Glossary

An authentication protocol for online card transactions that adds an additional verification layer between the cardholder and issuing bank, shifting fraud liability from merchants to card issuers when properly implemented.

Automated Clearing House payment is an electronic bank-to-bank payment method that transfers funds directly between bank accounts through the ACH network, typically used for direct deposits, bill payments, and recurring transactions.

A financial institution that processes credit card payments on behalf of merchants, maintains merchant accounts, and facilitates the settlement of funds from card-issuing banks to merchant bank accounts.

A fraud prevention tool that compares the numeric portions of a billing address provided during a transaction against the address registered with the card-issuing bank, returning match result codes to help merchants assess transaction risk.

A payment service provider that enables multiple merchants to process card transactions under a single master merchant account rather than each merchant having their own dedicated merchant account, common with services like Square, Stripe, and PayPal.

A yearly charge assessed by payment processors for maintaining a merchant account, typically ranging from $50 to $300 or more, billed once per year in addition to other processing fees.

Apple's mobile payment and digital wallet service that allows users to make contactless payments using iPhone, Apple Watch, iPad, or Mac devices through near-field communication (NFC) technology and biometric authentication.

Non-negotiable fees charged by card networks (Visa, Mastercard, Discover, American Express) to all merchants for the use of their payment networks, typically calculated as a percentage of transaction volume plus per-transaction charges.

A per-transaction fee charged by payment processors for each authorization request submitted to card networks, regardless of whether the transaction is approved or declined, typically ranging from $0.02 to $0.10.

The mean transaction amount for card payments over a given period, calculated by dividing total sales volume by the number of transactions, used to analyze processing costs and pricing model suitability.

A unit of measurement equal to one-hundredth of one percentage point (0.01%), commonly used in payment processing to express processor markups, rate differences, and fee adjustments.

The process of collecting authorized credit card transactions throughout the day and submitting them together as a group to initiate the fund transfer from the card-issuing banks to the merchant's account.

The process of finalizing a pre-authorized credit card transaction by instructing the payment processor to transfer the approved amount from the cardholder's account to the merchant's account.

The payment card network or issuing company whose logo appears on a payment card, identifying which network processes the transaction and which operating rules apply, including Visa, Mastercard, American Express, and Discover.

The infrastructure and organization that connects merchants, acquiring banks, issuing banks, and cardholders to facilitate electronic payment card transactions, with major networks including Visa, Mastercard, Discover, and American Express.

Transactions where the physical payment card is not physically presented to the merchant at the time of purchase, including online, phone, mail order, and recurring billing transactions.

The individual or business entity whose name appears on a payment card and who is authorized by the card-issuing bank to use the card for purchases, with the contractual obligation to repay charges or maintain sufficient funds for debit transactions.

A forced transaction reversal initiated by a cardholder's issuing bank that debits funds from the merchant's account, typically occurring when cardholders dispute charges due to fraud, service issues, or processing errors.

An early warning notification service that informs merchants when a cardholder initiates a dispute inquiry with their issuing bank, providing an opportunity to resolve the issue or issue a refund before it escalates to a formal chargeback.

The percentage of a merchant's transactions that result in chargebacks, calculated as total chargebacks divided by total transactions over a specific period, used by card networks and acquirers to assess merchant risk.

Credit or purchasing cards issued to businesses, government entities, or organizations rather than individual consumers, typically carrying higher interchange rates but offering enhanced data tracking and reporting capabilities.

A fee charged to customers who choose to pay through an alternative payment channel that provides additional convenience beyond the merchant's standard payment method, subject to strict card network regulations.

Payment card networks that establish and govern the infrastructure for card-based payments, set interchange rates and operating rules, and facilitate authorization and settlement between issuing and acquiring banks.

An additional fee assessed by card networks when the country of the card-issuing bank differs from the country of the merchant's acquiring bank, regardless of where the transaction physically occurs.

Card Verification Value (CVV) or Card Verification Code (CVC) is the three or four-digit security code printed on credit cards, used to verify that the person making a card-not-present transaction physically possesses the card.

An incident where sensitive cardholder data is accessed, stolen, or exposed by unauthorized parties, potentially compromising payment card information and leading to fraud, identity theft, regulatory penalties, and significant financial liability for affected merchants.

A payment card that deducts funds directly from the cardholder's checking or savings account at the time of purchase, rather than extending credit as credit cards do.

The merchant name and additional information that appears on a cardholder's credit or debit card statement to identify the transaction, typically including business name, location, and contact phone number.

A payment processor that maintains direct relationships with card networks and acquiring banks, processing transactions under the merchant's own merchant account rather than through an intermediary or aggregator.

The total percentage-based fee a merchant pays to accept credit card payments, representing the combined cost of interchange fees, assessment fees, and processor markup, often expressed as a single blended rate.

