How does a credit card transaction flow?

A credit card makes a very large journey in a very short amount of time. While many merchants believe that the transaction gets sent from them, to the processor, then back to them, this is false. The transaction leaves the merchant, usually passes through a gateway, goes to the processor, gets sent to the card association, then gets to the customers bank.

The bank then either approves or declines the transaction, sends their response back to the card association, the card association sends it back to the processor, the processor sends it back to the gateway, then the gateway sends it back to the merchant. That's probably a lot more than you were expecting! Here's an image to help make sense of it.