Card processing
Merchant services glossary
Stratamize explains the terms a business owner meets on a processing statement, a quote or an application, in plain words and without the sales pitch.
About two minutes. Our team follows up.
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Glossary
A to C
0–9
3-D Secure
A security step for online card payments in which the bank that issued the card confirms the cardholder before the sale is authorized. The check often happens in the background, and sometimes the customer is asked for a code or an approval in their banking app. When a sale is authenticated this way, responsibility for some fraud disputes can move from the business to the card issuer.
See Authorize.net and High-risk gateway.
A
ACH
Short for Automated Clearing House, the network that moves money between bank accounts in the United States. An ACH payment is pulled from a customer's bank account using a routing and account number instead of a card. It is not approved in real time the way a card is, so the customer's bank can return it after the fact.
See ACH payments.
Acquirer (acquiring bank)
The bank that is a member of the card networks and holds a business's merchant account. The acquirer takes on the financial risk of the account and moves the money from card sales to the business. Most businesses never deal with the acquirer directly; they work with a processor or an ISO that the acquirer sponsors.
Address Verification Service (AVS)
A fraud check for sales where the card is not physically read. The numbers in the billing address and postal code the customer enters are compared with what the card issuer has on file, and a result code comes back with the authorization. The business or its gateway settings decide whether to accept a sale when the address does not match.
See Virtual terminal.
Assessment
A fee the card networks charge on card sales for the use of their brand and network. It is separate from interchange, which goes to the bank that issued the card. Assessments are set by the networks and are the same whichever processor a business uses.
Authorization
The request sent to the card issuer at the moment of sale, asking whether the card is valid and has the funds or credit available. An approval places a hold on the amount and returns an approval code. No money moves until the sale is settled.
B
Basis point
One hundredth of one percent, often written as bps. Processor markups and card-brand fees are frequently quoted in basis points because the amounts are small. A quote in basis points applies to the dollar volume of sales, on top of any per-item fee.
See Statement review.
Batch
The group of authorized card sales a business sends for settlement together, usually once at the end of the business day. Closing the batch, by hand or automatically, is what starts the money moving. A sale that is authorized but never included in a closed batch is not paid.
Billing descriptor
The business name and contact detail that appear next to a charge on the cardholder's statement. A descriptor the customer recognizes prevents disputes that begin with a customer not knowing who charged them. It is set when the merchant account is opened.
See Recurring billing and High-risk gateway.
C
Card network (card brand)
The company whose brand is on the card and whose network carries the authorization and settlement messages between banks. The networks write the operating rules that businesses, processors and banks follow, and they publish the interchange tables. Their fees appear on a statement as assessments and network fees.
Card-not-present
A sale where the card is not physically read: a website checkout, a paid invoice, a payment link, a recurring charge or a card number typed in from a phone order. Because the card itself cannot be verified, these sales carry more fraud risk and usually cost more to accept than a tap or chip sale.
See Online payments, Ecommerce merchant account and Virtual terminal.
Card-present
A sale where the customer's card or phone is read by a device at the business, by tap, chip or swipe. The card is verified electronically, so card-present sales carry less fraud risk and usually cost less to accept than a typed-in card number.
See Credit card processing, Clover POS from Stratamize and Compare devices.
Cash discount program
A pricing program in which the posted price is the card price and a customer who pays cash gets a discount. With Stratamize it is 3.5% off for cash, for in-person sales only: nothing is added at the register, and it never applies to online payments. Federal law protects a seller's right to offer a discount for cash, provided it is offered to every customer and disclosed clearly.1
See 3.5% off for cash.
Chargeback
A card sale reversed by the card issuer after the cardholder disputes it, for reasons such as fraud, goods not received or a charge they do not recognize. The disputed amount is taken back from the business, usually with a chargeback fee, while the case is decided. The business can answer with evidence. The issuer reviews it, and if the two sides still disagree the card network makes the final ruling.