When a credit card transaction fails to meet the qualification requirements for its optimal interchange category and is processed at a higher, more expensive interchange rate.

A provision of the 2010 Dodd-Frank Wall Street Reform Act that caps debit card interchange fees for regulated banks (those with over $10 billion in assets) at $0.21 plus 0.05% per transaction, with an additional $0.01 for fraud prevention compliance.

A penalty charge imposed by payment processors when merchants cancel their processing contract before the agreed-upon term expires, typically ranging from several hundred to several thousand dollars.

The total cost of payment processing expressed as a percentage of total transaction volume, calculated by dividing all processing fees by total sales volume, providing an accurate measure of actual processing costs.

A global payment standard for chip-enabled credit and debit cards, named after its founding organizations (Europay, Mastercard, and Visa), that uses embedded microchips to authenticate transactions and reduce card fraud.

A payment processing pricing model where merchants pay the same percentage rate and fixed fee for all transactions regardless of card type, transaction method, or interchange category, popularized by payment facilitators like Square, Stripe, and PayPal.

A transaction submitted for settlement without a prior electronic authorization, typically used for voice authorizations or situations where normal authorization processes were unavailable, requiring manual entry of an approval code.

The technologies, processes, and systems used to identify potentially fraudulent payment transactions before they are completed, helping merchants prevent chargebacks and financial losses from unauthorized card use.

The strategies, technologies, and practices merchants implement to reduce unauthorized payment card use, identity theft, and fraudulent transactions before they occur, protecting both the business and legitimate customers from financial losses.

Chargebacks filed by legitimate customers who authorized and received products or services but dispute the charge with their bank, either intentionally to obtain a fraudulent refund or unintentionally due to confusion or forgetfulness.

Fees charged by payment gateways for providing the technology infrastructure that securely captures, encrypts, and transmits payment card data between e-commerce sites or point-of-sale systems and payment processors.

A prepaid stored-value card issued by a specific retailer or payment network that can be used to make purchases up to the loaded value, functioning as an alternative payment method to cash or credit cards.

A permanent transaction authorization failure indicating that the transaction should not be retried with the same card, typically due to invalid card details, closed accounts, stolen cards, or issuer restrictions.

Businesses classified by acquiring banks and processors as having elevated risk of chargebacks, fraud, or financial instability, resulting in more stringent underwriting requirements, higher processing fees, and additional security measures.

Transactions exceeding a specified dollar threshold, typically $1,000 or more, that may trigger additional fraud screening, require special authorization procedures, or qualify for capped per-transaction fees depending on processor terms.

Transaction fees paid by the merchant's acquiring bank to the cardholder's issuing bank, set by card networks and varying based on card type, transaction method, and merchant category.

A transparent payment processing pricing model where merchants pay the actual card network interchange rate plus a consistent, clearly disclosed processor markup expressed as basis points and a per-transaction fee.

A third-party company registered with card networks and authorized to market, sell, and support merchant payment processing services on behalf of acquiring banks and processors.

The financial institution that provides payment cards to consumers, maintains cardholder accounts, extends credit or provides debit card access to deposit accounts, and approves or declines transaction authorization requests.

Enhanced transaction information beyond basic payment card data, including tax amount, customer code, and merchant postal code, required to qualify for reduced interchange rates on commercial, corporate, and government purchasing card transactions.

Enhanced transaction information required to qualify for the lowest available B2B and government purchasing card interchange rates, including detailed line-item details such as product descriptions, quantities, unit costs, tax amounts, and freight charges.

The Member Alert to Control High-Risk Merchants database maintained by Mastercard that tracks businesses whose merchant accounts were terminated for compliance violations, excessive chargebacks, fraud, or other reasons, making it extremely difficult to obtain new merchant accounts.

A four-digit ISO 18245 standard classification code assigned to businesses that categorizes the type of goods or services they provide, used by card networks to determine interchange rates, assess risk, and apply processing rules.

A unique identifier assigned by acquiring banks to each merchant account, used to route transactions, track processing activity, and attribute fees across the payment processing system.

A monthly report provided by payment processors detailing all transaction activity, processing fees, chargebacks, and account charges for a merchant account, typically organized by transaction type, fee category, and card network.

A guaranteed minimum amount that merchants must pay their payment processor each month, regardless of actual processing volume, with any shortfall charged as an additional fee.

Electronic payment transactions processed through internet-based platforms where customers enter their payment information on a website or mobile app to purchase goods or services, classified as card-not-present transactions.

A cyberattack where criminals systematically test large volumes of stolen or randomly generated payment card data against a merchant's payment system to identify valid card numbers, expiration dates, and security codes for fraudulent use.

A technology service that securely captures, encrypts, and transmits payment card data from e-commerce websites or point-of-sale systems to payment processors for authorization and settlement.

The specific way a customer chooses to pay for goods or services, including credit cards, debit cards, digital wallets, ACH transfers, checks, cash, and alternative payment options.

