Payments
- How card transactions actually work, from swipe to deposit
- Authorization asks "can this card pay?". Capture commits to it. Settlement is when money actually moves, one to three days later
- Treat every control on these pages as a test. Start small, measure, then roll out
- Looking for one answer? The Quick Answer table below routes you straight there
15 min read
You're either working out why a transaction failed, or where your money went. Both start here.
Treat every control on these pages as a test. Start small, measure it, then roll it out if it's working.
Quick Answer
| Looking for... | Go here |
|---|---|
| Which processor should I use? | Processor Comparison |
| How much will processing cost? | Total Cost Model |
| Why are transactions failing? | Auth Optimization |
| How does settlement work? | Settlement |
| What payment methods should I accept? | Payment Methods |
| Understanding my statement | Reading Statements |
Are You Card-Present or Card-Not-Present?
Not sure? If customers swipe/tap in person, you're CP. If they type their card online, you're CNP.
Pick Your Mode
- Calculate your effective rate (total fees / total volume). On interchange-plus pricing, above 2.9% deserves investigation. On aggregator pricing (Stripe at 2.9% + $0.30, Square at 2.6-3.3% depending on plan), your effective rate will naturally be 3.0-3.5% depending on average ticket size - that's normal for that pricing model.
- Pull your top 5 decline codes from last month. Pick the most common one and read what it means.
- Got recurring billing? Check how many customers failed payment in the last 30 days. Are you retrying intelligently?
That's it. Dashboards and optimization can wait.
Under $50K/month: Use a simple all-in-one processor (Stripe, Square, PayPal). Don't negotiate rates yet. Your volume doesn't justify it. Focus on getting paid reliably.
$50K-$150K/month: You've got a little leverage, not much. Work on checkout conversion first, it pays back hardest. Make sure guest checkout is smooth. Check your auth rate monthly, 85-90% for US domestic CNP. Watch that your effective rate isn't creeping up. Don't touch interchange, fraud tools or orchestration yet. At this size the money's in growing revenue, not shaving payment costs.
$150K-$1M/month: your effective rate matters now. Compare it to benchmarks, ask your processor about interchange-plus, and start tracking decline codes monthly. You're big enough that they'll answer.
Over $1M/month: Negotiate interchange-plus pricing if you haven't. Consider a dedicated payment gateway vs. all-in-one. Auth optimization becomes worth the effort.
Over $10M/month: Multi-processor strategy, dedicated payment operations person, and formal vendor reviews. See Scaling Milestones.
How a Transaction Flows
From checkout to cash in your bank account.
| Phase | What Happens | Timing |
|---|---|---|
| Authorization | "Can this card pay?" - Funds reserved | 2-3 seconds |
| Capture | "Charge it now" - Transaction finalized | Same day or delayed |
| Clearing | Networks calculate who owes what | End of day |
| Settlement | Money moves between banks | T+1 to T+3 |
| Funding | Cash hits your account | T+1 to T+3 |
Deep dives: Authorization & Capture | Settlement | Money Flow
Optimization (when you're past $100K/month and want to improve margins)
If you're new to payments, read these in order:
Test capture timing: For one product line, compare capture-at-shipment vs. capture-at-order. Measure "goods not received" disputes vs. operational complexity over 30 days.
Payment Methods (cards, bank transfers, wallets, and alternatives)
Run a 2-week checkout survey: "What payment method do you wish we had?" If fewer than 10% of customers mention it, it's probably not worth the integration effort.
Next Steps
- Authorization & Capture - How transactions work
- Settlement & Reconciliation - Where your money goes
- Payment Methods Overview - Your options
- Selling Internationally - If you get foreign orders
- Buying Payments - Choose the right processor
- Checkout Conversion - Stop losing sales
- Auth Optimization - Improve approval rates
- Interchange - Optimize your fees
- Digital Wallets - Add Apple Pay, Google Pay
- Going Global - International expansion
Start with The Guide, Pathway 1: Getting Started with Payments, It's a 20-minute walkthrough of how money moves, choosing a processor and understanding fees. This page is the deep dive.
See the Glossary for quick definitions of payments and fraud terms.
See Also
- Processor Management - Multi-processor strategy
- AVS & CVV - Verification signals
- 3D Secure - Authentication and liability shift
- Risk Scoring - Transaction scoring
- Holds and Reserves - Cash flow impacts
- Payments Metrics - Performance tracking
- Refund Strategy - When to refund