express) and the cardholder’s issuing bank. Unlike ACH transactions, credit card payments are typically authorized in real time, allowing immediate confirmation of fund availability, although settlement between financial institutions occurs afterward.

The lifecycle begins with the merchant submitting the transaction for authorization, during which the issuing bank approves or declines the payment based on credit availability, fraud checks, and account status. Approved transactions are then captured and submitted for clearing and settlement through the card network to the merchant’s acquiring bank. Settlement transfers funds from the issuing bank to the acquiring bank, while returns, chargebacks, and disputes are managed according to established network rules and timelines. As credit card transactions involve real-time authorization and a structured settlement process, allow faster processing compared to ACH transactions.

Risk management, fraud detection, and regulatory compliance are integral throughout the lifecycle, ensuring secure and reliable payment processing.

2. Key Considerations

Risk management, fraud detection, and regulatory compliance are integral throughout the lifecycle, ensuring secure and reliable payment processing.

KEY CONCEPTS:

For chargeback or compliance purposes, merchants must retain transaction records, receipts, and authorization data.
Credit card processing depends on the merchant’s acquiring bank, the card network, and the issuing bank. Network downtime, processing cutoffs, or settlement delays can affect fund availability.
Temporary holds on cardholder funds can impact available credit and may remain until the transaction is captured or released, affecting customer account balance.
Certain industries or transaction types carry higher risk for chargebacks or fraud, influencing processing requirements and reserve policies.
Merchants may submit partial captures or adjustments after the initial authorization, which require proper reconciliation and can affect settlement amounts and reportig.

3. Credit Card Payment Lifecycle

The credit card transaction lifecycle consists of the following stages:

Authorization	The customer provides card details, and the merchant submits a request for approval through a payment processor.
Authentication and Approval	The issuing bank validates the transaction by checking card validity, available credit, and potential fraud indicators. The transaction is either approved or declined.
Authorization Hold	If approved, the transaction amount is placed on hold on the customer’s credit line. Funds are not yet transferred.
Clearing and Settlement	The merchant submits authorized transactions in a batch to the processor. The processor routes them through the card network to the issuing bank for settlement.
Settlement Timing	● Settlement files are typically generated around 1:00 AM, and merchants generally retrieve them around 5:00 AM, depending on processor configuration. Actual settlement timelines may vary according to processor schedules and merchant setup. ● Actual settlement timelines may vary according to processor schedules and merchant setup.
Funding	The issuing bank transfers the funds (minus applicable fees) to the merchant’s acquiring bank.
Customer Billing	The transaction appears on the customer’s credit card statement, and the customer repays the issuing bank according to their billing cycle.
Disputes and Chargebacks (if applicable)	The customer may dispute the transaction, which may result in a chargeback and reversal of funds if the claim is validated.

Credit card transactions involve four primary participants:
● Merchant: submits the transaction
● Processor: transmits and manages the transaction
● Card Network (Visa, Mastercard, etc.): routes authorization and settlement
● Issuing Bank: approves, declines, and funds the transaction

The processor sends authorization and settlement data to the network, which forwards it to the issuing bank for final approval and funding.

4. Key Characteristics

Processing Timeframes	Credit card transactions involve real-time authorization and short settlement cycles. ● Authorization: Real-time ● Settlement: typically 24–48 hours ● Refunds: typically 5–10 business days, depending on the issuing bank
Transaction Types	Credit card transactions support multiple types that define how funds are handled:
	Type	Name	Description
	10-SALE	Sale	Charges the customer’s credit card and sends the transaction for settlement.
	11-AUTH ONLY	Authorization Only	Place a temporary hold on the cardholder’s funds without capturing them.
	12-CAPTURE	Capture	Completes a previous AUTH ONLY transaction and sends it to settlement.
	13 -CREDIT	Refund	Returns funds to the cardholder after a settled transaction.
	14-VOID	Void	Cancel a transaction before settlement, preventing any funds from being captured.
	15-PRE-AUTH	Pre-Authorization	Approves a charge initiated from another system or source and puts funds on hold temporarily.
Transaction Statuses	Transactions move through defined statuses during processing: ● Authorized ● Captured ● Settled ● Funded ● Voided ● Refunded ● Chargeback
Processing Nature	● Real-time authorization model ● Batch-based settlement process ● Dependent on multiple parties: ○ Processor: facilitate communication between systems ○ Card Network: routes transactions (e.g., Visa, Mastercard) ○ Issuing Bank: approves transactions and provides funds ● Subject to cutoff times and processor schedules ● Settlement and funding may be affected by: ○ Processor risk reviews ○ Merchant risk category ○ High-volume or high-ticket processing ○ Issuer or network fraud review delays
Dispute and Chargeback Risk	Credit card transactions are subject to disputes initiated by cardholders. ● Disputes may result in chargebacks ● Funds may be reversed from the merchant ● Supporting documentation is required to challenge disputes

5. Credit Card Processors and Cutoff Times

CSG Forte maintains processing relationships with multiple credit card processors. Each merchant is associated with a specific processor, which facilitates transaction authorization, settlement, and funding. Applicable cutoff times:

PayPal

Processor	Cutoff
Global Payments	8:00 PM / 10:00 PM
Nova / Elavon	9:00 PM
Vital / TSYS	8:00 PM
First Data	10:00 PM
Worldpay	5:00 PM (unless configured otherwise)
PayPal	11:59 PM at the merchant's time zone

● Processing relationships may be either directly managed by CSG Forte or supported through external processor teams, which may impact support and coordination efforts.

● Transactions submitted after the established cutoff time will be processed in the next business day’s batch, which may affect settlement and funding timelines.

6. Voids vs Refunds

Action	When Used	Effect
Void	Before settlement	Stops capture; preferred when possible.
Refund	After settlement	Sends money back to cardholder.

Chargeback Handling

If the customer disputes the charge (e.g., fraud or product issues), they can initiate a chargeback.

The bank investigates and may reverse the transaction, pulling the funds from the merchant’s account unless the merchant can prove the charge was valid.

7. Additional Topics for Further Reference

Disputes

Topic	Context
Limit Increase	A request to raise the approved ACH processing or funding limits for a merchant account. Limit increases are evaluated based on risk, transaction history, and funding exposure.
Transaction Status and Decline Codes	Overview of transaction and verification codes used in CSG Forte payment processing, including status, response, return, settlement, AVS, and CVV codes.
Cutoff Times	This FAQ explains cutoff times for ACH and credit card transactions, including how they affect processing, settlement, returns, and funding timelines. It also covers processor-specific cutoffs, same-day ACH, midnight cutoff options, and expected funding delays.
PCI FAQ	CSG Forte’s PCI-DSS Program provides merchants with simple options to achieve PCI compliance, including a low-cost managed solution with guided validation, security scans, and data protection support.
Disputes	Documentation that supports a credit card dispute (chargeback). This documentation may be required to review, investigate, and resolve disputed card transactions in accordance with card network rules and compliance requirements. *Note:* Requests outcomes are determined by the requesting banks and applicable payment networks. CSG Forte acts only as an operational intermediary and does not control or make final decisions regarding their resolutions.