See High-risk merchant accounts, High-risk gateway and Subscriptions.
Contactless payment
A card-present sale made by holding a card, phone or watch near the reader instead of inserting or swiping it. It uses near-field communication (NFC) and the same chip security as an inserted card. Phone wallets add a device-specific token, so the real card number is not passed to the business.
See Compare devices.
CVV (card security code)
The short security code printed on a card, separate from the card number. Asking for it on an online or phone sale helps show that the customer has the card in hand. Card industry security rules do not allow a business to store the code after a sale is authorized.
See Virtual terminal.
Glossary
D to I
D
Discount rate
The percentage of each card sale that a business pays for processing. Depending on the pricing model it may be one blended rate that includes interchange, or only the processor's markup over interchange. It is a processing cost and has nothing to do with a discount given to customers.
See Merchant services.
Downgrade
A sale that is priced at a more expensive rate than expected because it did not meet the requirements for the better one. Common causes are a batch settled late, a card number keyed without address verification, or a business card run without the extra data it calls for. On tiered pricing, downgrades appear as mid-qualified and non-qualified sales.
See Statement review.
E
Early termination fee
A fee some processing agreements charge when a business closes its merchant account before the contract term ends. It may be a flat amount or be calculated from the months that remain. The term, the renewal rule and the fee are in the agreement and its program guide, and are worth reading before switching.
See Statement review.
eCheck
An electronic payment taken from a customer's checking account over the ACH network, using the routing and account number that would appear on a paper check. Some gateways use eCheck as their name for ACH payments. It needs the customer's authorization and can be returned by their bank after it is accepted.
See ACH payments and Authorize.net.
Effective rate
Total processing fees for a period divided by total card sales for the same period, shown as a percentage. It folds every rate, per-item fee and monthly fee into one number, which makes it the fairest way to compare one statement or quote with another. It changes from month to month with the mix of cards and the average sale.
See Statement review.
EMV
The global standard for chip cards and the devices that read them, named for Europay, Mastercard and Visa, the companies that created it. The chip produces a unique code for each sale, which makes a counterfeit copy of the card far harder to use than a copied magnetic stripe. A business that swipes a chip card on equipment that cannot read the chip can be held responsible for counterfeit fraud on that sale.
See Compare devices.
F
Flat-rate pricing
A pricing model that charges the same rate for every card, usually a percentage plus a per-item fee. It is simple to read and to predict. The trade-off is that a low-cost debit card is charged the same as a premium rewards card, so the processor's margin differs from sale to sale.
See Merchant services.
Funding time
How long it takes for settled card sales to be deposited in the business's bank account. It depends on the batch cut-off time, the processor's funding schedule, weekends and bank holidays, and any hold placed on the account. The schedule is set in the processing agreement.
H
High-risk merchant
A business that underwriting reviews more closely because of its industry, its sales method or its processing history. Typical reasons are age-restricted or heavily regulated products, subscription or advance billing, and a higher expected rate of chargebacks. High-risk accounts are placed with banks that accept the category and often come with added conditions such as a reserve.
See High-risk merchant accounts and High-risk gateway.
Hosted payment page
A checkout page or form served by the gateway or processor instead of by the business's own website. The customer types the card number into the hosted form, so the card data never passes through the business's systems. That keeps most of the card security burden with the provider.
See Authorize.net and Invoices & payment links.
I
Interchange
The fee paid on each card sale to the bank that issued the customer's card. The card networks publish the rates, which vary by card type, by how the card was accepted and by the kind of business. Interchange is the largest part of most processing statements and is the same whichever processor a business uses.
Interchange-plus pricing
A pricing model that passes interchange and card-brand fees through at cost and adds a fixed processor markup, usually a number of basis points plus a per-item fee. The statement is longer because each card type is listed, but the processor's share is visible and can be checked. It is also called cost-plus or pass-through pricing.
See Merchant services and Credit card processing.
