A man walks into a bar. The bartender takes his order and asks him if he wants to open a tab. The man says “yes,” and hands her his credit card. At the end of the night, the bartender hands the man his card and a receipt, and he goes home.

Both of them are happy. The man got his drinks without having to pay in cash. The bartender didn’t have to count dollar bills or wonder when she would get paid.

How did the money make it from the customer’s bank account to the bartender’s bank? That flow of money requires an ecosystem of payments companies to process the transaction. They have to act quickly, so the bartender doesn’t have to wait a long time to find out if the man has enough money in his account for drinks. They also have to communicate securely so that criminals can’t easily intercept the man’s credit card information.

For this speed and security, as well as any card rewards attached to his transaction, these intermediaries charge a price. And while the cost of each card swipe may be small, the trillions of dollars spent using cards each year quickly add up to fuel a vast payments industry.

This primer speaks mainly to credit transactions, which are processed differently than are debit transactions. Credit card purchases move through a processor and are essentially loans to the customer by a card issuer. Debit card purchases, on the other hand, are debits directly from the customer’s bank account.

Here are a few of the different organizations that get involved in the swipes, taps and clicks used to make purchases across the U.S. payments system.


An acquirer is a bank that allows a merchant to accept credit and debit card payments. An acquirer may also be called an “acquiring bank,” “merchant acquiring bank,” or “merchant acquirer.” When a customer makes a purchase at a business, the acquirer handles getting money from the customer’s bank account.

But the flow of money isn’t instant. It may take a couple of days for the acquirer to contact the customer’s bank, verify the customer has enough money for the purchase, and then retrieve the money. So, the acquirer essentially loans the business the money, allowing the merchant to get paid before the banks settle the transaction.

And things can go wrong. A customer may dispute a charge on their credit card or the business may go bankrupt. If those things happen, the acquirer is stuck with the bill. The riskier a business is, the less likely acquirers will be willing to work with them.

The benefit acquirers get for taking on that risk comes from fees they charge the businesses they serve. Acquirer fees are part of the total amount a business pays each time they accept a card payment. That total is called a merchant discount rate. 

Calculating the merchant discount rate can be complicated. The exact formula depends on multiple factors, including whether the customer paid with a credit or debit card and the specific companies involved in the card transaction.

Generally speaking, the total amount a business pays for a credit card transaction will be about 2-3% of the transaction’s value plus $0.10-$0.20. By contrast, the amount that can be charged to process a debit card transaction is federally regulated and can be adjusted. For bank issuers with $10 billion or more, the debit fees are capped at 0.05% plus 21 cents, with the latter subject to adjustment by the Federal Reserve.

The biggest acquiring banks last year were JPMorgan Chase, Wells Fargo and Bank of America, respectively, according to industry research firm The Nilson Report. 


A payment processor is a company that connects the business to the acquirer and a customer’s bank. It is the go-between party that makes sure that money flows from the customer’s bank account to the business’s bank account. 

The processor does this by quickly performing an authorization or “auth,” to confirm that a customer has enough money in their bank for the purchase. But the money isn’t moved right away, TSG Senior Associate Cliff Gray explained in an interview.


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