MSG Payment Systems

Credit Card Glossary

Widely-used terms in credit card processing.

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Glossary of widely-used terms in credit card processing (see also Industry Terms)

Please be advised: The purpose of this glossary is to help you become more-informed business owners. This is not indicative of the fees assessed when processing credit cards through Member Service Group. If you would like to know more about the fees associated with our credit card programs, please contact us directly at (888) 697-8831 or via .

Interchange-based fees

Qualified rate
The percentage rate merchants are charged whenever they accept regular consumer credit cards and processing them in a manner that has been defined as “standard”. Typically, this requires that the cards be electronically swiped and the transaction settled within 24 hours.
Qualified rate for offline debit (debit/check cards without PIN entry)
Some merchants prefer not to enter PIN numbers. Thus, merchants may receive a reduced discount rate know as the qualified check card rate. This is the percentage rate merchants are charged whenever they accept regular consumer debit or check cards and process them in a manner that has been defined as “standard”. Typically, this requires that the cards be electronically swiped and the transaction batched/settled within 24 hours.
Mid-qualified rate
The percentage rate merchants are charged whenever they accept credit cards that do not qualify for the lowest rate (the qualified rate). This may happen for several reasons:
  • A consumer credit card is keyed into a credit card terminal instead of being swiped
  • A special kind of credit card is used, such as a rewards card, purchase or business card
  • A transaction is held in the terminal or software without being batched within 24-48 hours.
Non-qualified rate
Highest percentage rate merchants are charged whenever they accept credit cards. All transactions that are not qualified or mid-qualified will fall into this rate category:
  • A consumer credit card is keyed into a credit card terminal instead of being swiped, and address verification is not performed.
  • A special kind of credit card is used, such as a business card, and all required fields are not entered.
  • A transaction is held in the terminal or software without being batched within 24-48 hours.
Interchange-plus pricing
Merchants that fall under the Interchange-Plus category pay a specified markup over and above the interchange costs, as opposed to the Qualified, Mid-Qualified, & Non-Qualified rates (better known as “tiered” pricing).

Authorization fees

Bankcard authorization/transaction fees
These apply to bankcards issued by MasterCard Worldwide and Visa USA. The authorization fee is charged each time a transaction is sent to the card-issuing bank to be authorized.
Nonbankcard authorization/transaction fees
These apply to issued by American Express Co., Discover Financial Services LLC, Diners Club Inc., as well as electronic benefits transfer (EBT), gift and loyalty cards, and so forth.
The authorization fee is charged each time a transaction is sent to the card-issuing bank to be authorized. Some credit card processors will separate EBT, gift and loyalty card transactions.
PIN Based (online) debit fees and network costs
Online debit cards require that every transaction be electronically authorized. Each transaction is additionally secured with the personal identification number (PIN). There are two ways to price PIN-based debit.
  • A single flat fee
  • A PIN-based transaction fee plus the actual cost for the various debit networks.
Address verification fee
Address verification service (AVS) is a fraud prevention service that compares the billing address provided by the cardholder in the transaction with the card issuing bank’s records and verifies that they match.
Voice authorization fees
This fee is only charged when a merchant calls in a transaction to an 800 number for a telephone or voice authorization. It is useful if the merchant’s terminal or software isn’t working. Most merchants rarely use the voice authorization service.

Other fees

Batch fee
A batch fee is charged whenever a merchant “settles” a terminal. Settling, also known as “batching”, is the act of send a merchant’s completed transaction at the end of the business day to the acquiring bank for payment.
Some processors will charge a higher processing fee if the merchant does not batch out within 24 hours of the transaction.
Statement fee/basic monthly service fee
The statement fee is assessed monthly and associated with the monthly statement sent to the merchant at the end of each month’s processing cycle. The statement shows how much processing the merchant did and the costs incurred.
The statement reflects the total dollar volume, number of transactions, average ticket and so forth.
Debit access fee
Some processors impose a monthly fee on merchants who are set up with PIN-based debit.
Monthly minimum fee
The monthly minimum fee is a way to ensure that merchants pay a minimum amount in fees each month. If a merchant’s qualified fees do not equal or exceed the monthly minimum, the merchant is charged up to the monthly minimum to satisfy the minimum fee requirements.
Online merchant reporting fee
Many processors offer merchants the ability to view their credit card processing data online. Typically, the reporting features will be far more robust than terminal-based reporting.
Retrieval fees
If a consumer disputes a transaction, a retrieval request is initiated. It takes the form of a letter requesting all hard-copy sales drafts and/or invoices to demonstrate the validity of the transaction. This information should be fulfilled as quickly as possible for disbursement to the issuing bank.
This fee is typically charged whether or not the chargeback is successful and is not dependent on the chargeback amount.
Chargeback fees
An acquiring bank may asses a fee on a merchant when a chargeback occurs. The fee is typically levied only when the chargeback is successful. However, it is not determined by the amount of the chargeback.
Annual fee
This is simply an amount that is charged annually for maintaining the merchant account.
Payment gateway
A payment gateway is an e-commerce service that authorized payments for e-businesses and online retailers. An example would be Authorize.net. It is the online equivalent of a physical POS terminal located in most retail outlets. A merchant account provider is typically a separate company from the payment gateway; however, the account provider could bill the gateways fees for simplicity.
Example payment gateway fees: Setup fee, including software or license.
Wireless gateway
A wireless gateway is charged by a network offering wireless credit and debit solutions for on-the-go merchants. This fee is only relevant or charged when merchants are processing through a wireless device.
These can range from pager devices or cellular phones with card readers attached to traditional terminal solutions. The fees would typically be: wireless setup/activation fee, monthly wireless gateway fee.
Reprogram, installation or setup fee
This is simply an upfront, initial fee, which can have a variety of names, to establish the merchant account.
Cancellation or early terminal fees
While controversial, most merchant accounts have some sort of cancellation or early termination fee. There is significant cost in setting up and maintaining a merchant account. This fee helps recoup some of those losses should a merchant cancel, especially in the beginning.
Beware of processors that charge a variable cancellation fee. For example, some processors will charge the number of months left on the contract term times the average fees that merchant has been paying each month.
Under such a scenario a merchant could be liable for thousands of dollars. Any cancellation or terminal fees should be disclosed and be a fixed amount, not a hidden fee.
Equipment / software fees
There are various ways a merchant can acquire POS equipment in today’s competitive marketplace.
  • Purchase
  • Lease
  • Rental
  • Free (as part of special offer)

 

 

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