Payments glossary

50 payment-processing terms you’ll see on statements, contracts and terminals — explained in plain English.

3-D Secure: An authentication layer for online card payments that can verify the cardholder with their bank. Learn more →
Account updater: A service that refreshes stored card details when cards are reissued, reducing failed recurring payments. Learn more →
ACH: The US bank-to-bank network used for eChecks, direct debits and many recurring payments. Typically cheaper than cards but slower to settle. Learn more →
Acquirer (acquiring bank): The bank that holds the merchant's account and receives card payments on the merchant's behalf. Learn more →
Address Verification Service (AVS): A check that compares the billing address a customer enters with the address on file at the card issuer — a key fraud tool for online and phone orders. Learn more →
Assessment fees: Fees charged by the card networks on transactions, separate from interchange and the processor's markup. Learn more →
Authorization: The real-time request to the card issuer to approve a transaction and hold the funds. Learn more →
Batch: A group of authorized transactions sent together for settlement, usually at the end of the business day. Learn more →
Card-not-present (CNP): A transaction where the card isn't physically presented — online, phone or mail orders. CNP usually carries higher interchange and fraud risk. Learn more →
Card-present: A transaction where the card is dipped, tapped or swiped at a terminal. Learn more →
Cash discount: A pricing approach that offers a lower price for cash payments. Program rules and disclosures vary by card network and state. Learn more →
Chargeback: A disputed transaction reversed by the cardholder's bank, often with a fee to the merchant. Learn more →
Convenience fee: A fee for using an alternative payment channel (for example paying online instead of in person). Card-network rules restrict when it can be charged. Learn more →
CVV / CVC: The security code printed on a card, used to verify card-not-present transactions. Learn more →
Dual pricing: Displaying both a cash price and a card price so card processing cost is covered at checkout — the basis of MCCPS Zero Processing Fees. Learn more →
Early termination fee (ETF): A fee some processors charge for ending a contract before its term ends. Learn more →
Effective rate: Total processing fees divided by total card volume — the clearest single measure of what accepting cards costs you. Learn more →
EMV: The chip-card standard. EMV transactions are more secure than magstripe swipes and affect who bears counterfeit-fraud liability. Learn more →
Flat-rate pricing: One blended percentage (and often a per-transaction fee) for every transaction regardless of card type. Learn more →
Friendly fraud: When a cardholder disputes a legitimate purchase — for example, forgetting a charge or a family member's purchase. Learn more →
Gateway: Software that securely transmits online and card-not-present payment data to the processor. Learn more →
Interchange: The fee paid to the card-issuing bank on each transaction, set by the card networks. It's the largest part of processing cost and varies by card type and how the card is accepted. Learn more →
Interchange-plus: A pricing model that passes interchange and assessments through at cost and adds a disclosed processor markup. Learn more →
ISA (Independent Sales Agent): An individual who refers or signs merchants for a processor or ISO, typically earning residuals. Learn more →
ISO (Independent Sales Organization): A company registered with card networks through a sponsor bank to sell and support merchant accounts. Learn more →
Issuer (issuing bank): The bank that issued the customer's card and approves or declines transactions. Learn more →
Level 2 / Level 3 data: Additional transaction details (tax amount, PO number, line items) that can qualify business and purchasing cards for lower interchange. Learn more →
MATCH list: A database of merchants whose accounts were terminated for certain reasons, which other acquirers check during approval. Learn more →
Merchant account: A bank account that lets a business accept card payments and receive settled funds. Learn more →
Merchant statement: The monthly report from your processor showing volume, transactions and every fee charged. Learn more →
Mid-qualified / non-qualified: Tiered-pricing buckets for transactions that don't meet the processor's 'qualified' criteria — they cost more. Learn more →
Next-day funding: Settlement that deposits funds the business day after a batch is closed. Learn more →
NFC (contactless): Near-field communication — the technology behind tap-to-pay cards and mobile wallets. Learn more →
P2PE: Point-to-point encryption: card data is encrypted at the terminal and only decrypted by the processor. Learn more →
Payment facilitator (PayFac): A provider that signs merchants up under its own master merchant account, rather than giving each a dedicated account. Learn more →
PCI DSS: The Payment Card Industry Data Security Standard — security requirements for any business that accepts card payments. Learn more →
PCI non-compliance fee: A monthly fee some processors charge until a merchant completes PCI validation. Learn more →
Pre-authorization: Holding an amount on a card before the final total is known — common at bars, hotels and fuel pumps. Learn more →
Processor markup: The processor's own margin on top of interchange and assessments — the negotiable part of your cost. Learn more →
Recurring billing: Automatically charging customers on a schedule for subscriptions, memberships or plans. Learn more →
Representment: The merchant's response to a chargeback, submitting evidence to reverse it. Learn more →
Reserve: Funds a processor holds back from settlements to cover potential chargebacks or risk. Learn more →
Residuals: Ongoing payments to sales agents based on the processing volume of merchants they signed. Learn more →
Settlement: The process of moving funds from issuing banks to the merchant's account after a batch is submitted. Learn more →
Surcharge: An added fee on credit card transactions to offset processing costs. Subject to card-network rules, disclosure requirements and state law. Learn more →
Terminal lease: A rental agreement for card hardware — often long-term and non-cancellable. Learn more →
Tiered pricing: A pricing model that groups transactions into qualified, mid-qualified and non-qualified rates. Learn more →
Tokenization: Replacing card numbers with tokens so sensitive data isn't stored in your systems. Learn more →
Virtual terminal: A browser-based tool for keying in card payments taken by phone or mail. Learn more →
Zero Processing Fees: MCCPS's compliant dual-pricing program that can take card processing cost to $0. Learn more →

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