Many first-time entrepreneurs do not realize how complicated the process of starting a business is, even in seemingly simple areas such as collecting customers’ payments. In fact, the ability to process credit cards involves four different parties—the merchant, the processing institution, the cardholder, and his or her bank—as well as a myriad of fees. This glossary can help you understand the basic principles of the process:
Acquirer – The financial institution that agrees to process credit card payments for a merchant in exchange for certain fees.
Authorization Code – A message from a cardholder’s bank to the merchant’s processing system verifying that the credit card has sufficient funds to complete the transaction.
Authorization Fee – The amount charged by the acquirer for each attempted credit card transaction.
Batch Processing – The act of closing out a day’s transactions with the acquirer in order to collect payment, typically performed once every 24 hours.
Card Verification Code – A three- or four-digit number, written on a credit card but separate from the account number, that helps merchants confirm a card’s validity.
Discount Rate – The percentage of each transaction charged by the acquirer, which may vary depending on how the card information was submitted.
Interchange Fee – A charge deducted from the total transaction amount paid to the acquirer by a cardholder’s bank.
Monthly Minimum – An established amount of transaction fees that must be reached every month—otherwise, the merchant must make up the difference.
Transaction Fee – A set rate that the merchant pays the acquirer for every approved credit card transaction.
If you entered into a credit card processing agreement under terms that no longer satisfy you, Merchant Advocate can help. By negotiating with your acquirer on your behalf, we ensure that you are paying the lowest possible rates. Call (732) 727-2073 today to find out what we can do for you!