A payment gateway that fills in missing data or corrects data in order for the credit card transaction to settle at the lowest available interchange rates. This will reduce the interchange fees by as much as .70 -1% on transactions that would have otherwise been downgraded.

Adjustments (debits or credits) made for an out-of-balance condition due to various problems in the transmittal. The merchant’s acquirer makes the correction at the time of capture. 

The merchant’s bank account is used by the processor to deposit and/or withdraw funds from the merchant at any time. Giving full bank account access to a processor is very serious, and the money they take out should be audited and validated every month. Reminder: The credit card processing industry has virtually zero oversight.

A payment card that withdraws funds directly from the cardholder’s checking account at the time of sale. If the cardholder enters a PIN, the transactions run through one of the debit networks, “Pin Debit Transactions.” However, the transaction runs through the processing networks if the cardholder does not enter their PIN. Debit processing fees are a small fraction compared to traditional credit card processing fees. Visa, Mastercard, and Discover forbid merchants from surcharging debit transactions.

Known as the “little black box,” this type of processing device is typically found in restaurants and retailers. It should never be used in a B2B environment as it cannot settle transactions at Level III, and most won’t even get Level II settlements. This means significantly higher interchange fees. Even though most of these devices are not dialing out anymore and are connected via the network/internet, the name has remained unchanged. 

The three main price points in a credit card transaction are 1) the credit card processor’s “Discount Rate,” 2) the credit card processing network’s “Interchange Fees” (which go to the card issuing bank), and 3) the “Dues and Assessments” (which go to the processing networks, i.e., Visa, Mastercard, and Discover).

If a business is set up correctly, the Discount Rate should make up the smallest fee. However, that’s not always the case. Also, don’t be duped by the word “Discount.” It is not a discount; it is an upcharge/markup. Below is a chart that shows the impact of each fee.

A downgrade credit card transaction happens when a transaction settles at a higher rate than it could have. This can occur for several reasons, including, but not limited to:

• The batch isn’t settled within 48 hours of authorization. 

• A transaction isn’t authorized within the allotted time frame. 

• A transaction is categorized as stale. 

• There is an address verification system (AVS) error. 

• The correct customer code isn’t supplied. 

• The terminal software is outdated. 

• The authorization and settlement amounts differ. 

• The settled amounts don’t match the original amounts. 

• A business, corporate, or purchasing card gets processed in a B2C processing gateway.

Dues and Assessments are fees charged by the processing networks, i.e., Visa, Mastercard, and Discover, on credit and debit card transactions. Dues are a general term for all of the various fees charged by card networks, including per-item transaction fees. Assessments are flat-rate percentages charged against the total gross monthly sales. See below for the impact these fees have.

A device used for cash sales which can also be integrated to accept credit cards.

Process of electronically authorizing, capturing, and settling a credit card transaction.

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