The payments glossary.

Payment processing has its own vocabulary, and a lot of it is used loosely — even by the people quoting you a rate. This glossary defines the terms merchants actually run into: the fees on your statement, the parts of a transaction, the pricing models, and the compliance jargon. Each entry is one or two sentences; where a term has a full guide, we link to it.

Jump to a letter, or read straight through. Definitions are vendor-neutral; the few that touch how Lifted Payments is set up say so plainly.

A

Acquirer / Acquiring Bank

The bank or financial institution that holds a merchant's account and receives card transaction funds on the merchant's behalf before settling them into the merchant's bank account.

ACH (Automated Clearing House)

The U.S. electronic network, governed by Nacha, that moves money directly between bank accounts — payroll, bill pay, eCheck payments — instead of over card rails. For invoices and recurring B2B billing it's often far cheaper than cards; see ACH vs card fees for B2B.

Address Verification Service (AVS)

A fraud check that compares the billing address a customer enters against the address on file with the card issuer, returning a match or mismatch code. Missing or failed AVS can push a card-not-present transaction into a costlier downgrade tier.

ARN (Acquirer Reference Number)

A unique number assigned to a transaction as it moves through the card network, used to trace and research a specific transaction during a dispute or chargeback investigation.

Assessment Fee

A fee paid to the card network itself (Visa, Mastercard, and others) — separate from interchange, which goes to the card-issuing bank. Together, interchange and assessments are the wholesale cost no processor can discount.

Authorization

The real-time approval or decline a card issuer gives at the moment of a transaction, confirming funds or credit are available. It's separate from the later settlement step that actually moves the money.

B

Basis Point (bps)

One one-hundredth of a percentage point (0.01%), the standard unit for quoting small rate differences in processing pricing. A 25 bps markup is 0.25%.

Batch

The group of a day's authorized transactions a merchant closes together for settlement. Most modern terminals auto-batch nightly; a late or missed batch can downgrade transactions and delay funding.

C

Card-Not-Present (CNP)

A transaction where the physical card isn't presented to the merchant — phone, online, or keyed into a virtual terminal. Generally priced higher than card-present because fraud risk is greater.

Card-Present (CP)

A transaction where the card, or a mobile wallet via NFC, is physically presented at the point of sale — generally the lowest-risk, lowest-cost transaction type.

Chargeback

A forced reversal of a transaction initiated by the cardholder's issuing bank (not the merchant), typically triggered by a customer dispute, fraud claim, or processing error. Distinct from a merchant-initiated refund or void.

D

Dual Pricing

A pricing model where a business posts two prices — a lower cash price and a higher card price — rather than adding a surcharge to one posted price. The mechanics and legality differ from surcharging; see dual pricing vs cash discount vs surcharging.

Durbin Amendment

A federal rule (part of Dodd-Frank, implemented by the Federal Reserve's Regulation II) that caps debit-card interchange for large banks and requires debit transactions to be routable over at least two unaffiliated networks.

E

E2EE (End-to-End Encryption)

Encrypting card data at the moment of swipe, dip, or tap inside the terminal's secure hardware, so the merchant's systems never touch readable card numbers. Lifted Payments uses E2EE tokenization (Voltage) supporting a SAQ-A posture — see tokenization and SAQ-A compliance.

Effective Rate

The true total cost of processing — all fees divided by total card volume over a period — the number that matters more than any single headline rate, because it captures interchange, markup, and incidental fees together. Work out yours with the effective rate calculator.

EMV

The global chip-card standard — named for founders Europay, Mastercard, and Visa and managed by EMVCo — that authenticates card-present transactions cryptographically, replacing magstripe-only swipes as the security baseline.

F

Flat-Rate Pricing

A pricing model charging one blended rate (e.g., 2.9% + 30¢) regardless of card type or interchange tier — simpler to read, usually costlier at higher volumes than interchange-plus. Compare the two in interchange-plus vs flat-rate.

G

Gateway

The technology layer that securely transmits transaction data from a checkout page, app, or terminal to the processor and networks — distinct from the processor, which actually moves the money. How to choose a payment gateway walks through what matters.

H

High-Risk Merchant

A business classified by processors as higher fraud or chargeback risk (certain industries, high average tickets, subscription models), typically facing higher rates or added underwriting scrutiny.

I

Interchange

The fee an acquiring bank pays to a card-issuing bank on every transaction, set by the card networks (not the processor) — the largest single component of most merchants' processing cost.

Interchange-Plus Pricing

A pricing model that passes through the actual interchange plus assessment cost on every transaction, plus a fixed, transparent processor markup — generally the most cost-transparent structure for growing merchants. It's how Lifted Payments quotes, after one statement review.

