Payment Processing Glossary
Understanding Fees, Rates, and Financial Structure
The world of merchant services is filled with jargon. For high-risk businesses like the firearms industry, this complexity can mask predatory pricing and unstable accounts.
Elite 2A Pay believes in absolute transparency. Use this glossary to understand exactly where your money goes, from Interchange to Reserves, so you can confidently compare rates.
Table of Contents
Glossary Terms
Merchant Account
A specialized commercial bank account that enables a business to accept and temporarily hold funds from credit and debit card transactions before they are deposited into the main business bank account. Secure your 2A-friendly merchant account today.
Acquiring Bank
The financial institution that sponsors the merchant account and processes credit card payments on behalf of the firearms business. Also known as the Merchant Bank or Acquirer.
Interchange Fee
The largest component of processing fees. This wholesale fee is paid by the acquiring bank (and passed to the merchant) to the Issuing Bank (the customer's bank) to cover costs like fraud risk and fund handling. We offer transparent interchange pricing.
Assessment Fee
A mandatory, non-negotiable fee charged by the card brands (Visa, Mastercard, etc.) to the Acquiring Bank for using their payment networks. These fees are fixed regardless of your processor. See how we manage all card network fees.
Discount Rate
In a tiered pricing model, this is the percentage of a transaction amount that the merchant pays to the processor. It is an often-misleading term as it includes the non-negotiable Interchange, the Assessment, and the Processor Markup.
Processor Markup
The profit portion of the fee charged by the payment processing company (Elite 2A Pay) that is applied above the wholesale Interchange and Assessment costs. This is the only portion of your fee that is negotiable. We guarantee low, transparent markups.
Chargeback
A transaction dispute initiated by the cardholder with their Issuing Bank, which results in the transaction being forcibly reversed and the funds withdrawn from the merchant’s account, often incurring a fee. Mitigate disputes with our chargeback management service.
Rolling Reserve
A risk mitigation tool where a set percentage (e.g., 5-10%) of each daily transaction batch is withheld by the processor and released after a fixed period (e.g., 90-180 days) to cover potential future chargebacks. Common for high-risk accounts.
Tiered Pricing
A confusing pricing model where the processor classifies transactions into vague categories (Qualified, Mid-Qualified, Non-Qualified) and applies a different, marked-up rate to each tier, often causing merchants to pay excessive fees for “Non-Qualified” cards.
Interchange-Plus Pricing
The most transparent pricing model, where the merchant pays the exact wholesale Interchange and Assessment fees, plus a flat, disclosed markup (e.g., "Interchange + 0.25% + $0.10"). Ask us about our Interchange-Plus model.
Authorization
The first step in a card transaction where the Issuing Bank verifies the customer has sufficient funds or credit and approves the purchase, placing a temporary hold on the funds. Fast authorization is key to a smooth sale.
Settlement
The final stage in payment processing where the merchant's batch of transactions is submitted to the Acquiring Bank for final processing, leading to the eventual transfer of funds. Efficient settlement ensures timely funding.
Batch Processing
The daily or periodic grouping and submission of all authorized transactions from the POS system or Payment Gateway to the processor for settlement. Merchants must "close the batch" daily. Our POS systems automate batch closing.
Funding Time
The time it takes for settled funds (minus processing fees) to be deposited from the Merchant Account into the merchant’s main business bank account after the batch is submitted. We offer Next Day Funding solutions.
MCC (Merchant Category Code)
A four-digit code used by card networks to classify a business's primary activity (e.g., a specific MCC exists for FFL Dealers and Gun Stores). This code helps determine risk and applicable Interchange rates. We specialize in your MCC.
ACH Processing (eCheck)
An electronic funds transfer method that moves money directly between bank accounts via the Automated Clearing House network. Often used for recurring billing, large-ticket sales, and avoiding card fees. Explore our secure ACH processing services.
AVS (Address Verification Service)
A fraud prevention tool used for Card-Not-Present (CNP) transactions where the billing address provided by the customer is checked against the address on file with the Issuing Bank. AVS is built into our e-commerce solutions.
BIN (Bank Identification Number)
The first four to six digits of a credit card number that identify the card's issuing bank, the card type (e.g., business or consumer), and the card brand. This data is a factor in determining the Interchange fee. We optimize your transaction routing based on BIN.
Effective Rate
The merchant’s true, overall cost of processing. It is calculated by dividing the total processing fees paid in a period by the total dollar volume processed in that same period. Compare our low effective rate against any competitor.
Debit Interchange
The specific Interchange fees associated with processing a debit card transaction. These are typically lower and governed by different regulations (like the Durbin Amendment) than credit card Interchange fees. See how debit fees can save you money.
Chargeback Ratio
The metric used by card networks to track the ratio of chargebacks to total transactions. If this ratio exceeds a certain threshold (often 1%), the merchant can face penalties or account termination. Keep your chargeback ratio low with our tools.
MID (Merchant Identification Number)
A unique number assigned by the Acquiring Bank and/or processor to a specific merchant account for tracking, billing, and reporting all of the business’s payment activities.
Next Day Funding
A service that ensures the funds from a settled batch are deposited into the merchant's business bank account on the very next business day, providing superior cash flow. Ask about qualifying for Next Day Funding.
PCI Non-Compliance Fee
A penalty fee charged by some processors (usually monthly) if the merchant fails to complete their required annual security validation or maintain their PCI DSS compliance standards. We offer support to avoid this fee.
Payment Gateway Fee
A separate fee, typically charged monthly or per-transaction, for using the technology service that securely routes transaction data from the POS, mobile reader, or e-commerce site to the payment processor. Our gateway fees are competitive and transparent.
Volume Cap
A maximum dollar limit placed by the processor on the total transaction volume a merchant can process in a given month. This restriction is common for high-risk accounts to mitigate sudden financial exposure. We work to maximize your monthly volume.
Issuing Bank
The financial institution that issues the credit or debit card directly to the customer (cardholder). This bank earns the largest portion of the transaction cost via the Interchange Fee. The Issuing Bank sets the Interchange rate.
Durbin Amendment
A 2010 amendment to the Dodd-Frank Act that capped the Interchange fees that large banks can charge merchants for regulated debit card transactions, aiming to lower costs for retailers.
PIN Debit
A debit transaction where the customer enters their Personal Identification Number (PIN). This routes the transaction over a separate, typically cheaper, network than the major card brands. Process PIN debit with our mobile readers.
Settlement Fee
A small, fixed fee charged by the processor for each time a batch is processed, or "settled," for funding. This is also sometimes called a "batch fee." Review all fixed fees transparently with us.
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