How Do Restaurant Credit Card Transactions Work?

February 14, 2013

For restaurant customers, credit card transactions allow you to pay for your meal easily and without much effort. You present your card to your server or cashier, who charges you accordingly. A gratuity is either added automatically, usually for large parties, or you write in how much you want to leave as a tip along with your signature. Within the next couple of days, your account will show a debit in the amount of your total purchase.

How Do Restaurant Credit Card Transactions Work for the Restaurant?

For the restaurant, the process is a little bit more complicated. After your card has been swiped and the total amount of your food and drink bill has been entered, someone on staff must manually enter tip information. At the end of the shift or day, someone at the restaurant, typically a manager or owner, will run a report and confirm the accuracy of the day’s credit card billing data. Once the information has been confirmed, he or she will send that information to the merchant that provides credit card processing for the restaurant.

What Is a Merchant?

The merchant — the company that does the credit card processing — acts just like a bank, so no other banks are involved in the transactions. The merchant receives the money for any purchases made by cardholders electronically, and it pays businesses like restaurants by depositing the money that it’s collected directly into the bank account of the business in the same way people receive paychecks via direct deposit. Because merchants behave like banks, they have capital on hand to pay businesses in the event there is a delay in receiving funds electronically from a credit card company. The merchant takes out any fees before depositing money into the business’s account.

Paying by credit card

What Does the Merchant Do?

Once this information has been sent to the merchant, it takes the funds from your credit or debit card and deposits those funds into the account of the restaurant owner or company. This usually occurs the next day although it may take longer. The amount of money that gets debited and deposited is based entirely on what gets entered into the credit card processing machine by an employee of the restaurant, which is why mistakes can sometimes occur.

How Do Restaurant Credit Card Transactions Work When There’s a Mistake?

If there’s a mistake at the time the card gets swiped, the restaurant staff can correct it relatively quickly by simply voiding the sale or issuing you a refund. A voided sale will not show up on your statement, but a refund will show up as two separate transactions—a charge and a refund. Because two transactions do actually occur, the money may get debited from your account and then refunded days later by your credit card company.

Noticing a Mistake on Your Statement

If you notice a mistake on your statement, first talk to the restaurant and find out if they made a mistake in billing. While you can dispute the charge through your credit card company, it may be faster and easier to work with the restaurant directly. If there was a genuine mistake, they can still issue you a refund that will be applied to your account much faster than if you had disputed the charge through your credit card company.


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