ACH (Automated Clearing House)
An electronic network used for direct bank-to-bank transfers, including direct deposits and bill payments. ACH transactions are not processed over card networks and carry much lower fees than credit card transactions.
Acquirer
Also called the "acquiring bank" or "merchant bank" — the financial institution that holds the merchant's account and receives credit card funds on their behalf. The acquirer settles transactions and deposits net proceeds into the merchant's bank account.
Assessment Fee
A small percentage fee charged by card networks (Visa, Mastercard, Discover, Amex) for access to their payment rails. Unlike interchange, assessment fees go to the network rather than the card-issuing bank. Typical range: 0.13%–0.15% per transaction.
Authorization
The approval a merchant receives from a cardholder's issuing bank confirming the card is valid and funds are available. Authorization places a hold on the funds but does not complete the transfer; that happens at settlement.
AVS (Address Verification System)
A fraud-prevention tool that compares the billing address provided by the customer against the address on file with the card issuer. Used primarily for card-not-present (e-commerce) transactions.
Basis Points (BPS)
The unit most commonly used to express processor markups. One basis point equals 0.01%, so 25 basis points = 0.25%. When comparing processor quotes, always convert to basis points for an apples-to-apples comparison.
Batch Settlement
The end-of-business-day process where a merchant submits all authorized transactions to the acquirer for payment. Funds from settled batches typically appear in the merchant's bank account within 1–2 business days.
Cash Discount Program
A legal fee-offsetting program where merchants post the card price as the standard price and offer a discount to customers who pay with cash. This avoids surcharge rules because the merchant is discounting cash, not adding a fee to cards. Legal in all 50 states.
Chargeback
A forced reversal of a transaction initiated by the cardholder's issuing bank. Common reasons include fraud, non-delivery of goods, or billing disputes. Merchants typically pay a chargeback fee ($15–$50) plus lose the transaction amount. High chargeback rates can result in account termination.
CVV / CVC
The 3-digit (Visa, Mastercard, Discover) or 4-digit (Amex) security code printed on a payment card. Processors require CVV for card-not-present transactions to verify the physical card is in the buyer's possession. Merchants are prohibited from storing CVV data.
Discount Rate
The percentage fee a processor charges on each transaction, typically expressed as a combination of interchange + assessment + processor markup. Despite the name, it's a cost to the merchant, not a benefit.
Dual Pricing
A compliant program where merchants display two prices at the point of sale — a cash price and a card price — so customers can see the cost of using a card. The card price includes the processing cost. Unlike surcharging, dual pricing displays both prices upfront, making it compliant in virtually all states.
Effective Rate
The true all-in cost of card acceptance, calculated by dividing total monthly processing fees by total monthly card volume processed. Example: $450 in fees ÷ $20,000 in volume = 2.25% effective rate. This is the single most important metric for comparing processors.
EMV Chip
The global payment security standard (named for Europay, Mastercard, and Visa) that uses a microchip embedded in payment cards to generate a unique transaction code, making counterfeit card fraud nearly impossible. In the U.S., liability for fraudulent card-present transactions shifted to merchants who don't support EMV in 2015.
Flat-Rate Pricing
A pricing model that charges a single blended rate (e.g., 2.9% + $0.30) on every transaction regardless of card type, rewards level, or transaction method. Simple to understand but almost always more expensive than interchange-plus for merchants processing over $2,000/month.
Payment Gateway
Software that securely transmits cardholder data between a merchant's point-of-sale system or website and the payment processor. For e-commerce, popular gateways include Authorize.net, Stripe, and Braintree. Gateway fees are separate from processing fees.
Interchange
The largest component of credit card processing fees — a non-negotiable fee set by Visa, Mastercard, and other card networks that is paid to the card-issuing bank on every transaction. Interchange rates vary by card type (debit vs. credit), rewards level, industry, and how the card is presented (swiped vs. keyed vs. online). There are over 700 interchange categories.
Interchange-Plus Pricing
A transparent pricing model where the merchant pays the actual interchange cost (which passes through at cost) plus a fixed processor markup (e.g., interchange + 0.25% + $0.10). Because the markup is consistent, merchants benefit when interchange is low. Best practice for any business processing more than $5,000/month.
Issuer
The bank or financial institution that issues a payment card to a consumer (e.g., Chase, Bank of America, Wells Fargo). The issuer receives the interchange fee on each transaction made by their cardholder.
Merchant Account
A specialized type of bank account that allows a business to accept credit and debit card payments. The acquiring bank holds funds briefly between authorization and settlement before transferring net proceeds to the merchant's regular business account.
Merchant Category Code (MCC)
A 4-digit code assigned by card networks that classifies a business by the type of goods or services it sells. MCCs affect interchange rates (e.g., grocery stores get lower rates), determine chargeback rules, and can trigger additional compliance requirements.
Net Proceeds
The amount deposited into a merchant's bank account after all processing fees (interchange, assessments, processor markup, and other fees) have been deducted from gross transaction volume.
PCI DSS (Payment Card Industry Data Security Standard)
A set of security standards established by the major card networks to protect cardholder data. All merchants that accept cards must comply with PCI DSS, regardless of size. Non-compliance can result in monthly fines of $5,000–$100,000 and loss of the ability to accept cards.
Processor
The company that handles the technical routing of card transaction data between the merchant, card network, issuing bank, and acquiring bank. Processors earn revenue through the markup added on top of interchange and assessments. SwipeSaving works with vetted processors to deliver interchange-plus pricing with minimal markup.
Surcharge
An additional fee added to a transaction when a customer pays by credit card (not debit). Unlike a cash discount, the surcharge raises the card price above the standard price. Surcharging is subject to card-network rules (capped at 3% or the merchant's effective rate, whichever is lower) and is prohibited or restricted in some states.
Statement Fee
A monthly fee charged by many processors for generating and sending a processing statement. Typically $5–$15/month. Look for this in your fee schedule — it is 100% negotiable or waivable.
Tiered Pricing
A non-transparent pricing model that bundles transactions into "qualified," "mid-qualified," and "non-qualified" tiers. Processors control how transactions are classified, often routing rewards cards and corporate cards into expensive non-qualified buckets. Tiered pricing is the least transparent model and almost always the most expensive — avoid it.
Tokenization
A security process that replaces sensitive cardholder data (the 16-digit card number) with a randomly generated surrogate value called a token. The token is useless if intercepted. Tokenization reduces PCI scope and is essential for recurring billing and card-on-file storage.
Zero-Cost Processing
A marketing term for programs that eliminate processing costs for the merchant by passing them to the cardholder — either through a cash discount program (discounting cash) or dual pricing (displaying both prices). The merchant pays $0 in processing fees; cardholders pay the card price. Legal in all 50 states when implemented correctly.