An authentication protocol (Visa Secure, Mastercard Identity Check) that adds a verification step for online payments. Reduces fraud and chargeback liability.
Electronic bank-to-bank transfers. Lower fees than card processing, typically used for large payments or recurring billing.
The process of verifying a cardholder has sufficient funds. Happens in milliseconds at the point of sale.
Compares the billing address provided by the customer with the address on file at the card issuer. Helps prevent fraud.
A unit of measurement for processing rates. 100 basis points = 1%. Used in interchange-plus pricing.
The process of settling all authorized transactions at end of day. Triggers fund transfer to the merchant’s bank account.
Any transaction where the physical card is not swiped, dipped, or tapped. Includes online, phone, and mail orders. Higher interchange rates due to fraud risk.
A transaction where the physical card is used at a terminal. Lower interchange rates than CNP.
A forced reversal of a transaction initiated by the cardholder’s bank. Merchants pay a fee ($15–$25) and may lose the sale amount.
The percentage of transactions that result in chargebacks. Exceeding 1% can trigger penalties or account review.
The 3 or 4 digit security code on a card. Used to verify the cardholder has physical possession of the card in CNP transactions.
Allows international cardholders to pay in their home currency at the point of sale. The conversion rate includes a markup.
The percentage fee charged to the merchant on each transaction. In interchange-plus pricing, this is the processor’s markup above interchange.
When a transaction is processed at a higher interchange rate than expected, usually due to missing data (no AVS, no CVV, late settlement).
The process of retrying failed subscription payments and notifying customers. Critical for SaaS and recurring billing businesses.
The chip card technology standard. EMV terminals read the chip embedded in cards for more secure transactions.
Software that transmits transaction data between the merchant and the payment processor. Required for online payments.
Fees set by card networks (Visa, Mastercard) paid by the merchant’s bank to the cardholder’s bank. The largest component of processing costs.
A pricing model where the merchant pays the actual interchange rate plus a fixed markup. The most transparent pricing model available.
A company authorized to sell payment processing services on behalf of an acquiring bank.
A bank account that allows a business to accept credit and debit card payments. Different from a standard business checking account.
A unique identifier assigned to a merchant account. Used to track and reconcile transactions.
The technology behind contactless (tap) payments. Apple Pay, Google Pay, and tap-to-pay cards use NFC.
A company that processes payments on behalf of sub-merchants under its own merchant account. Square and Stripe operate as PayFacs.
Security standards that all businesses accepting card payments must follow. Compliance levels range from Level 1 (highest) to Level 4.
A temporary hold placed on a cardholder’s funds. Common in hotels and car rentals. The final amount may differ from the auth amount.
Funds held back by a processor as collateral against potential chargebacks or fraud. Common for new merchants or high-risk accounts.
A type of reserve where a percentage of each transaction is held for a set period (typically 90–180 days) before being released.
The process of transferring funds from the customer’s bank to the merchant’s bank account after a transaction is authorized and batched.
A fee added to a card transaction to cover processing costs. Legal in most US states with proper disclosure. Different from cash discount.
Physical hardware used to accept card payments. Includes countertop, wireless, and mobile devices.
Replacing sensitive card data with a non-sensitive placeholder (token). Used for secure card-on-file storage.
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