Merchant services

Payment Processing: Understand Your Common Payment Transaction Types

payment processingHaving a business with payment processing is a great way to generate customer loyalty, drive revenue to your business, and provide multiple payment options for your customers and clients. But not all payment processing is as simple as taking a customers credit or debit card and running a transaction. When it comes to payment processing, it is important to understand the different types of payment transactions that your business will be processing. 

Starting a business? Download "The merchant services survival handbook" to  learn how to process payments.

Not only will understanding the different types of payment processing transaction help you better run your business and provide the proper knowledge to deal with different payment issues that may arise, but it is a great way to manage your transactions, and ensure that you know that your business is getting the money, refunding the money, or there was a failed transaction. Making both parties confident that either the transaction went through, or it was dealt with properly.


The authorization transaction is typically used by a merchant to obtain the authorization of a transaction amount as a pre-approval for the purchase of goods or services during the fulfillment process. Authorization transactions are submitted for authorization and then funds are held by the issuer until that transaction is capture, or the authorization is reversed or cancelled. This is typical in online purchases where the online business will run an authorization transaction to ensure that the customers card is able to pay for the goods or services, and then once the authorization is returned and funding is guaranteed, the customers card will be charged upon order fulfillment.


A sale transaction is used by merchants for the immediate purchase of goods or services. With payment processing, this transactions completes both the authorization and capture in a single transaction request. This transaction is approved automatically and included in the settlement.

Forced Sale

A forced sale in payment processing is a transaction initiated by a merchant with the intent of forcing the posting of the transaction against the customer account without receiving prior authorization by the card issuer, or receiving a voice authorization code from the merchant acquiring call center. For cases such as forced sale transactions in payment processing, the merchant would enter the transaction details and forward this forced sale transaction to the card issuer with the exception of receiving funding for the goods or services rendered. These are very commonly known as off-line sales.


In payment processing, the refund is a very common transaction process in which a previously settled transaction in refunded and that amount if submitted for processing. Refunds are only allowed for financial transactions, sale and captured, and are typically limited to the original authorization amount, nothing less or greater in value.


Void transactions can reverse transactions that have been previously authorized or approved by the card issuer and are pending settlement. In payment processing, merchants will only be allowed to void transactions that are in an open batch, which means that they have not settled their transactions for that day.

With the above transaction types, you should have a better understanding of the types of payment processing transactions that are most common, and that your business does on a regular basis. When dealing with a payment processing provider, it is important to know that information that you require should be provided to you are your request. It may be time for you to switch providers if you are not receiving the type of service and support that your business requires.


Text Size

Matt Moore

As the President and Co-Founder of BNA Smart Payment Systems, Matt is responsible for the company’s strategic direction, daily operations, and growth. Entrepreneurial by nature, he brings a wealth of sales and marketing experience earned from over 36 years in business. He has developed, implemented, and directed international sales and marketing strategies, established strategic alliances with international companies, and demonstrated leadership in the electronic payments market. Prior to BNA, Matthew served at the senior levels of major EFT/POS companies, helping them increase sales and optimize customer service. Matt is also a father of three, a fitness enthusiast who does power lifting and CrossFit, and he enjoys weekends at the cottage.

Find Matt Moore on:

Subscribe to our blog