If you run a business today—whether it’s a brick-and-mortar shop, an online store, or a mix of both—payment processing is already woven into your daily operations. But for most business owners, it still feels like a black box. Why are there so many fees? Who actually moves the money? And how can something so common still feel so confusing?
Let’s break it all down in a way that makes sense—and more importantly, in a way that helps you make better decisions for your business.
🔁 What Actually Happens When Someone Pays You
Every time a customer pays you—whether they tap a card, insert a chip, pay online, or set up a bank draft—a series of things happen behind the scenes, in a matter of seconds:
- Authorization: The customer’s bank (called the “issuer”) checks the card, account balance, and fraud risk, and either approves or declines the charge.
- Batching: At the end of the day, your sales are grouped into a batch and submitted for processing.
- Settlement: Once approved, the funds are sent to your merchant bank, where they land in your business account.
🔬 Who’s Actually Involved?
Here’s a simple way to think about the payment chain:
Customer → Issuing Bank → Card Network → Processor/Gateway → Merchant Bank
- Customer’s Bank (Issuer) – Approves the transaction and releases funds.
- Card Network – Think Visa, Mastercard, Discover. They route and standardize the transaction.
- Payment Processor – Moves the data and initiates the transfer of funds.
- Payment Gateway – Encrypts card data and securely sends it (especially important for online or CNP – card-not-present – transactions).
- Merchant Bank – Deposits the funds into your account.
🧾 Why Am I Being Charged So Many Fees?
Once you look at your monthly processing statement, things can start to get muddy. Here’s what you’re usually being charged for—just the processing itself (not software, hardware, or additional services):
- Interchange Fees – These are set by card networks and paid to the customer’s bank. They vary depending on the card and transaction type. These are non-negotiable.
- Assessment Fees – These go to the card brands themselves (like Visa or Mastercard) for using their network. Also non-negotiable and standardized across all processors.
- Processor Fees – This is what your processor charges for handling the transaction. This is where pricing models (like Flat Rate, Tiered, or Interchange-Plus) come into play
👉 It’s important to note: this breakdown applies only to the core transaction cost of accepting card payments. It doesn’t include any gateway fees, POS subscriptions, fraud tools, or other add-on services your provider may charge for.
So, Why Does Any of This Matter?
Because every decision—from how you accept cards to how your account is set up—affects your bottom line. From monthly minimums to which gateway you use, there are smarter choices that can put money back in your business, rather than your processor’s pocket.
True North Makes It simple
At True North Payments, we believe in transparent pricing and honest practices—no smoke, no mirrors. We work to simplify this entire process so you can focus on what matters most: running your business.
We’ll pair you with a real industry expert who takes the time to understand your goals, your model, and your future plans. Whether you’re in retail, eCommerce, service-based business, or beyond, we’ll recommend the products, services, and pricing structure that truly fit you.
You don’t have to figure this out alone.
Common Industry Terms—Translated
| Term | What It Really Means |
|---|---|
| Authorization | When a customer’s card is approved (or declined) for a transaction. |
| Batch | A group of transactions sent together to be settled (usually daily). |
| Chargeback | When a customer disputes a transaction and the money is pulled from your account. |
| Card-Present Transaction | A payment made in person, using a physical card at your terminal or POS system. |
| Card-Not-Present (CNP) | Any payment made without a physical card—like online, over the phone, or via invoice. |
| Interchange Fees | Set by the card networks, these go to the customer’s bank. Non-negotiable. |
| Assessment Fees | Also non-negotiable—these go to Visa, Mastercard, etc. for using their network. |
| Gateway | The tech that sends payment data securely online. Think of it as a digital bridge between your checkout and the processor. |
| Settlement | When the money from your sales is actually deposited into your business bank account. |
| Monthly Minimum | The minimum dollar amount in fees you’re expected to generate each month. If you don’t, you may owe the difference. |
| PCI Compliance | Security rules you must follow to safely process credit cards. Required by the card brands. |
| EMV | The chip on modern cards. Offers better fraud protection than the magnetic stripe. |
| POS (Point of Sale) | The system or hardware where a customer pays—can be a terminal, tablet, register, or mobile reader. |
| MID (Merchant ID) | Your unique identifier with the processor. Like an account number for your payment processing. |
| Rolling Reserve | A portion of your funds held temporarily to protect against chargebacks. Usually applies to high-risk businesses. |
| Tokenization | Replaces sensitive card data with a random string of characters (a token) to reduce fraud risk. |
| ACH | A type of bank transfer—good for recurring billing or B2B payments. Slower than cards, but often cheaper. |
| NSF (Non-Sufficient Funds) | When a transaction fails because the customer’s bank account doesn’t have enough money. |
| Decline Code | A reason your customer’s card was rejected (e.g., expired card, insufficient funds, fraud alert). |
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