Prerequisites

Before diving into settlement, understand:

• Authorization and capture flow
• Payments metrics you should track
• Reading statements from your processor
• Chargebacks and how they affect settlement

TL;DR

• Settlement = When card networks/banks actually move money between accounts (T+1 to T+3)
• Funding = When your processor deposits money in YOUR bank account
• Reconciliation = Matching what you sold vs. what you got paid (they won't match exactly due to fees, chargebacks, timing)
• Deposits ≠ sales. Understand the fee waterfall: interchange + assessments + processor markup

Settlement & Reconciliation: A Complete Guide

The Settlement Flow

Where Does the Money Actually Go?

Authorization approves a transaction. Capture commits to it. But neither of those steps actually moves money. That's settlement, and it's where most people's understanding of payments gets fuzzy.

When you tap your card at a coffee shop, the $5 doesn't teleport from your bank account to theirs. It goes on a journey through multiple institutions, gets bundled with thousands of other transactions, passes through clearing systems, has fees extracted at every step, and eventually lands in the merchant's bank account. Usually 1-3 days later.

Understanding this journey matters because:

• For merchants: Your cash flow depends on it. A Friday sale might not hit your bank until Tuesday. See holds and reserves for cash flow impacts.
• For fraud teams: Chargebacks can arrive weeks after settlement, clawing back money you thought was yours. Track your chargeback metrics.
• For finance teams: Reconciling what you sold against what you received is harder than it sounds. See reading statements.
• For issuers: You're funding transactions before you collect from cardholders.

This guide breaks down exactly how money moves, when it moves, who takes a cut, and how to make sure you're getting what you're owed.

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Part 1: The Settlement Lifecycle

Every card transaction goes through distinct phases. Most people think of "the transaction" as one event, but it's actually a chain of events spread across multiple days:

Phase 1: Authorization (Milliseconds)

The issuer approves the transaction and places a hold on the cardholder's funds. No money moves. This is just a promise.

Phase 2: Capture (Same Day, Usually)

The merchant confirms they want to collect the payment. For most retail transactions, this happens immediately after authorization. For e-commerce, it might happen when the item ships.

Phase 3: Batching (End of Day)

Here's where it gets interesting. Merchants don't send each transaction individually for settlement. Instead, they bundle all the day's captured transactions into a single "batch" and send it to their payment processor.

Think of it like the mail. You don't send each letter individually. You collect them and drop them all at the post office at once. The processor does the same thing with your transactions.

Batch cutoff times matter. If your processor's cutoff is 9pm EST:

• Transaction captured at 8pm → goes in tonight's batch → settles tomorrow
• Transaction captured at 10pm → goes in tomorrow's batch → settles the day after

Miss the cutoff by a minute, and your funding is delayed by a full day.

Phase 4: Clearing (Overnight)

This is the "paperwork" phase. The batch travels through the system:

1. Your processor sends the batch to your acquiring bank
2. The acquirer sends transactions to the card networks (Visa, Mastercard, etc.)
3. The networks route each transaction to the correct issuing bank
4. Issuers verify the captures match their authorization records
5. Interchange fees are calculated for each transaction
6. Everyone reconciles their records

Clearing answers the question: "Do we all agree on what happened?"

Phase 5: Settlement (T+1 to T+2)

Now money actually moves:

1. The issuing bank transfers funds to the card network
2. The network transfers funds to the acquiring bank (minus network fees and interchange)
3. The acquirer credits the processor
4. The processor credits you (minus their fees)

Settlement answers the question: "Let's move the cash."

Phase 6: Funding (T+1 to T+3)

The net amount (your sales minus all the fees) hits your bank account. This is what you actually receive.

The timeline in practice:

Day	What Happens
Monday 2pm	Customer pays $100 at your store
Monday 2pm	Authorization approved, capture submitted
Monday 9pm	Your terminal batches the day's transactions
Tuesday 3am	Clearing happens overnight
Tuesday	Settlement between banks
Wednesday morning	$97.30 lands in your bank account

That $2.70 difference? Fees. We'll get to those.

