Card Clearing Analyzer

What is Card Clearing?

Card clearing is the post-authorization process in which completed card transactions are reconciled and settled between all parties in the payment chain: the merchant, the acquiring bank (merchant’s bank), the card network (Visa, Mastercard, etc.), and the issuing bank (cardholder’s bank). While authorization happens in real time, clearing is a batch process that determines the actual movement of funds.

When you tap your card at a coffee shop, the authorization confirms you have sufficient funds and places a hold. But no money actually moves at that moment. The clearing process — running hours or even a day later — calculates the exact amounts owed by each party, applies interchange fees, and triggers the actual fund transfers through settlement.

Understanding the distinction between authorization and clearing is fundamental to payment processing. Authorization is a promise; clearing is the accounting that makes good on that promise.

How Card Clearing Works

The Four Phases

Phase	Timing	Key Action	Primary Actor
Authorization	Real-time (1-3 seconds)	Cardholder’s bank approves or declines	Issuer
Clearing	T+0 (end of business day)	Transaction details exchanged in batch	Card Network
Settlement	T+1 (next business day)	Net fund positions calculated and transferred	Card Network + Banks
Funding	T+1 to T+2	Merchant receives proceeds minus fees	Acquirer

Authorization vs Clearing vs Settlement

These three stages serve fundamentally different purposes:

Authorization is a real-time check that happens when the card is presented. The issuer verifies the card is valid, not blocked, and has sufficient funds or credit. A successful authorization places a hold on the cardholder’s available balance but does not move money.

Clearing occurs when the merchant’s batch of completed transactions is submitted to the card network. The network matches each clearing record against its corresponding authorization, calculates interchange fees, network assessments, and acquirer markups, and creates net settlement positions for each participating bank.

Settlement is the actual movement of funds. The card network instructs its settlement bank to debit issuers and credit acquirers based on the net clearing positions. In many markets, this happens on a T+1 basis — one business day after the clearing file is processed.

Chargebacks and Disputes

A chargeback is a forced reversal of a settled transaction, initiated by the cardholder’s issuing bank. Chargebacks can occur for several reasons:

• Fraud: The cardholder did not authorize the transaction
• Merchandise not received: The goods or service were never delivered
• Not as described: The product differs significantly from what was advertised
• Processing error: Duplicate charge, incorrect amount, or wrong currency

The chargeback window extends up to 120 days from the transaction date for most dispute categories, and even longer for certain types (e.g., recurring billing disputes). Each chargeback carries a fee to the merchant (typically $15-$25) and impacts the merchant’s chargeback ratio, which can lead to higher processing fees or account termination if it exceeds network thresholds (typically 1% of transactions).

Common Use Cases

• Merchant reconciliation: Matching clearing records against POS transactions to verify correct settlement amounts
• Fee analysis: Calculating effective interchange rates by comparing authorized amounts to net settlement amounts
• Dispute management: Tracking chargebacks from initial retrieval request through final resolution
• Cash flow forecasting: Predicting merchant funding dates based on clearing and settlement cycles
• Fraud detection: Identifying clearing records that do not match their original authorizations
• Network compliance: Ensuring clearing files conform to Visa (TC05/TC07) or Mastercard (IPM) specifications