Payment processing is full of jargon that processors use to keep you confused and overpaying. This page defines the 25+ terms that actually matter — from interchange and Zero‑Fee Processing to chargebacks and MCCs — in plain English.
When you’re ready, send us your current statement and we’ll walk every line item with you. No jargon, no pressure.
Pricing models
Interchange
Interchange is the wholesale fee the card-issuing bank charges every time someone pays you with their card. Visa and Mastercard publish these rates publicly and they’re the same for every processor — it’s the floor of what you can ever pay. Anything your processor charges above interchange is markup.
Related: Assessment Fee, Markup
Interchange‑Plus
Interchange‑Plus is a pricing model where you pay the exact interchange cost on each transaction plus one small, fixed markup (e.g., “interchange + 0.30% + $0.10”). It’s the most transparent model because every line on your statement is visible — you see what Visa charged and what the processor charged, separately.
Related: Interchange, Tiered Pricing, Effective Rate
Flat-Rate Processing
Flat-rate processing charges one blended percentage (e.g., 2.9% + $0.30) for every card, regardless of what it actually cost the processor. It’s simple and predictable but usually expensive once your volume grows — you overpay on debit cards to subsidize the processor’s margin on premium rewards cards.
Related: Tiered Pricing, Interchange‑Plus
Zero‑Fee Processing (Surcharge / Dual Pricing)
Zero‑Fee Processing — also called dual pricing or surcharging — passes the credit card processing cost to the customer paying with a credit card, usually as a 3–4% line item at checkout. You receive the full ticket amount; cash and debit customers pay the base price. Rules vary by state and card brand, so it has to be set up compliantly.
Related: Interchange‑Plus, MCC (Merchant Category Code)
Tiered Pricing
Tiered pricing groups every card into “qualified,” “mid-qualified,” and “non-qualified” buckets, each with its own rate. The catch: the processor decides which card lands in which bucket, and rewards cards almost always get pushed to the expensive tier. It’s the legacy model most hidden-fee statements come from.
Related: Interchange‑Plus, Effective Rate
Card networks & fees
Assessment Fee
An assessment fee is the small percentage the card network itself (Visa, Mastercard, Discover, Amex) takes on every transaction — usually around 0.13% — separate from interchange. Like interchange, it’s non-negotiable; every processor pays the same number to the network.
Related: Interchange, Network Fee
Network Fee
Network fees are the various per-transaction charges Visa and Mastercard add on top of interchange and assessments — things like the Network Access Brand Usage fee or Acquirer Processing Fee. They’re small individually but add up, and an honest processor passes them through at cost rather than hiding them in markup.
Related: Assessment Fee, Authorization Fee
Markup
Markup is whatever the processor adds on top of the pass-through costs (interchange, assessments, network fees). On an Interchange‑Plus statement it’s one clean line; on tiered or flat-rate statements it’s buried inside the blended rate. Markup is the only number you can actually negotiate.
Related: Interchange‑Plus, Effective Rate
Effective Rate
Your effective rate is total fees divided by total card volume for the month — the real percentage you’re paying once every fee is counted. If you process $50,000 and pay $1,500 in fees, your effective rate is 3.0%. It’s the single best number to compare processors with.
Related: Markup, Interchange‑Plus
Card mechanics
EMV
EMV (Europay, Mastercard, Visa) is the chip-card standard — those little gold squares on every modern card. Dipping or tapping an EMV chip generates a unique cryptogram per transaction, which makes the card almost impossible to clone and shifts fraud liability away from the merchant when accepted properly.
Related: NFC / Tap‑to‑Pay, Tokenization
NFC / Tap‑to‑Pay
NFC (Near Field Communication) is the short-range wireless tech that powers tap‑to‑pay — contactless cards, Apple Pay, Google Pay. It uses the same EMV cryptogram security as dipping the chip but with a faster customer experience, which is why contactless has become the default at checkout.
Related: EMV, Tokenization
Tokenization
Tokenization replaces the real 16-digit card number with a random stand-in token that’s useless if stolen. It’s what makes Apple Pay safe and what lets your gateway store a “card on file” for recurring billing without you ever touching the actual PAN.
Related: Encryption, PCI Compliance
Encryption
Encryption scrambles card data the moment it’s entered — swiped, dipped, or typed — so it travels through your network as gibberish that only the processor can decode. Point-to-point encryption (P2PE) is the gold standard and dramatically shrinks your PCI compliance burden.