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Part 2: Clearing vs Settlement (Why the Distinction Matters)

People use these terms interchangeably. They shouldn't.

Clearing is Information Exchange

During clearing, the banks are exchanging data: transaction details, authorization codes, merchant information. They're checking that:

• The capture matches the authorization
• The amounts are correct
• All required data fields are present
• No duplicate submissions

Think of clearing as the banks comparing notes before exchanging money. "You say you authorized $50 for this card number, we say we captured $50, agreed? Good."

If there's a mismatch (maybe the capture amount is higher than the authorization, or the authorization expired) it gets flagged during clearing. The transaction might be rejected, or it might create an exception that needs manual review.

Network-specific clearing requirements:

Per Visa's Core Rules, acquirers must enter all original presentments into interchange in the exact amount of transaction currency authorized by the cardholder. This means you can't capture more than you authorized without proper handling (like tip adjustments with the right indicators).

Per Mastercard's Rules, customers using the Interchange System for authorization and clearing are required to net settle in accordance with Mastercard's settlement standards. However, an acquirer and issuer may agree to settle directly between themselves via bilateral agreement, though this is rare for typical merchant transactions.

Transaction reversals: If you detect duplicate or erroneous data, you must reverse it. Visa requires reversals be sent within one business day of detection. Mastercard similarly requires prompt correction of duplicate transactions.

Settlement is Money Movement

Settlement is when funds actually transfer between banks. The card network acts as the central clearinghouse:

• Networks calculate what each bank owes or is owed
• Banks with net debit positions send money to the network
• Banks with net credit positions receive money from the network
• This happens via Fed wire or other interbank transfer systems

By handling it centrally, each bank only needs one relationship (with the network) rather than thousands of bilateral relationships with every other bank.

Network settlement guarantees:

Per Visa's Core Rules, an issuer must pay the acquirer the amount due for a transaction occurring with the use of a valid card. This is the foundation of the four-party model. The issuer is obligated to fund valid transactions.

Per Mastercard's Rules, if a principal or association fails to discharge a settlement obligation arising from a processed transaction, Mastercard will satisfy such settlement obligation. This settlement guarantee protects the system. If one bank fails, Mastercard steps in to ensure merchants get paid. However, this doesn't cover intracountry transactions between related parties or transactions not processed through the network.

What happens when settlement fails:

Networks have extensive provisions for settlement failures. Per Mastercard's Rules, if the network requires funds to maintain system liquidity due to a customer's failure to discharge obligations, they can collect funds directly from settlement accounts. They do this by decreasing outgoing volumes and increasing incoming volumes by up to 5% to maintain system liquidity.

Why This Matters for You

Clearing failures don't cost you money immediately. If a transaction fails clearing, you'll get an error and can usually resubmit or investigate. No money was lost. It just didn't process.

Settlement is harder to undo. Once funds have settled, reversing the transaction requires a refund (you send money back) or a chargeback (it's taken from you). Both have costs and complications.

Timing differences create reconciliation challenges. A transaction might clear on Tuesday but not settle until Wednesday. Your processor report shows it Tuesday; your bank shows it Wednesday. If you don't understand this, your books won't balance.

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Part 3: The Money Flow (Who Pays Whom)

Here's where payments professionals need to really pay attention. Money doesn't flow directly from cardholder to merchant. It cascades through multiple parties, with each taking a cut.

The Players

Cardholder: The person who swiped their card. Their bank account or credit line is the ultimate source of funds.

Issuing Bank (Issuer): The bank that gave the cardholder their card. Chase, Citi, your local credit union. They take on the risk of extending credit to the cardholder.

Card Network: Visa, Mastercard, American Express, Discover. They operate the rails that connect issuers and acquirers. They set the rules and take a small fee on every transaction.