ISO (independent sales organization)
A company registered with the card networks, through a sponsoring acquiring bank, to sell and service merchant accounts. The ISO is usually the team a business talks to for its quote, setup and support. Stratamize is a registered ISO.
See Merchant services.
Issuer (issuing bank)
The bank or credit union that gave the customer their card. The issuer approves or declines each authorization, bills the cardholder and receives the interchange on the sale. A chargeback starts with the issuer, when its cardholder disputes a charge.
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Glossary
L to P
L
Level 2 and Level 3 data
Extra detail sent with a business, purchasing or government card sale, such as the tax amount, a customer or purchase order code and, at Level 3, the line items. Sending it can qualify those cards for lower interchange than the same sale without the data. It matters mainly to companies that sell to other businesses or to government agencies.
See Virtual terminal and NMI gateway.
M
MATCH list
A database run by Mastercard, also known as the terminated merchant file, where acquirers record businesses whose merchant accounts were closed for specific reasons such as excessive chargebacks or fraud. Acquirers check it during underwriting. A listing does not forbid a new account, but it makes approval much harder.
See High-risk merchant accounts.
Merchant account
The account with an acquiring bank that allows a business to accept card payments. Approved card sales settle into it before the money is deposited in the business's own bank account. Every merchant account is subject to underwriting approval.
See Credit card processing and A payment gateway is only one part of your setup.
Merchant category code (MCC)
A numeric code assigned to a merchant account that describes the kind of business, such as a restaurant or a grocery store. The card networks use it to set interchange, issuers use it for rewards and spending rules, and underwriters use it to judge risk. A wrong code can change both what a business pays and how its account is reviewed.
See Merchant services.
Merchant ID (MID)
The unique number that identifies a merchant account to the processor and the acquiring bank. It appears on statements and is what support teams ask for first. A business with several locations, or with separate in-person and online accounts, often has more than one.
See NMI vs Authorize.net and Merchant services.
Monthly minimum
A floor on the processing fees a business pays each month. If the fees earned from actual sales come to less than the minimum, the difference is billed. It mostly affects seasonal businesses and those with low card volume.
See Statement review.
P
Payment facilitator
A company that holds one master merchant account and signs businesses up beneath it as sub-merchants, also called an aggregator. Sign-up is quick because the business does not get its own fully underwritten merchant account at the start. In exchange, review of the account can come later, after processing has begun.
See Authorize.net vs Stripe, Clover vs Toast and Credit card processing.
Payment gateway
The service that carries card details securely from a website, invoice, payment link or virtual terminal to the processor for authorization. It is the online counterpart of the card terminal at a counter. A gateway works together with a merchant account and does not replace one.
See Online payments, NMI gateway and A payment gateway is only one part of your setup.
PCI DSS
The Payment Card Industry Data Security Standard, the security rules for any business that stores, processes or transmits card data. It is published by the PCI Security Standards Council, which the major card brands founded. Most small businesses show compliance by completing a self-assessment questionnaire each year, and some must also run network scans.
PCI non-compliance fee
A monthly fee many processors charge when a business has not completed its yearly PCI self-assessment or a required scan. It is a processor fee, not a fine from the card networks, and it normally stops once the business validates compliance. It is one of the fee lines worth looking for on a statement.
See Statement review.
Per-item fee
A fixed amount charged on each transaction, in addition to any percentage. It is also called a transaction fee or an authorization fee, and a statement may show more than one kind. Per-item fees weigh most on a business with many small sales.
See Credit card processing and Statement review.
PIN debit
A debit card sale where the customer enters a PIN and the sale travels over a debit network instead of the credit card networks. It is priced differently from a debit card run without a PIN. It requires a device with a keypad approved for PIN entry.
See Compare devices.
Point of sale (POS)
The hardware and software a business uses to ring up a sale: the register screen, the card reader, the receipt printer and the program that tracks items, orders, staff and reports. A POS system does more than a standalone card terminal, which only takes the payment. A POS takes card payments through the merchant account it is connected to.
