How A MasterCard Credit Card Transaction Works

Information verified correct on October 28th, 2016

When you make a purchase with your MasterCard there are a number of processes that happen following the purchase and leading up to the statement being delivered to you. You can read this article to find out the exact steps taken by both the banks and MasterCard after you buy an item.

If you have a MasterCard credit card you may be wondering what types of steps happen behind the scenes once you have made a purchase transaction. This article outlines all of these steps taken by MasterCard and the other banks involved so that you can see exactly what takes place.

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MasterCard Credit Card Offer

The St.George Vertigo Visa offers a low interest rate on balance transfers and purchases with a low annual fee

  • $55 p.a. annual fee
  • 1% p.a. for 12 months (reverts to 13.24% p.a.) on purchases
  • 0% p.a. for 18 months on balance transfers
  • Cash Advance Rate of 21.49% p.a.
  • Up to 55 days interest free

How does a MasterCard Credit Card Transaction work

There are three main steps to how a Mastercard transaction works

  1. Authorisation
  2. Clearing
  3. Settlement


A MasterCard is authorised at the time of purchase and follows these 7 steps.

  1. The MasterCard credit card containing the account information is provided to the merchant from the cardholder.
  2. The cardholder’s bank is determined by MasterCard at the request of the merchant’s Bank.
  3. The MasterCard credit card security features are checked by the MasterCard authorisation system and sent for approval to the cardholder’s bank.
  4. The purchase is approved by the cardholder’s bank.
  5. This approval is sent by MasterCard to the merchant’s Bank.
  6. Approval is sent to the merchant from the merchant’s bank.
  7. Cardholder receives a receipt after he completes the credit card transaction.


Clearing is usually accomplished within one day and follows these 3 steps.

  1. The MasterCard network receives the purchase information sent to them from the merchant’s bank.
  2. The information is validated by the MasterCard clearing system, which then sends this purchase information over to the cardholder’s bank.
  3. Data is then prepared for the cardholder’s statement.
    Comprehensive reconciliation is provided by the MasterCard clearing system to both the cardholder’s bank and the merchant’s bank.


Settlement of the purchase usually occurs within 2 days, in this order.

  1. Payment is sent by the cardholder’s bank to the MasterCard counter-party to settlement.
  2. Payment is sent over to the merchant’s bank from the MasterCard counter-party to settlement.
  3. Merchant is paid by the merchant’s bank for the cardholder’s credit card transaction.
  4. The cardholder is billed by the cardholder’s bank.

As you can see, this is quite a process, and as a MasterCard client it is good to know everything you can about your card. It can help you understand how a mistake can possibly be made, and how your statement gets processed.

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Credit Cards Comparison

Rates last updated October 28th, 2016
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Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
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HSBC Platinum Credit Card
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NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $59 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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