Acquiring Bank (Acquirer): The bank that has a relationship with the merchant. They take on the risk of the merchant not fulfilling orders or going out of business.

Payment Processor: Often sits between the merchant and acquirer, handling the technical side of submitting transactions. Sometimes the processor and acquirer are the same company.

Merchant: You. The business that sold something.

The Flow for a $100 Purchase

Let's trace exactly what happens:

At Authorization:

• Cardholder's available credit/balance reduced by $100 (hold)
• No money moves yet

At Settlement:

Step	From	To	Amount	Running Total to Merchant
1	Issuer	Network	$100.00	-
2	Network keeps assessment fee	-	-$0.14	-
3	Network	Acquirer	$99.86	-
4	Acquirer pays interchange to Issuer	-	-$1.80	-
5	Acquirer keeps their fee	-	-$0.10	-
6	Processor keeps their fee	-	-$0.20	-
7	Net to merchant	-	-	$97.76

Actual amounts vary significantly based on card type, merchant category, and negotiated rates.

Note: In practice, the network nets interchange between issuers and acquirers in its own settlement run. The step-by-step flow here is simplified to show where each fee ultimately ends up. In many modern PSPs (Stripe, Adyen, Square), the acquirer and processor are the same legal entity.

Where Do the Fees Go?

Interchange (~70-90% of total fees): This is the big one. It goes to the issuing bank as compensation for:

• Fronting the money (especially for credit cards, where the issuer pays the merchant before collecting from the cardholder)
• Taking on fraud risk
• Providing cardholder rewards programs
• Funding the cost of issuing cards

Per Visa's Core Rules: "Interchange Reimbursement Fees help to make electronic payments possible by enabling Visa to expand Card holding and use, increasing the places consumers can use their Cards, and providing a financial incentive for all parties to pursue system-wide improvements, such as rewards, innovation, and security."

The rules explicitly state that interchange is "consistently monitored and adjusted, sometimes increased and sometimes decreased, in order to ensure that the economics present a competitive value proposition for all parties." If rates are too high, retailers won't accept cards; if rates are too low, issuers won't issue cards.

Interchange is set by the card networks and varies wildly based on:

• Card type (debit vs credit vs premium rewards)
• Transaction type (card-present vs card-not-present)
• Merchant category (grocery stores pay less than jewelry stores)
• How the transaction was processed (chip vs swipe vs keyed)

Network/Assessment Fees (~5-10% of total fees): Goes to Visa, Mastercard, etc. for operating the network. Usually around 0.13-0.15% of the transaction.

Processor/Acquirer Markup (~5-20% of total fees): This is the negotiable part. Your processor adds their margin on top of interchange and assessments. This is where shopping around can save you money.

Net Settlement vs Gross Settlement

Most merchants receive net settlement, where your deposit is the total sales minus all fees minus any chargebacks or refunds from that batch.

This means your bank deposit is not equal to your sales total. If you sold $10,000 today, you might see $9,720 deposited. The $280 difference is fees, and possibly chargebacks being deducted. See reading statements for how to interpret your deposits.

Some larger merchants negotiate gross settlement, where the full transaction amount is deposited and fees are invoiced separately (usually monthly). This is easier for accounting but requires good cash management to ensure you have funds available when the fee invoice comes due. See processor management for negotiation strategies.

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Part 4: Settlement Timing (When Do You Get Paid?)

The timing of settlement varies based on several factors. Understanding these helps with cash flow planning.

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Deposit Timing and Cutoffs: The Details That Matter

Understanding exactly when your money arrives prevents cash flow surprises and reconciliation headaches.

Processing Day Cutoffs

Your processor defines a "processing day" with specific cutoff times. Everything batched before cutoff settles together. Everything after cutoff waits for the next day.

