The payment industry is packed with jargon that sounds like it was made to confuse you—terms like “interchange optimization,” “chargeback ratio,” and “merchant acquirer” get thrown around like everyone’s supposed to know what they mean.
But unless you work inside a payments company, you probably don’t. And that’s okay.
At TRC-Parus, we believe in transparency, not complexity. Whether you’re a business owner trying to make sense of your statement, a startup exploring payment options, or just tired of pretending to understand what your processor is telling you—this glossary is for you.
We’ve put together over 100 common (and uncommon) payment terms and explained them in plain, everyday language. No buzzwords. No filler. Just simple definitions to help you feel more confident and in control when it comes to payments.
General Terms
Merchant – A business that accepts credit or debit card payments.
Customer – The person making a payment.
Transaction – A payment made using a card or digital wallet.
Authorization – An authorization is a request to the cardholder’s bank to approve a charge.
Settlement – A settlement is when the funds from a transaction are actually transferred to the merchant.
Batch – A group of transactions sent for settlement at the same time.
Gateway – A service that connects your website to payment networks.
Processor – The company that handles the technical side of the transaction.
Acquirer (Acquiring Bank) – The bank or processor that works with the merchant.
Issuer (Issuing Bank) – The issuing bank is the bank that gave the customer their credit or debit card.
Payment Network – Companies like Visa, Mastercard, Amex, and Discover that move the data between banks.
ISO (Independent Sales Organization) – A reseller of payment processing services.
Fees & Pricing
Interchange Fee – A fee paid to the customer’s bank for every transaction.
Assessment Fee – A fee charged by the card networks (Visa, Mastercard, etc.).
Markup – The amount the processor adds on top of interchange and assessments.
Flat Rate – A single rate for all transactions.
Tiered Pricing – Transactions are grouped into different “tiers” with different rates.
Interchange-Plus – You pay the true interchange fee + a transparent markup.
Blended Rate – A mix of different fees combined into one rate.
Effective Rate – Your total fees divided by total volume.
Monthly Fee – A recurring fee some processors charge.
PCI Compliance Fee – A fee for maintaining security standards.
Statement Fee – A fee for providing your monthly statement.
Chargeback Fee – A fee charged when a customer disputes a charge.
Early Termination Fee – A penalty for cancelling your merchant account early.
Bank Accounts & Settlements
Merchant Account – A special account used to receive card payments.
Bank Account – Where funds are deposited after processing.
Rolling Reserve – A percentage of funds held temporarily to protect against chargebacks.
Hold – When a processor temporarily keeps funds due to risk or issues.
Next-Day Funding – Receiving funds in your account the next business day.
Same-Day Funding – Receiving funds the same day a transaction is settled.
Hardware & Software
POS (Point of Sale) – The system or terminal where the sale happens.
Terminal – A card reader that processes physical payments.
Mobile Reader – A portable card reader that works with your phone or tablet.
Virtual Terminal – A web-based way to enter payments manually.
Integrated Payments – Payment systems built into your POS or software.
mPOS (Mobile Point of Sale) – A point of sale system on a mobile device.
Security & Compliance
PCI Compliance – Security standards for handling cardholder data.
Tokenization – Replacing card data with a secure, unique token.
Encryption – Scrambling card data so it can’t be read by anyone else.
Fraud Detection – Tools and systems to detect suspicious activity.
3D Secure – An added layer of authentication (e.g., Verified by Visa).
AVS (Address Verification System) – Verifies the billing address matches the card.
CVV (Card Verification Value) – The 3-digit number on the back of a card.
Chargeback – When a customer disputes a charge and wants their money back.
Dispute – Another word for chargeback, usually before it’s resolved.
Chargeback Ratio – The percentage of transactions that become chargebacks.
KYC (Know Your Customer) – Verification required to open a merchant account.
Payment Methods & Card Types
Credit Card – A card that borrows money from a line of credit.
Debit Card – A card that pulls money directly from a bank account.
Prepaid Card – A card loaded with a specific amount of money.