See Clover POS from Stratamize and What Clover costs.
Point-to-point encryption
Encryption of the card data inside the card reader at the moment the card is read, so that it stays unreadable until it reaches the processor. Because readable card data never sits on the business's own network or computers, a break-in there exposes far less. It works alongside tokenization, which protects card data that is kept for later use.
See Compare devices.
Glossary
R to V
R
Recurring billing
Charging a stored payment method on a schedule, such as a monthly membership or a payment plan. The card or bank account is saved as a token in the gateway and the customer agrees to the schedule in advance. Clear terms and an easy way to cancel are what keep recurring charges from turning into disputes.
See Recurring billing and Subscriptions.
Representment
The business's formal answer to a chargeback, in which it sends evidence that the sale was valid, such as a signed receipt, proof of delivery or the customer's agreement to the terms. The acquirer presents the sale to the issuer again with that evidence. If the issuer accepts it, the disputed amount is returned to the business; if not, the case can go to the card network for a final ruling.
See High-risk merchant accounts.
Reserve
Money the acquirer holds back from a business's sales as security against chargebacks and refunds. It may be collected up front, withheld as a share of each day's sales and released later on a rolling basis, or built up to a set cap. Reserves are most common on new and high-risk accounts, and the terms are stated in the approval.
See High-risk merchant accounts, Travel and Before you apply for a high-risk merchant account.
Retrieval request
A request from the card issuer for a copy of the sales record or more information about a transaction, usually because the cardholder has questioned the charge. It is not a chargeback and no money is taken back at that point, but a request that is ignored or answered late can lead to one. Visa has retired retrieval requests and Mastercard has dropped them for most cards; today they come mainly from Discover and from American Express, which calls them inquiries.2
See Merchant services.
S
Settlement
The step in which authorized sales are submitted in a batch and the money moves from the issuing banks through the card networks to the acquirer. Authorization only reserves the funds; settlement is what gets the business paid. The deposit to the business's bank account follows settlement on the account's funding schedule.
T
Terminal lease
A contract to rent card equipment for a fixed term, often with a leasing company that is separate from the processor. Because it is a separate contract, it can continue after the merchant account is closed, and many leases cannot be cancelled early. A business that is switching should read the lease as well as the processing agreement.
See Statement review.
Tiered pricing
A pricing model that sorts sales into buckets, usually called qualified, mid-qualified and non-qualified, each with its own rate. The processor decides which bucket a sale falls into, and the statement does not show the underlying interchange. That makes a tiered statement hard to check and hard to compare with a quote on another model.
See Merchant services.
Tokenization
Replacing a card number with a substitute value, a token, that is useless to anyone who steals it. The real card number is kept by the gateway or processor, and the business stores only the token to charge the same customer again. It is how cards on file, subscriptions and repeat invoices work without the business holding card numbers.
See Recurring billing and NMI gateway.
U
Underwriting
The review an acquirer carries out before approving a merchant account and from time to time afterward. It covers who owns the business, what it sells and how, its expected volume and average sale, and any processing history. The outcome is an approval, an approval with conditions such as a reserve or a volume limit, or a decline.
See Credit card processing and Before you apply for a high-risk merchant account.
V
Virtual terminal
A secure web page inside a payment gateway where staff type in a card number to take a payment, most often for a phone or mail order. It needs only a browser and no card reader. Sales keyed this way are card-not-present, so they are priced and disputed as such.
See Virtual terminal.
Void
Cancelling an authorized sale before the batch it belongs to has settled. The hold on the customer's card is released and no money moves. Once the batch has settled, the sale has to be reversed with a refund instead.
Sources
Where these facts come from.
- 15 U.S. Code § 1666f, cash discounts (Legal Information Institute, Cornell Law School), checked 2026-10-12
- Chargebacks911: retrieval requests, checked 2026-10-13
Keep reading
Where these terms come up.
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