Processor Type	Typical Cutoff	Notes
Traditional (TSYS, Fiserv)	9-11pm Eastern	Fixed, rarely flexible
Modern PSP (Stripe, Square)	Varies by region	Often configurable
Bank-based	5-7pm local time	Aligned with banking day

Real Cutoff Examples

Scenario	Your Sale	Cutoff	Your Batch	Settlement	Deposit
Before cutoff	Mon 4pm	5pm	Monday	Tuesday	Wednesday
After cutoff	Mon 6pm	5pm	Tuesday	Wednesday	Thursday
Friday late	Fri 8pm	5pm	Monday	Tuesday	Wednesday
Weekend	Sat 2pm	5pm (Mon)	Monday	Tuesday	Wednesday

Key insight: Friday afternoon sales after cutoff won't settle until Tuesday (Monday batch), funded Wednesday. That's 5 days from sale to deposit. This matters for holds and reserves planning.

Bank Holiday Impact

Holiday	What Happens
Federal Reserve holiday	No interbank settlement - see ACH timing
Banking holiday	Deposits delayed
Network holiday	Clearing delayed - check time frames

Fed holidays (US): New Year's Day, MLK Day, Presidents Day, Memorial Day, Juneteenth, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving, Christmas.

Each holiday adds a day to your funding timeline.

Setting Optimal Batch Time

Business Type	Recommended Batch Time
Retail (closes 9pm)	10pm (right after close)
Restaurant (closes 11pm)	Midnight or 1am
E-commerce (24/7)	Align with processor cutoff
B2B (business hours)	End of business day

Auto-batch vs manual batch:

• Auto-batch: Set it and forget it. Consistent timing.
• Manual batch: Flexibility, but human error risk.

Recommendation: Use auto-batch unless you have specific operational reasons for manual control.

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Push ACH Reconciliation Warning

If you're using push payments (ACH credit, same-day ACH, real-time payments) for payouts, reconciliation is more complex than card settlement. See payment methods cheat sheet for timing comparisons.

Why Push ACH is Different

Card Settlement	Push ACH
Processor handles funds flow	You initiate outbound payments
Fees deducted automatically	Fees may be separate
One deposit = one batch	Each payout is separate
Chargebacks handled by processor	Returns come back to you

Push ACH Reconciliation Challenges

Challenge	Why It Matters
No atomic matching	Payouts and returns don't naturally link
Return timing varies	ACH returns can arrive 2-60 days later
Multiple return windows	Different return codes have different deadlines
Bank account changes	Recipient bank account may be closed

Return Window Reality

Return Type	Timeframe	Common Codes
Administrative (R01-R04)	2 business days	NSF, closed account, invalid account
Unauthorized (R05, R07, R10)	2-60 business days	Consumer disputes
Late returns (R31-R33)	Up to 60 days	Dishonored by recipient

Push ACH Reconciliation Best Practices

1. Track every payout uniquely. Assign internal ID that maps to ACH trace number.

2. Build return matching logic. When returns arrive, match to original payout using trace number.

3. Hold reserve against returns. For high-risk payouts (new recipients, large amounts), hold funds 3-5 business days before marking "complete."

4. Reconcile daily. Match:

   • Payouts initiated vs. payouts debited from your account
   • Returns received vs. original payouts
   • Net balance change

5. Flag stale unreconciled items. Any payout older than 5 days without confirmation needs investigation.

ACH Reconciliation Complexity

ACH reconciliation is harder than card reconciliation. Budget 2-3x the operational effort if you're moving from card-only to including ACH payouts.

Standard Timelines by Payment Type

These are typical ranges for US/Canada card programs. Individual processors may fund faster or slower depending on your agreement and risk profile.

Payment Type	Clearing	Settlement	Funding
Visa/Mastercard Credit	Overnight	T+1 to T+2	T+2 to T+3
Debit (PIN and signature)	Overnight	T+1	T+1 to T+2
American Express	Overnight	T+2 to T+3	T+3 or later
Discover	Overnight	T+1 to T+2	T+2 to T+3
ACH/Bank Transfer	T+1 batch	T+1 to T+2	T+1 to T+3
Wire Transfer	Same day	Same day	Same day

T = Transaction date. All times are business days.

