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Learn common terms for processing credit cards in QuickBooks Payments
Learn about common industry terms to help you accept credit card payments in QuickBooks Online.
There are fees, regulations, and requirements that come when you accept credit card payments. Learn about the players, fees, and services to save you time, money, and a lot of headaches down the road.
Processing terms
Authorization Fee
When you process a payment without the physical card present, such as for an online invoice or phone order, we verify the cardholder’s billing address. This helps prevent fraud and makes sure you get the best possible rate. While most processors charge a small flat fee for this check, QuickBooks typically bundles this into your transaction rate so your costs remain predictable.
Bank cards
A card association like Visa, MasterCard, and Discover can issue a bank card. The card associations have several types of bank cards:
Business or corporate
Government
International (foreign banks)
Purchasing (business supplies and travel expenses)
Rewards (points or mileage)
Each type may have different interchange fees in line with benefits and status set by the card association.
Batching
Batching is the process of settling your daily charges and sending them to the bank. QuickBooks automatically settles, or batches, your transactions daily usually at 3 PM PT. You don't need to manually close out your terminal, but make sure all transactions are completed before the cutoff time to get them in your next deposit. For the best rates and fastest deposits, batch out within 24 hours of the sale.
Chargebacks
A chargeback occurs when a customer disputes a charge with their bank.
Retrieval request: A "soft chargeback" is when a bank asks for info about a charge. This is your chance to provide proof, like a signature, before it becomes a full dispute.
The timeline: Many card brands—like Visa, Mastercard, and Amex—often allow customers 120–180 days to dispute a transaction based on the type of claim.
The cost: If you aren't enrolled in Payments Dispute Protection, a chargeback results in the immediate withdrawal of the disputed funds plus a non-refundable fee of $25.
PIN-less Debit: For certain debit transactions processed without a PIN, card brands may not allow a rebuttal, meaning the chargeback is automatic.
Downgrade
A downgrade occurs when a transaction is processed at a higher rate because it didn't meet specific security or data requirements.
Best practice: Always use a QuickBooks Card Reader for in-person sales. Swiped, dipped, or tapped transactions are more secure and typically qualify for the lowest rates.
Security data: For remote sales, always enter the customer’s billing ZIP code and CVV. Missing this data is a common reason for a rate increase.
Daily review: At the end of each day, review your Sales Center in QuickBooks Online to make sure all payments were recorded correctly.
Interchange fees
This is the baseline fee charged by the card-issuing bank, such as Chase or Citi. It's usually a percentage of the transaction plus a flat cost. This fee covers authorization costs, fraud prevention, and the cost of moving funds.
Not all cards cost the same to process. Cards with high-value perks, like travel rewards or corporate cards, often have higher Interchange fees set by the card brands. While you can't control which card your customer uses, understanding this helps explain why some transaction fees may vary.
Rates
Processing rates are tailored to your business profile, including your industry type and transaction history. There are 3 tiers of rates:
Qualified rate: This is the lowest rate. It's typically applied when you swipe a physical card or use a chip reader.
Mid-qualified rate: A higher rate applied when you manually key in card info.
Non-qualified rate: A higher rate applied when you manually key in card info or if the transaction is missing security data, such as a billing zip code.
Payments Dispute Protection (PDP) is also included on many accounts. This adds a small fee (starting at 0.99%) to every credit or debit card transaction you process with QuickBooks Payments. It help protect you from losing money on eligible chargebacks.
Participating groups
A credit card transaction involves a number of participants from swipe to payment. All benefit from the transaction fees you pay.
Card Association
The card association is a network of issuing and acquiring banks that process payment cards of a specific credit card brand.
Issuing bank
Extends a line of credit to the consumer. The issuing bank and acquiring bank share liability for non-payment by the merchant, according to the rules established by the card association brand.
Merchant bank
Known as the acquirer or the acquiring bank, is the financial institution that provides you with a merchant account. It handles acceptance and payment of all credit card transactions at the quoted rate. For every transaction you make, a portion of your rate is paid to the issuing bank and card association on your behalf.
Merchant Service Provider
A merchant service provider acts as a median for all communication and relationships between the merchant and the card associations, processors, and merchant bank. Merchant service providers are set up your account on the front and back end to handle credit card transactions.
Payment Gateways
Act as the front-end connection to the card associations. Payment gateways transfer payment data from the merchant to the issuing bank or processor. These gateways support most point-of-sale systems, banks, processors, and merchant types.
Processors
Processors handle the transmission of payment that you need to authorize and settle credit card transactions. Processors charge you a fee for each transaction, which is usually bundled with your rate.
Front-end processor: Deals with up-front card authorization, connectivity to card associations, and network authorization.
Back-end processor: Receives and forwards settlement batches to the issuing banks on a schedule or time frame.
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