ISO (Independent Sales Organization)

A company registered with the card networks, through a sponsoring bank, to sell and support merchant payment processing services. Lifted Payments operates as an ISO.

Issuer / Issuing Bank

The bank that issued the customer's card and extends the credit or holds the funds being charged. It's the party that ultimately approves or declines an authorization.

L

Level 1 / 2 / 3 Data

Increasing tiers of transaction detail — Level 1 is basic, Level 2 adds tax amount plus merchant and customer codes, Level 3 adds full line-item detail like SKU, quantity, and freight — submitted with B2B and B2G card transactions to qualify for lower interchange. See Level 2/3 processing and B2B card processing.

M

MCC (Merchant Category Code)

A four-digit code classifying a business's industry, used by card networks to set applicable interchange rates and for payment reporting categorization.

MID (Merchant ID)

The unique account number a processor or acquirer assigns to a merchant's payment account, used to route and reconcile that merchant's transactions.

N

NFC (Near Field Communication)

The short-range wireless standard behind contactless tap-to-pay transactions, including Apple Pay, Google Pay, and tap-enabled physical cards.

Non-Qualified / Downgrade Rate

A higher interchange tier a transaction falls into when it doesn't meet a network's criteria for the lowest ("qualified") rate — for example, missing AVS data or a manually keyed card instead of a swipe. Chasing these down is a big part of lowering your processing fees.

P

Payment Facilitator (PayFac)

A model where a master merchant onboards and processes for many sub-merchants under its own umbrella account, trading faster onboarding for less individualized underwriting than a standalone merchant account.

PCI DSS (Payment Card Industry Data Security Standard)

The security standard — maintained by the PCI Security Standards Council, currently version 4.0.1 — that any business handling card data must follow to protect cardholder information.

P2PE (Point-to-Point Encryption)

A PCI-validated solution that encrypts card data from the instant of capture through to a secure decryption endpoint, reducing a merchant's PCI compliance scope.

Processor

The company that actually moves transaction data and funds between the merchant, the card networks, and the banks — distinct from a gateway, which just transmits the data securely.

PTS (PIN Transaction Security)

The PCI standard covering the physical and logical security of payment hardware — PIN pads and terminals. Devices like the PAX A920 carry a PCI PTS approval.

Q

QSA (Qualified Security Assessor)

An individual or firm certified by the PCI SSC to formally audit and validate a merchant's PCI DSS compliance for higher-risk assessments (or a Report on Compliance).

R

Reserve

Funds a processor temporarily holds back from a merchant's payouts (a set amount or percentage) as a buffer against future chargebacks or refunds, common for higher-risk or new merchants.

Retrieval Request

A card issuer's request for a copy of a transaction receipt or documentation, often the step immediately before a chargeback is filed.

S

SAQ (Self-Assessment Questionnaire)

The PCI DSS compliance validation tool merchants complete themselves (rather than a full external audit), sized to how much card data their systems actually touch. The eligibility descriptions below are summarized from the PCI SSC's own SAQ guidance; your acquirer confirms which one applies to you.

Settlement

The process of actually moving authorized transaction funds from the issuing bank through the network to the merchant's bank account, typically completed after a batch closes.

Surcharge

An extra fee a merchant adds specifically for paying by credit card, distinct from a tip or a dual-pricing cash discount; legality and caps vary by state. See surcharge rules by state.

Swipe Fee

Informal (and media) term for interchange — the fee paid on every card transaction to the issuing bank.

T

Tokenization

Replacing sensitive card data (the actual card number) with a randomly generated, non-sensitive substitute — a "token" — that has no exploitable value if intercepted. It powers cards on file and recurring billing and shrinks PCI scope; more in tokenization and SAQ-A compliance.

U

Underwriting

The risk-review process an acquirer or ISO runs before approving a merchant account, evaluating the business's industry, processing history, and financials.

V

Virtual Terminal

A web-based interface that lets a merchant manually key in card transactions (phone or mail orders) from any browser, without a physical card reader. Lifted Payments includes one in the merchant portal; see virtual terminal for small business.

Void

Canceling a transaction before it settles (same day), as opposed to a refund, which reverses an already-settled transaction.

Where each fee actually goes

Three parts make up almost every card fee. Only one of them is negotiable — which is exactly why the split is worth knowing before you compare quotes.

Interchange-plus pricing shows all three separately. Flat-rate bundles them into one number, which is simpler to read but hides where your money is going. To see your real all-in number, run three months of statements through the effective rate calculator.