The Batch Cutoff Problem

Your processor has a daily cutoff time, which is the deadline for transactions to be included in that day's batch. This is one of the most misunderstood aspects of settlement timing.

Cutoff times vary by processor. Most define their own "processing day" with cutoffs typically in the late afternoon local time, or midnight UTC for some platforms. Common ranges:

• Modern PSPs (Stripe, Square, etc.): Often late afternoon to evening, varies by region and account type
• Traditional processors: Often 9pm or 11pm Eastern
• Always check your specific processor's documentation, as missing the cutoff by even a minute pushes funding back a full business day

How cutoff affects your funding:

Scenario	Transaction Time	Cutoff	In Batch	Funded
Before cutoff	Monday 4pm	5pm	Monday night	Wednesday
After cutoff	Monday 6pm	5pm	Tuesday night	Thursday
Friday after cutoff	Friday 6pm	5pm	Monday night (!)	Wednesday

That Friday transaction? You might not see that money until the following Wednesday. That's 5 days later.

Weekend and Holiday Impact

Interbank settlement and funding generally don't move on weekends or bank holidays in most markets. This creates pile-ups:

• Friday transactions batch Friday night, settle Monday, fund Tuesday or Wednesday
• Saturday and Sunday transactions batch Monday night, settle Tuesday, fund Wednesday
• Holiday weekend (3 days off): Transactions might not fund until Thursday

For a business doing $10,000/day in credit card sales, a holiday weekend means $30,000+ delayed in funding. That matters for cash flow.

Same-Day and Instant Funding

Many processors now offer accelerated funding options:

Funding Type	Timing	Typical Cost
Standard	T+2 to T+3	Included in normal fees
Next-day	T+1	Often included, or small fee
Same-day	Same business day	0.5-1% additional
Instant	Minutes	1-1.5% additional

Same-day requirements usually include:

• Batch before an early cutoff (often 10am-11am)
• Be in good standing with the processor
• Have a verified bank account with recent deposit history
• Meet minimum transaction amounts

When instant funding makes sense:

• High-velocity businesses with tight cash flow
• Businesses with net-30 or net-60 supplier terms
• Event-based businesses (concerts, festivals)
• Businesses in cash-flow crunch

When it doesn't make sense:

• The 1% fee on a $100,000 day is $1,000. Is getting your money 2 days earlier worth that?

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Why Settlement Gets Complicated

If settlement were just "money goes from A to B," it would be simple. It's not. Here's what creates complexity:

Interchange Variation

Interchange rates aren't uniform. They vary by card type, merchant category, and transaction method. A $100 purchase might cost $1.50 in fees (regulated debit at a grocery store) or $3.50 (rewards credit card, keyed manually at a jewelry store).

See Interchange Optimization for detailed strategies to reduce interchange costs, including Level 2/3 data for B2B transactions.

Chargebacks Complicate Everything

Chargebacks are the wild card in settlement. A chargeback can arrive weeks or months after the original transaction settled, and it reverses the funds.

Day	Event
Day 1	Customer purchases $500 item
Day 3	You receive $485 (settlement minus fees)
Day 30	Customer disputes charge with their bank
Day 32	Issuer files chargeback
Day 33	$500 is deducted from your next settlement

Notice you're out $500, not $485. You don't get your fees back. And you've probably already spent the $485. See chargeback metrics for tracking impact.

Multi-Currency Settlement

International transactions add another layer. Exchange rate fluctuations between authorization and settlement can work for or against you. Most processors lock the rate at authorization, but not all. See Going Global for international settlement strategies.

