An authentication protocol (branded as 'Verified by Visa,' 'Mastercard SecureCode,' or simply '3DS') that adds a step for the cardholder to verify their identity during checkout — often via a one-time code. Enabling 3DS shifts fraud liability from the merchant to the card issuer, which can reduce chargeback risk. Some processors offer lower rates when 3DS is enabled.

A U.S. bank-to-bank electronic payment network used for direct deposits, bill pay, and business transfers. ACH is dramatically cheaper than card payments — typically a flat $0.25–$1.00 per transaction with no percentage — but slower (1–4 business days). For large invoices, asking clients to pay via ACH instead of card can save you 2–3% in fees with no change to your pricing.

The bank or financial institution that holds your merchant account and processes card payments on your behalf. Stripe, Square, and PayPal act as your acquirer through aggregated merchant accounts. The acquirer assumes some risk for your transactions, which is why they may hold funds or request documentation for unusually large payments.

A small percentage fee charged directly by the card networks (Visa, Mastercard, American Express) on every transaction, separate from interchange. Assessment fees are typically 0.13% to 0.15% and are fixed by the network. When combined with interchange, these two fees make up the 'wholesale' cost of card acceptance — everything your processor charges above this is their markup.

The first step in a card transaction where the issuing bank confirms the cardholder has sufficient funds and reserves that amount. An authorization is not a charge — it's a hold. Funds are only transferred after settlement. For freelancers, this matters because an authorized payment can still fail if the client cancels their card or disputes the charge before settlement completes.

Checks whether the billing address a customer enters matches the one on file with their card issuer. AVS returns a code (match, partial match, no match) that helps you and your processor decide whether to accept a risky transaction. Not passing AVS data on keyed-in transactions often causes a downgrade — so always collect the billing ZIP code, even for phone orders.

A unit of measurement equal to 1/100th of a percent (0.01%). One basis point = 0.01%, so 100 basis points = 1%. Processors and financial professionals use basis points to discuss rate changes precisely. If a processor offers to lower your rate by '25 basis points,' that's a 0.25% reduction — on $10,000 in monthly volume, that saves you $25 per month.

The automatic grouping of the day's authorized transactions into a single batch submitted to the payment network for settlement. Most processors auto-batch at the end of each business day. Some charge a per-batch fee (typically $0.05–$0.25), and delaying batch submission can cause downgrades that raise your effective rate.

The first 6–8 digits of a payment card that identify the issuing bank and card type. BINs tell processors whether a card is debit, credit, rewards, corporate, or international — which determines the interchange rate you'll pay. You'll rarely see BIN data directly, but it's why a 'simple' credit card can cost you more than expected if it's a premium rewards card.

The step that converts an authorization hold into a real charge, initiating the settlement process. With some invoicing platforms you can authorize a payment when a client receives the invoice and capture it when you're ready to bill — useful for deposits or when you need to adjust the final amount before charging.

The network that defines the rules and infrastructure for a card brand — Visa, Mastercard, American Express, Discover. Networks set interchange rates, define security standards, and route transactions between banks. American Express historically charged higher fees because it acts as both issuer and network, though recent pricing changes have narrowed the gap.

A forced transaction reversal initiated by the cardholder through their issuing bank, usually citing fraud, product not received, or service not as described. Chargebacks carry a fee ($15–$25 each) on top of the lost revenue, and too many can get your merchant account closed. Strong contracts, delivery confirmation, and clear communication are your best defense — prevention is far cheaper than fighting disputes after the fact.

An intermediary organization that routes transaction data and funds between the merchant's bank (acquirer) and the cardholder's bank (issuer). VisaNet and the Mastercard network are clearinghouses. While you'll rarely interact with one directly, they sit at the center of every card transaction and are the reason settlement takes 1–3 days rather than happening instantly.

A fee charged for offering a non-standard payment channel — for example, letting a client pay by phone when you normally accept only online payments. Convenience fees are regulated differently from surcharges and are generally allowed by card networks. They're a way to recoup costs on payment methods you don't normally offer, but the rules vary by network and state.

The 3- or 4-digit security code printed on a card (not stored in the magnetic stripe or chip). Collecting the CVV proves the customer physically has the card and reduces fraud. Processors may flag or block transactions without it, and some card networks require CVV for the lowest interchange rate on keyed-in transactions.

