The short answer
A card transaction runs in three phases. First comes authorization — the quick yes/no that happens in under a second while the customer is still at checkout. Then, hours or days later, comes clearing: the acquiring bank submits the batch of captured transactions to the card networks, which route each one to the correct issuing bank for reconciliation. Finally comes settlement: the actual money moves from the issuing bank through the network to your acquirer, which then deposits it into your merchant bank account on its own schedule.
Why the two phases exist
Authorization is a real-time credit check. Clearing and settlement are the accounting and money-movement steps that actually make you whole. Splitting them lets the networks batch thousands of transactions per merchant per day into a single clearing file (cheaper, more efficient) and lets banks net out their obligations to each other (one $4M transfer instead of thousands of individual ones).
The gap between authorization and settlement is where most operator confusion happens. Your Stripe dashboard shows a sale the second a card is authorized, but the money does not actually hit your business account until settlement completes — typically T+2 for standard payouts, sometimes T+7 on a new account, sometimes never if the charge is reversed before clearing.
What operators need to know
- Refunds before clearing are free and fast. If you void a transaction within a few hours of authorization (before the daily batch submits), no clearing happens and no interchange gets charged. After clearing, a refund is a new transaction with its own fees.
- Settlement timing is your cash-flow clock. Stripe standard is T+2. Square is next-business-day. High-risk acquirers often run T+3 to T+7 with a rolling reserve on top. Model your AR aging off the settlement date, not the transaction date.
- Clearing batches close daily. Most acquirers auto-close at a set time (usually 11pm local). Sales after the cutoff roll into the next day's batch, which pushes settlement out another full day. Relevant if you run flash sales that start at midnight.
- Discrepancies live at clearing. If the customer's bank clears for a different amount than you authorized (tip adjustment, currency conversion), the discrepancy shows up at clearing, not at auth.
Why multi-brand operators care
When multiflow consolidates your brands on a single parent merchant account, clearing and settlement happen once for all brand volume combined — not once per brand. That means one settlement file, one payout schedule, one reconciliation. Your downstream AR team gets one source of truth instead of five. For more on how this affects your books, see settlement, T+2, and our 30-day cutover plan.