Hidden Fees

The payment processing industry has a transparency problem. Merchants routinely pay 30-50% more than they should, and they don't realize it until someone audits their statements.

See Processor Fees Guide for a complete breakdown of legitimate vs. junk fees and how to audit your statements.

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Reconciliation (Making Sure You Got Paid)

Reconciliation is comparing what you think happened (your sales records) against what actually happened (your bank deposits). It sounds simple until you try to do it.

The Three-Way Match

Proper reconciliation involves matching three sources:

Source	What It Shows	Where to Get It
Your POS/system	Every transaction processed	Your terminal, gateway, or POS software
Processor settlement report	Transactions settled, fees charged, chargebacks	Processor portal or API
Bank statement	Actual deposits received	Your bank

All three should match. When they don't, you have a discrepancy to investigate.

Your reconciliation obligation:

Per Mastercard's Rules: "It is the responsibility of each Customer to reconcile the totals and Transactions provided by the Interchange System to its own internal records on a daily basis."

This isn't just best practice. It's a network requirement. Both Visa and Mastercard expect participants to maintain accurate records and reconcile daily. For merchants, this responsibility flows through your acquiring relationship.

Why They Don't Match

Timing differences: The most common issue. Your POS shows $10,000 in Monday sales. Your processor report shows $10,000 settled Tuesday. Your bank shows $9,720 deposited Wednesday. This is normal. They're just looking at different points in the timeline.

Fee deductions: Your sales were $10,000 but your deposit was $9,720. The $280 difference is fees. If you don't account for this, you'll think you're short.

Batching differences: You processed 100 transactions Monday. Your processor batched 98 of them Monday night, and 2 of them (captured after cutoff) Tuesday night. Your reports will show different counts for "Monday."

Chargebacks and refunds: A chargeback or refund gets deducted from your current settlement, not matched against the original transaction. A $500 chargeback on an order from 2 months ago shows up as a deduction in today's settlement.

Reserves and holdbacks: Your processor might be holding 10% of your settlement in reserve. Your sales say $10,000, your fees are $280, but you only received $8,748. That's the reserve.

Common Reconciliation Discrepancies

Discrepancy	Likely Cause	How to Fix
Transaction in POS, not in settlement	Auth only, never captured; voided; rejected at clearing	Check transaction status in gateway
Transaction in settlement, not in POS	System not syncing; manual transaction on terminal	Check all transaction sources
Amount mismatch	Tip adjustment; partial capture; currency conversion	Compare original vs settled amount
Extra fees	PCI non-compliance fee; chargeback fee; statement fee	Review fee schedule
Missing deposit	Batch didn't close; settlement rejected; bank holiday	Check batch status, bank account
Unexpected deduction	Chargeback; refund; adjustment; reserve	Review processor deductions report

Reconciliation Frequency

How often should you reconcile?

Business Type	Recommended Frequency	Why
High-volume e-commerce (1000+ txns/day)	Daily	Discrepancies compound quickly; fraud detection
Medium retail (100-1000 txns/day)	Daily or every 2-3 days	Catch issues before they age
Low-volume (under 100 txns/day)	Weekly	Sufficient for error detection
All businesses	Monthly (at minimum)	Month-end close, financial reporting

The 3-day rule: Discrepancies are 10x easier to investigate within 3 days. After 30 days, some become impossible to resolve.

The Reconciliation Process

Step 1: Export your data

• Pull settlement report from your processor (by settlement date)
• Pull bank statement or transaction export
• Export your POS/sales data for the same period

Step 2: Match gross amounts

• Total sales from your system
• Total settled amount (before fees) from processor
• Should match (or difference should be explainable)

Step 3: Verify fees

• Expected fees based on your rate and volume
• Actual fees charged
• Variance should be under 1% (some interchange variation is normal)

Step 4: Match deposits

• Settled amount minus fees = expected deposit
• Actual bank deposit
• Difference = chargebacks, reserves, or adjustments