A card that pulls funds directly from the cardholder's bank account. U.S. regulation (the Durbin Amendment) caps interchange on debit cards from large banks at around 0.05% + $0.22 — far lower than credit. If a client can pay with debit instead of credit, your cost drops sharply. However, online/in-app debit transactions are often routed differently and may not get the lower rate.

The percentage fee a processor deducts from each transaction before depositing the remainder into your account. Historically called the 'discount' because the processor 'discounts' your gross sale by the fee amount. On a $100 invoice with a 2.9% discount rate, you receive $97.10 (before any flat fees). This term is still used in merchant agreements, though 'processing rate' is more common today.

When a transaction falls into a higher-cost pricing tier than expected, increasing your fee. Downgrades happen when card data is missing, the card is a premium rewards card, the transaction is manually keyed in rather than swiped/tapped, or settlement takes too long. Each downgrade can add 0.5% to 1.5% to your cost, making them a silent margin killer for businesses on tiered pricing.

The total percentage of your gross sales volume that goes to processing fees, calculated by dividing total fees paid by total sales volume. This is the single most important metric for understanding your true cost of payment acceptance. A freelancer processing $20,000/month and paying $580 in fees has an effective rate of 2.9%. Tracking your effective rate over time reveals whether your stated rate matches your real cost.

The fixed per-transaction charge added on top of the percentage rate (the $0.30 in '2.9% + $0.30'). Flat fees hit small invoices disproportionately hard: on a $50 invoice, that $0.30 is 0.6% of the total — effectively raising your rate to 3.5%. Bundling small invoices into fewer larger ones is the easiest way to reduce flat-fee drag.

A simple pricing model where every transaction costs the same percentage plus a flat fee — regardless of card type. Stripe and PayPal use this (e.g., 2.9% + $0.30 per transaction). It's the easiest to understand and predict, but usually more expensive for higher-volume businesses because you pay the same rate even on low-cost debit cards that carry lower interchange.

Automated tools that score each transaction for fraud risk based on velocity, location, card history, and other signals. Many processors include basic fraud screening; advanced tools (like Stripe Radar or Signifyd) charge extra but can block fraudulent orders before they become chargebacks. For high-ticket freelance work, even a small number of fraud chargebacks can erase a month of margin.

The full amount shown on an invoice before any processing fees are deducted — the number you send to your client. If you invoice $1,000, that's your gross. The gap between gross and what you actually receive (net) is where processing fees quietly eat into your revenue, which is why many freelancers underprice without realizing it.

The fee set by card networks (Visa, Mastercard) that the merchant's bank pays to the cardholder's bank for each transaction. This is the largest component of most credit card processing fees and is non-negotiable — your processor cannot lower it. It typically ranges from 1.5% to 3.5% depending on card type and transaction method. Understanding interchange is crucial because any processing rate you negotiate sits on top of this baseline cost.

A transparent pricing model where you pay the actual interchange cost plus a fixed markup from your processor. For example, if interchange is 1.8% and your processor's markup is 0.5% plus $0.10, your total rate on that transaction is 2.3% + $0.10. This model is generally the cheapest for businesses processing more than ~$10,000/month because the markup stays consistent regardless of interchange fluctuations.

The bank or financial institution that gave the card to your client — Chase, Capital One, Bank of America, etc. The issuer pays the interchange fee to the acquirer and bears the credit risk. When a client disputes a charge, the issuer is the entity that initiates the chargeback process on their behalf.

A specialized bank account that allows a business to accept card payments by holding funds in transit before they transfer to your regular business bank account. With traditional processors you apply for your own merchant account; with Stripe, PayPal, and Square you use an aggregated merchant account shared with other businesses, which means faster setup but less control.

A unique identifier assigned to your merchant account by your acquirer. Your MID appears on statements and is what customer support uses to locate your account. If you operate multiple businesses or locations, each may have its own MID — and each has its own rate structure that should be reviewed independently.

The National Automated Clearing House Association — the organization that governs ACH payments in the United States. NACHA sets the rules for ACH transfers, including authorization requirements, return codes, and fee structures. If a client disputes an ACH payment, the dispute follows NACHA's Return Reason codes rather than the card network chargeback process.

