Payments glossary
Plain-English definitions of the payment processing terms you’ll meet when comparing providers — from interchange and chargebacks to ACH, PCI, and rolling reserves.
3
- 3D Secure
- An extra authentication step that verifies the shopper and can shift fraud liability.
A
- ACH
- A US network for low-cost bank-to-bank transfers, cheaper than cards for large payments.
- Acquiring bank
- The bank that holds the merchant's account and receives card payments on their behalf.
- Assessment fee
- A small fee paid directly to the card network (Visa, Mastercard) on each transaction.
- Authorization
- The issuing bank's approval that holds funds for a pending transaction.
- AVS
- A fraud check that matches the billing address entered against the card issuer's records.
B
- Batch
- A group of captured transactions submitted together for settlement, usually daily.
- Buy now, pay later
- Letting customers split a purchase into instalments while the merchant is paid up front.
C
- Capture
- The step that turns an authorization into an actual charge to be settled.
- Card-not-present
- A remote transaction — online, phone, or mail — where the card isn't physically read.
- Card-present
- An in-person transaction where the physical card is dipped, tapped, or swiped.
- Chargeback
- A forced reversal of a card payment initiated by the customer's bank after a dispute.
- Chargeback ratio
- Chargebacks as a share of transactions — a key risk metric for processors.
- CVV
- The 3–4 digit code that proves the shopper physically has the card.
D
- Digital wallet
- A stored-card app like Apple Pay or Google Pay that speeds up secure checkout.
- Dispute
- A customer's formal challenge to a charge, which may escalate into a chargeback.
- Dunning
- Automated retries and reminders that recover failed recurring payments.
E
- Effective rate
- Your true cost of processing: total fees divided by total sales volume.
- EMV
- The global chip-card standard that reduces counterfeit fraud for in-person payments.
F
- Flat-rate pricing
- One blended percentage (plus a fixed fee) on every sale, regardless of card type.
G
- Gateway fee
- A separate charge for the software that transmits transactions to the processor.
H
- High-risk merchant
- A business in an industry with elevated chargeback, fraud, or regulatory risk.
- Hosted checkout
- A prebuilt payment page hosted by the processor, reducing your PCI burden.
I
- Interchange
- The fee set by the card networks and paid to the customer's issuing bank on every card sale.
- Interchange-plus
- A transparent pricing model: true interchange cost plus a fixed processor markup.
- Issuing bank
- The customer's bank that issued their card and approves or declines the payment.
K
- KYC
- Identity checks a processor must run to comply with anti-money-laundering rules.
M
- Markup
- The processor's own margin added on top of interchange and network fees.
- Merchant account
- A bank account type that lets a business accept and hold card payments.
- Monthly minimum
- A floor on monthly fees — you pay the difference if processing fees fall short.
- MOTO
- Taking card payments by phone or mail, keyed into a virtual terminal.
- Multi-currency
- Accepting payment in customers' currencies and settling in yours.
N
- NFC
- The short-range wireless tech behind tap-to-pay cards and mobile wallets.
P
- Payment gateway
- The software layer that securely passes card data from checkout to the processor.
- Payment link
- A shareable link that lets a customer pay on a hosted page — no website required.
- Payment processor
- The company that moves a card payment between the customer's bank and yours.
- Payout time
- How long after a sale the money actually lands in your bank account.
- PCI DSS
- The security standard every business handling card data must follow.
R
- Recurring billing
- Automatically charging a saved payment method on a repeating schedule.
- Refund
- Returning funds to a customer for a transaction that has already settled.
- Rolling reserve
- A portion of your sales held back for months to cover potential chargebacks.
S
- SEPA
- The euro-area scheme for low-cost bank transfers and direct debits.
- Settlement
- The batch process that moves captured funds from the issuer to the merchant's account.
- Surcharge
- A fee added to a card payment to pass processing costs to the customer.
T
- Tap to Pay
- Accepting contactless payments directly on a phone, with no separate card reader.
- Tiered pricing
- Transactions are bucketed into 'qualified', 'mid-qualified', and 'non-qualified' rates.
- Tokenization
- Replacing card numbers with a meaningless token so you never store real card data.
U
- Underwriting
- The risk review a processor runs before approving a merchant to accept payments.
V
- Virtual terminal
- A web page in your dashboard for keying in card payments without hardware.
- Void
- Cancelling an authorized transaction before it's captured or settled.