Step 5: Investigate discrepancies

• Document each discrepancy
• Research root cause
• Resolve or escalate
• Track patterns over time

Automation vs Manual Reconciliation

Manual reconciliation works when you're processing a handful of transactions. At scale, you need automation:

Volume	Approach
Under 100 transactions/day	Spreadsheet reconciliation feasible
100-1000 transactions/day	Semi-automated (import/match tools)
1000+ transactions/day	Fully automated reconciliation software

Most payment processors offer reconciliation reports and APIs. Your accounting software (QuickBooks, NetSuite, etc.) may have integrations. Third-party reconciliation tools exist for complex multi-processor setups.

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Settlement Holds and Reserves

Not all of your money makes it to you right away. Processors and acquirers manage risk by holding funds in certain situations.

See Holds and Reserves for complete coverage of:

• Rolling, capped, upfront, and minimum reserves
• Why funds get held (new accounts, high-risk MCCs, chargeback spikes)
• How to negotiate reserve release

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The Issuer's Perspective

When a credit card transaction settles, the issuer pays the merchant's acquirer before collecting from the cardholder. The issuer is essentially extending credit not just to the cardholder, but temporarily to the entire system.

See The Issuer Perspective for how issuers think about settlement, fraud, and why they file chargebacks.

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Quick Reference: Settlement Timelines

Scenario	Captured	Batched	Settled	Funded
Monday 2pm, 5pm cutoff	Monday	Monday 5pm	Tuesday	Wednesday
Monday 6pm, 5pm cutoff	Monday	Tuesday 5pm	Wednesday	Thursday
Friday 2pm, 5pm cutoff	Friday	Friday 5pm	Monday	Tuesday
Friday 6pm, 5pm cutoff	Friday	Monday 5pm	Tuesday	Wednesday
Saturday anytime	Saturday	Monday 5pm	Tuesday	Wednesday

Quick Reference: Common Fee Ranges

Fee Type	Typical Range	Who Receives
Interchange (debit)	0.05% + $0.21 to 0.80% + $0.15	Issuing bank
Interchange (credit)	1.50% + $0.10 to 2.50% + $0.10	Issuing bank
Network assessment	0.13% to 0.15%	Card network
Processor markup	0.10% + $0.05 to 0.50% + $0.10	Your processor
Effective rate (total)	2.0% to 3.5%	All parties

Quick Reference: Reserve Types

Reserve Type	How It Works	Typical Terms
Rolling	% held each batch, released after X days	5-10% for 90-180 days
Capped	% held until reaching maximum	10% up to $50K
Upfront	Lump sum held before processing	$10K-$50K
Minimum	Floor that must be maintained	$5K-$25K minimum

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Next Steps

Just learning settlement?

1. Pull your last week's deposits and match them to sales → Practice the reconciliation process
2. Ask your processor for fee breakdown documentation → Understand your effective rate
3. Identify your batch cutoff time → Know when transactions move to next-day funding

Optimizing cash flow?

1. Review payout strategy → Consider faster funding options
2. Negotiate reserve terms → Build track record, then request reductions
3. Time large expenses after known settlement dates → Align outflows with inflows

Handling discrepancies?

1. Understand chargebacks → Disputes cause the biggest reconciliation gaps
2. Build a fee tracking system → Catch overcharges before they accumulate
3. Review your processor contract → Know what you agreed to pay

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See Also

• Authorization and Capture - Transaction flow
• FX and Settlement - International settlement
• Payments Overview - Payment fundamentals
• Chargeback Fundamentals - Dispute impact on settlement
• Fraud Prevention - Reducing fraud losses
• Payout Strategy - Cash flow optimization
• Holds and Reserves - Reserve mechanics
• Reading Statements - Fee breakdown
• Interchange - Fee structures
• Processor Management - Acquirer relationships
• Bank Transfers - ACH settlement
• Chargeback Metrics - Dispute tracking