Credit card processing is a complex system that allows businesses to accept and process payments made with credit cards. Here is a simplified explanation of "how credit card processing typically works":

Customer initiates payment: The customer provides their credit card information (card number, expiration date, and CVV code) to the merchant during a purchase.

Merchant's point-of-sale (POS) system: The merchant enters the customer's payment information into their POS system, which may be a physical terminal or "an online payment gateway".

Authorization request: The merchant's system sends an authorization request to the credit card network (e.g., Visa, Mastercard, American Express) or "the merchant's payment processor". The request includes the transaction amount, merchant identification, and the customer's card details.

Credit card network or payment processor: The authorization request is forwarded to the customer's credit card issuer (the bank or financial institution that issued the card) through the credit card network or "payment processor".

Card issuer response: The card issuer receives the authorization request, verifies the customer's account details, and checks if there are sufficient funds available to cover the transaction. They also perform security checks to ensure the transaction is not fraudulent. Once the checks are completed, the issuer sends an authorization code or decline response back to the merchant's system.

Authorization response: The merchant's system receives the response from the card issuer. If the response is an authorization code, it means the transaction is approved. If the response is a decline, the transaction is rejected.

Completion of the transaction: If the transaction is approved, the merchant can proceed to complete the sale. The customer's card is charged, and the merchant provides the goods or services to the customer. For online transactions, the "payment gateway" securely captures the customer's funds.

Settlement: At the end of each business day or a specified settlement period, the merchant batches the authorized transactions and sends them to the acquiring bank or payment processor. The acquiring bank facilitates the transfer of funds from the customer's card issuer to the merchant's bank account.

Funding and fees: The acquiring bank deposits the funds from the authorized transactions into the merchant's account, usually net of any fees charged by the "payment processor" and interchange fees set by the credit card networks.

Statement and reconciliation: The merchant receives a statement detailing the processed transactions and associated fees. They reconcile the statement with their own records to ensure accuracy and track their financial transactions.

It's important to note that this is a simplified overview, and there may be additional steps or variations in the process depending on the "specific payment gateway", merchant account provider, or payment processor involved. 

https://www.paymentsclarity.com/our-services/credit-card-processing