Gift Card – A prepaid card often used at a specific retailer.
ACH – Bank-to-bank transfers, like direct deposit or bill pay.
EFT (Electronic Funds Transfer) – Same as ACH, used more often in Canada.
Digital Wallet – Apps like Apple Pay or Google Pay that store your card.
Contactless Payment – A tap-to-pay method using NFC.
EMV – Chip technology on credit cards.
Swipe – A magnetic stripe transaction.
Chip & PIN – EMV transaction that requires a PIN instead of a signature.
Tap-to-Pay – Using NFC to make a payment by tapping a card or phone.
Online & Recurring Payments
E-commerce – Selling products or services online.
Cart Abandonment – When a customer leaves a website without finishing checkout.
Checkout – The final step in an online transaction.
Recurring Billing – Automatic billing on a regular schedule.
Subscription Payment – A recurring payment for a service (e.g., Netflix).
Card on File – Storing a customer’s card for future use.
Retry Logic – Automatically reattempting a failed payment.
High-Risk & Special Cases
High-Risk Merchant – A business seen as more likely to have fraud or chargebacks.
MATCH List – A blacklist of merchants banned by Visa/Mastercard.
Underwriting – The process of assessing risk before approving a merchant account.
Volume Cap – A limit on how much a merchant can process per month.
Reserve Account – A fund held to cover future chargebacks or fraud.
Refunds & Adjustments
Refund – Returning money to a customer.
Partial Refund – Returning part of the total payment.
Void – Cancelling a transaction before it settles.
Adjustment – A correction to a transaction amount after processing.
Reporting & Analytics
Statement – A monthly summary of your transactions and fees.
Reconciliation – Matching your deposits to your sales.
Chargeback Report – A summary of disputes.
Settlement Report – Shows how much money was deposited and when.
Strategy & Optimization
Interchange Optimization – Adjusting how transactions are submitted to lower costs.
Level 2/3 Processing – Extra data on B2B transactions that lowers fees.
Downgrade – When a transaction doesn’t meet criteria for lower rates.
Card Not Present (CNP) – A sale made without the card physically present.
Card Present – A sale made with the card in hand.
Canadian-Specific Terms
Interac – Canada’s debit card network.
EFT (Electronic Funds Transfer) – Used in Canada for bank transfers.
PAD (Pre-Authorized Debit) – Recurring debit payments in Canada.
Settlement Delay – Canadian merchants often get funds in 1–2 business day
U.S.A.-Specific Terms
Durbin Amendment – A U.S. law that caps debit card interchange fees for large banks and encourages routing choice for merchants.
FedNow – A new U.S. real-time payments system developed by the Federal Reserve for instant transfers between banks.
ACH (Automated Clearing House) – The U.S. system for transferring funds between banks, used for payroll, bill payments, and more.
Same Day ACH – A faster version of ACH that settles payments the same business day.
NACHA – The organization that governs the ACH network in the U.S.
IRS 6050W – A tax rule that requires payment processors to report merchant transaction volume to the IRS using Form 1099-K.
1099-K – A tax form that reports card and third-party payment volume to the IRS for U.S. businesses and freelancers.
State Sales Tax Nexus – In the U.S., some states require businesses to collect sales tax if they meet certain sales thresholds there—even if they’re not physically located in the state.
Roles & Parties
Reseller – A company that sells another company’s processing service.
Agent – A salesperson for payment services.
Aggregator – A company like Stripe or Square that shares a single merchant account across users.
Independent Contractor – A freelance agent selling payment services.
Miscellaneous but Useful
Decline – When a card is rejected.
Holdback – Funds held due to suspected fraud or risk.
Token – A secure substitute for card data.
BIN (Bank Identification Number) – The first 6 digits of a card, identifying the issuing bank.
MID (Merchant ID) – Your unique identifier with the processor.
NSF (Non-Sufficient Funds) – When an account doesn’t have enough money.
Fallback – When a chip card fails and the system reverts to swipe.
Dual Pricing – Offering a discount for cash vs. card payments.
