What does it mean when a transaction is referred to as being "cleared"?

When a transaction is referred to as being "cleared," it marks the completion of all processing steps for the transaction. This involves a series of actions that ensure the transaction is fully finalized, which includes confirming the availability of funds, processing authorization, and ensuring that all necessary adjustments are made to the accounts involved.

Clearing is a critical part of the transaction lifecycle, as it indicates that not only has the initial transaction been authorized, but the funds have also been successfully accounted for and moved between the payer’s and payee's financial institutions, making the payment effective. This status confirms that the transaction has progressed through all necessary channels and is complete, allowing both parties to be assured that the funds are settled and the transaction is fully legitimate.