Payment Processing Glossary
50+ essential terms and definitions for understanding high-risk payment processing. Your go-to reference guide.
Terms Defined
50+
Updated
2026
Industries Covered
15+
Verified Content
100%
18 of 18 terms
Authorization Rate
The percentage of payment attempts that are approved by the issuing bank. Higher authorization rates mean more successful transactions.
Chargeback
A transaction reversal initiated by the cardholder's bank, typically due to fraud, product dissatisfaction, or merchant error. High chargeback ratios can lead to account termination.
High-Risk Merchant
Businesses in industries with elevated chargeback rates, regulatory complexity, or reputational concerns (e.g., CBD, adult, nutraceuticals).
Interchange Fee
A fee paid to the card-issuing bank for processing a transaction, set by card networks (Visa/Mastercard). Typically 1.5-3% of transaction value.
MCC (Merchant Category Code)
A four-digit code assigned to businesses that identifies their industry type. High-risk MCCs face higher fees and stricter requirements.
PCI DSS Compliance
Payment Card Industry Data Security Standard - security requirements for handling cardholder data. Required for all merchants accepting card payments.
Payment Gateway
Software that securely transmits payment data between your website and the payment processor.
Payment Processor
The company that handles the technical aspects of moving money from customer to merchant, connecting merchants with acquiring banks.
Acquiring Bank
The financial institution that processes card payments on behalf of merchants and assumes chargeback liability.
Rolling Reserve
A percentage of each transaction held by the processor as security against chargebacks, typically 5-10% for high-risk merchants, released after 180 days.
3D Secure (3DS)
An authentication protocol (e.g., Visa Secure, Mastercard Identity Check) that adds an extra security layer, shifting liability from merchant to issuer.
ACH (Automated Clearing House)
A US bank transfer network for processing direct debit and credit transactions. Lower cost than cards but slower settlement.
Batch Processing
Grouping transactions together for settlement at the end of the business day, rather than processing individually.
Descriptor
The text that appears on a customer's credit card statement identifying the merchant. Unclear descriptors increase chargebacks.
Issuing Bank
The bank that issued the credit or debit card to the cardholder and approves or declines transaction attempts.
Retrieval Request
A request from the cardholder's bank for transaction documentation, often a precursor to a chargeback.
Settlement
The process of transferring funds from the acquiring bank to the merchant's bank account, typically 1-3 business days.
Underwriting
The risk assessment process where payment processors evaluate a merchant's business model, financials, and chargeback history to approve or decline an account.
People Also Ask About Payment Processing Terms
What is an interchange fee and who sets it?
Interchange fees are set by Visa and Mastercard (not processors) and paid to the card-issuing bank. They vary by card type, industry (MCC), and transaction method. Typical range: 1.15%-2.99%. Source: Visa Interchange Reimbursement Fees schedule (2026)
What does PCI DSS compliance mean for merchants?
PCI DSS (Payment Card Industry Data Security Standard) requires merchants to protect cardholder data through network security, access controls, and monitoring. Non-compliance fines range from $5,000-$100,000/month. Source: PCI Security Standards Council (2024)
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