The amount you actually receive in your bank account after all processing fees are deducted from the gross invoice. On a $1,000 invoice processed at 2.9% + $0.30, your net payout is $966.80. Reverse fee calculation — figuring out what to invoice to hit a target net — is the single most useful skill for protecting your margins.

The technology that securely transmits transaction data from your website or invoicing platform to the payment processor. For online businesses, the gateway is what collects card details on a checkout page. Many modern processors (Stripe, Square) combine the gateway and processor into one product, while older setups separate them — requiring you to pay two companies for one transaction.

The company that handles the technical routing of your transactions through the card networks and to your bank. 'Processor' is often used loosely to mean the entire company you pay for card acceptance (Stripe, PayPal, Square), even though they technically combine gateway, processor, and sometimes acquirer roles. This is the entity you negotiate rates with and that deposits your payouts.

Payment Card Industry Data Security Standard — a set of security requirements that any business accepting card payments must follow to protect cardholder data. The good news for freelancers: if you use a processor like Stripe, PayPal, or Square and never store card data yourself, your compliance is largely handled by the processor. You still must complete a short annual self-assessment questionnaire (SAQ A) confirming you don't store card data.

Returns funds from a settled transaction back to the customer's account. Critically, most processors do not refund the original processing fee — meaning a $100 refund still costs you the $2.90–$3.20 you paid to process it. This is why clear client agreements and scope documentation matter: every refund eats into both your revenue and your processing costs.

Funds that your processor withholds from your deposits to cover potential chargebacks or risk, either as a fixed amount or a rolling percentage. Reserves are common for businesses with higher chargeback risk or seasonal spikes. A rolling reserve might hold 5–10% of each transaction for 180 days — meaning you must cover that cash flow gap yourself.

A preliminary inquiry from the cardholder's bank asking for transaction documentation — often the first sign of a potential chargeback. If you can't provide proof of delivery, a signed agreement, or service completion within the requested timeframe, the retrieval usually escalates into a full chargeback. Responding quickly and completely can stop a chargeback before it starts.

A specific reserve structure where the processor holds a percentage of each transaction and releases it on a rolling schedule — for example, holding 5% and releasing funds from 90 days ago each day. It protects the processor against chargebacks on older transactions. Rolling reserves can strain cash flow for growing businesses and should be negotiated before signing a contract.

The process where authorized transactions are batched and submitted for actual fund transfer from the cardholder's bank to your merchant account. Settlement typically takes 1–3 business days, which is why your payout doesn't arrive instantly. Some processors offer 'instant' or 'same-day' settlement for an additional fee — useful for cash flow but usually not worth the cost for most small businesses.

Adding a fee (usually the processing cost) to a customer's bill to cover card processing — legal in most U.S. states but heavily regulated. Surcharges typically can't exceed your actual cost or 4% (whichever is lower), must be clearly disclosed before payment, and can't apply to debit cards. Always check your state's rules and your processor's surcharging policy before implementing.

A pricing model where transactions are sorted into tiers — typically 'Qualified,' 'Mid-Qualified,' and 'Non-Qualified' — each with a different rate. Qualified is the lowest rate (usually basic debit/rewards cards), while Non-Qualified is the highest (premium rewards, corporate, or keyed-in cards). The risk is that processors control which transactions qualify for the lowest tier, making your effective rate unpredictable.

Replaces sensitive card data with a unique, non-reversible token that can be stored and used for future charges without exposing the actual card number. When a processor says they 'store' your client's card for recurring billing, they're tokenizing it — the real number lives in their vault, not your system. This is what makes PCI compliance manageable for small businesses.

Cancels a transaction that has been authorized but not yet settled. A void prevents the charge from completing and releases the hold on the customer's funds, usually within 3–7 business days. Voids are free and carry no processing fee — unlike refunds, which can still incur the original transaction fee.

A reduced processing rate offered by processors when your monthly transaction volume exceeds a set threshold. Many processors negotiate lower rates once you consistently process above $10,000–$25,000/month. If you've grown your business and are still paying your original startup rate, you're likely leaving money on the table — volume discounts are rarely automatic.

A direct bank-to-bank transfer that moves funds within hours, often used for large or international payments. Unlike ACH, wires are irreversible — making them ideal for high-value freelance projects where you want no chargeback risk. Your bank may charge $15–$50 to receive a wire, but for a $10,000 invoice that's still cheaper than a 2.9% card fee ($290).