Related: Tokenization, PCI Compliance
PCI Compliance
PCI DSS (Payment Card Industry Data Security Standard) is the rulebook every business that accepts cards has to follow for storing, processing, and transmitting card data. Most small merchants meet it by filling out an annual Self-Assessment Questionnaire and using a compliant terminal or gateway — ignoring it can mean monthly non-compliance fees and real liability if you’re breached.
Related: Encryption, Tokenization
Transaction lifecycle
Capture
Capture is the step that turns an authorization into an actual charge — it tells the bank “yes, finalize this $X.” For most in‑store sales, auth and capture happen together in one tap. For restaurants and hotels, auth happens first (the swipe) and capture happens later (after the tip is added).
Related: Authorization, Settlement
Settlement
Settlement is when the captured transactions get bundled up and the money actually moves from the customer’s bank to your bank account. It usually happens overnight, which is why “next-day funding” is a real feature — some processors hold funds for 2–3 days instead.
Batch
A batch is the daily file of captured transactions your terminal sends to the processor for settlement — usually triggered automatically at end of day. Forgetting to batch (older terminals required a manual button press) used to be a real reason deposits got delayed.
Related: Settlement, Capture
ACH
ACH (Automated Clearing House) is the bank-to-bank rail used for things that aren’t card transactions: payroll, e-checks, vendor bill pay, and how your processor deposits your daily settlements. ACH is slower than cards (1–3 business days) but vastly cheaper — cents per transaction instead of percentages.
Related: Settlement
Risk & dispute
Chargeback
A chargeback is when a customer disputes a charge with their bank instead of asking you for a refund — the bank pulls the money back from your account and you have to prove the sale was legit. Beyond the lost revenue, every chargeback typically costs $15–$25 in fees, and a high chargeback ratio can get your account terminated.
Related: Retrieval Request, Reversal
Retrieval Request
A retrieval request is a softer step than a chargeback — the issuing bank just asks you for proof of the transaction (receipt, signed slip, delivery confirmation) before deciding whether to dispute. Responding fast and thoroughly is often the difference between a closed inquiry and a full chargeback.
Related: Chargeback
Reserve
A reserve is money the processor holds back from your deposits as a cushion against future chargebacks. New accounts, high-risk industries, and any business with sudden volume spikes can get a rolling reserve (e.g., 10% held for 90 days) — it’s annoying but it’s how processors protect themselves and keep you live.
Related: Chargeback, MCC (Merchant Category Code)
Reversal
A reversal cancels a transaction before it ever settles — think of it as undoing an authorization the same day, before the money actually moves. It’s cleaner than a refund (which is a separate transaction after settlement) and never shows on the customer’s statement.
Related: Authorization, Chargeback
Industry actors
Acquirer
The acquirer (or acquiring bank) is the bank that holds your merchant account and is ultimately on the hook for the funds flowing through it. Names you’d recognize: Wells Fargo Merchant Services, Chase Paymentech, Fiserv. Everything downstream — processors, ISOs, gateways — plugs into an acquirer.
Processor
The processor is the company that actually moves the data — takes the swipe from your terminal, routes it through the card network, and hands the result back. Sometimes the processor and the acquirer are the same company; often they’re separate, and the processor is who you talk to for support.
ISO
An ISO (Independent Sales Organization) is a reseller of an acquirer’s merchant accounts — they sign you up, set your rates, handle your support, and get a cut of the markup. Most local sales reps are ISOs. A good ISO advocates for you on pricing; a bad one buries fees in the contract.
Gateway
A gateway is the software bridge between your website or app and the processor — it captures the card data, encrypts it, and passes it along. Names: Authorize.Net, NMI, Stripe (which is gateway + processor in one). For card-present sales you don’t need a separate gateway; your terminal does the job.
Related: Processor, Tokenization
MID (Merchant ID)
Your MID is the unique account number that identifies your business to the card networks — every transaction is tagged with it. If you have multiple locations or multiple business types, you’ll typically have a separate MID for each one, which keeps deposits and chargebacks cleanly separated.
Related: MCC (Merchant Category Code), Acquirer
MCC (Merchant Category Code)
An MCC is a four-digit code the card networks assign to your business that says what you sell — 5812 is restaurants, 5411 is grocery, 7299 is misc services. It quietly affects everything: your interchange rate, what surcharging rules apply, and whether the issuing bank gives the customer category rewards points.
Related: MID (Merchant ID), Interchange
Keep going
Now that the vocabulary is out of the way, see how the pieces fit together:
- Zero‑Fee vs Interchange‑Plus — which transparent pricing model fits your business
- The hidden fees on your statement — every junk fee processors quietly add
- Zero‑Fee Processing — how surcharge / dual pricing works in practice
- Interchange‑Plus pricing — the most transparent model, line by line
- See pricing — both models side by side