A company that handles the technical infrastructure and operations required to process credit card transactions, including transmitting authorization requests, routing transaction data through card networks, and facilitating settlement between banks.

A company that offers integrated payment acceptance services combining payment gateway, processing, merchant account, and often additional business tools in a single package, typically using a payment facilitator model with simplified onboarding and flat-rate pricing.

The Payment Card Industry Data Security Standard is a comprehensive set of security requirements established by the PCI Security Standards Council for all entities that store, process, or transmit cardholder data.

A monthly penalty fee charged by payment processors and acquiring banks when merchants fail to complete and submit required PCI DSS compliance validation documentation, typically ranging from $20 to $200 per month depending on merchant size and processor.

Payment Card Industry Self-Assessment Questionnaire is a validation tool used by most merchants to demonstrate PCI DSS compliance through responses to security-related questions, with different questionnaire types (A, A-EP, B, B-IP, C, D, P2PE) based on the merchant's payment processing methods and environment.

Point of Sale system is the combination of hardware and software that merchants use to process customer transactions, manage inventory, track sales, and accept various payment methods at physical retail locations.

A temporary hold placed on a cardholder's available credit or funds to verify the card is valid and has sufficient balance, without immediately capturing the full payment amount.

The total dollar amount of credit card transactions a merchant processes over a specific time period, typically measured monthly or annually, used by processors to determine pricing, risk assessment, and account terms.

A payment model where customers authorize automatic, periodic charges to their payment cards at regular intervals for ongoing subscriptions, memberships, or service agreements, requiring secure storage of payment credentials and proper customer consent.

The process of returning funds to a cardholder after a transaction has already been settled, reversing a completed payment and transferring money back from the merchant's account to the customer's card.

A portion of a merchant's processing funds that the payment processor holds as security against potential chargebacks, refunds, or other liabilities, common for new merchants and high-risk businesses.

A formal inquiry from a card-issuing bank requesting transaction documentation from a merchant, typically initiated when a cardholder questions a charge, often serving as a precursor to a chargeback if the merchant cannot provide satisfactory proof of the transaction's legitimacy.

A risk management practice where acquiring banks or processors withhold a percentage of a merchant's daily credit card sales for a specified period before releasing funds, providing financial protection against potential chargebacks, refunds, or business closure.

The final stage in payment processing where funds are transferred from the cardholder's issuing bank through the card network and acquiring bank to the merchant's bank account, completing the transaction initiated during authorization.

A temporary transaction authorization failure that may succeed if retried, typically caused by issues like insufficient funds, suspected fraud alerts, or communication errors rather than permanent card problems.

Secure Socket Layer certificate is a digital certificate that authenticates a website's identity and encrypts data transmitted between the website and users' browsers, essential for secure online payment processing.

A monthly charge assessed by payment processors for generating and providing merchant account statements, typically ranging from $5 to $25 per month.

A business that processes credit card transactions under a payment aggregator or facilitator's master merchant account rather than having its own dedicated merchant account with an acquiring bank.

An additional fee added to credit card transactions to offset the merchant's cost of accepting credit cards, subject to strict card network rules and state laws, with some states prohibiting the practice entirely.

A unique identifier assigned to each physical credit card terminal, virtual terminal, or payment acceptance device, used to track transactions, attribute fees, and organize processing activity at the device level.

A payment processing pricing model that groups the hundreds of possible interchange categories into three simplified tiers—typically Qualified, Mid-Qualified, and Non-Qualified—with each tier charged at progressively higher rates set by the processor.

A security process that replaces sensitive payment card information with a unique, non-sensitive identifier called a token, allowing merchants to reference stored payment credentials for future transactions without retaining actual card numbers.

A fixed dollar amount charged by payment processors for each transaction processed, typically ranging from $0.10 to $0.30 per transaction, charged in addition to percentage-based processing fees.

A security process that requires users to provide two different authentication factors to verify their identity before accessing an account or system, significantly reducing unauthorized access risk.

The entity responsible for evaluating and approving merchant account applications by assessing business risk, fraud potential, and regulatory compliance before authorizing the business to accept credit card payments.

A digital-only payment card with a unique card number, expiration date, and security code that exists only electronically and is typically used for single transactions or limited-time use to enhance security for online purchases.

A web-based application that allows merchants to manually enter credit card information and process transactions through a computer or mobile device without a physical card reader, commonly used for mail order, telephone order, and invoice payments.

A manual transaction authorization obtained by merchants calling their processor's authorization center when electronic authorization systems are unavailable, resulting in higher costs and less favorable interchange rates.

The cancellation of a credit card transaction before it has been settled and the funds transferred, effectively erasing the transaction as if it never occurred.

A merchant account configuration requiring authorization for every transaction regardless of dollar amount, meaning even the smallest purchases must be approved before processing rather than being automatically accepted below a threshold.