Settlement
Also known as: Clearing
The batch process that moves captured funds from the issuer to the merchant's account.
Settlement is where money actually changes hands: captured transactions are batched (usually daily) and the funds flow from issuing banks through the networks to the acquiring bank. The time from settlement to money in your account is the payout time.
How it works
Your bank shows $96.80 for a $100 sale, and that is net settlement: fees come out before the money reaches you. It is how most flat-rate providers work, and it leaves you unpicking the fee later from a statement. Gross settlement deposits the full amount and debits fees once a month. Traditional merchant accounts commonly work that way, and it makes reconciliation and effective-rate calculations far easier.
Behind that, the sequence is fixed. Your batch cuts off, your processor submits the day's captured transactions to the card networks, and the networks clear them. Every issuer is told what it owes. Interchange and assessments come out at this stage, and the net amount moves to your acquiring bank, which credits your merchant account and starts the transfer to your business bank. Nothing you do after batch cutoff changes that day's settlement, which is why the cutoff time matters more than merchants tend to think.
On a statement, settlement date and deposit date are two different things, and support teams confuse them constantly. A sale that settles on Friday can sit over the weekend and turn up on Tuesday. Settlement is also the moment an interchange downgrade becomes visible, because the final category is fixed when the transaction clears, so a batch full of keyed-in or missing-data sales costs more than your quote implied. Any reserve is withheld here too.
Worked example
Your terminal batches at 9pm on Tuesday with 42 sales totalling $3,180, and the networks clear the batch on Wednesday. You are on interchange-plus at interchange + 0.25% + $0.10, and interchange and assessments average 1.95% of volume, so fees come to $74.16. Net settlement makes Thursday's deposit $3,105.84. Gross settlement lands the full $3,180 and debits the $74.16 at month end.
Frequently asked questions
- Why is my bank deposit smaller than my sales total?
- Most processors settle net, taking their fees before the money reaches your bank. The gap is those fees plus whatever else came out that day: refunds you issued, chargebacks and their fees, any rolling reserve. Match one day's batch report against the matching deposit line and it should reconcile exactly. When it does not, ask your processor for the itemised settlement report for that date.
- Does settled mean the money is in my bank account?
- No. Settled means the transaction has cleared between the banks, and your funds then travel to your business account on your processor's payout schedule, commonly one to two business days later. Dashboards label these stages inconsistently, so check what settled means on yours: cleared with the networks, or actually transferred to you. The two can be days apart.
- Can I change what time my transactions settle?
- Usually yes. Most terminals and gateways have a batch cutoff time that you or your processor can move, and that time decides which day a sale settles. Shift the cutoff from 5pm to late evening and evening sales join the same day's batch instead of the next one, which pulls your deposit forward by a day. Weekends and bank holidays still push funding to the next business day.