Financing & payments, explained simply

A

ACH transfer

Moving money directly between bank accounts through the U.S. banking network. Often cheaper than card payments, and commonly used for recurring billing and large invoices.

Acquirer

The bank or financial company that works with a business to accept card payments and routes the money from the customer's card to that business.

Annual percentage rate (APR)

The yearly cost of borrowing expressed as a single percentage that includes interest and certain fees — which makes different offers easier to compare.

Authorization

The first step in a card payment, when the customer's bank checks the card and confirms funds are available before the sale is approved.

C

Card network

Companies such as Visa, Mastercard, American Express and Discover that connect banks and move card payments between them.

Chargeback

When a customer asks their bank to reverse a card charge, usually because they didn't recognize or agree with it. The business can respond with evidence, and repeated chargebacks can carry fees.

Collateral

Something of value a borrower pledges against a loan — if the loan isn't repaid, the lender may be able to claim it. Loans without collateral are called unsecured.

Consumer financing

When a customer spreads the cost of a purchase over time through a loan or payment plan instead of paying the full amount up front.

Credit score

A number that summarizes how someone has handled credit in the past. Lenders use it, alongside other details, when deciding whether to approve an application and on what terms.

D

Down payment

The portion of a purchase the customer pays up front, with the rest financed. A larger down payment usually means smaller monthly payments.

E

Embedded financing

When financing is offered directly inside a company's own website, app, or checkout — so customers can apply for a payment plan without being sent somewhere else.

F

Factor rate

A number used with some short-term business financing that multiplies the amount received to show the total to repay — 1.3 on $10,000 means repaying $13,000. Unlike APR, it doesn't reflect a yearly cost.

H

Hard credit check

A credit review a lender performs when deciding whether to approve an application. It's recorded on the applicant's credit report and can temporarily affect their score.

I

Installment loan

A loan repaid in fixed, scheduled payments — usually monthly — over a set period of time.

Interchange

A fee set by the card networks and paid to the customer's bank on most card transactions. It's one of the largest parts of card processing costs.

Interest rate

The percentage charged for borrowing, shown as a yearly rate. It's part of the total cost of financing, which may also include fees.

L

Lease-to-own

An arrangement where a customer makes payments over time and can own the item at the end — often used by customers who can't or don't want to use traditional credit.

Lender

A bank or finance company that provides funds and is repaid over time with interest or fees.

M

Merchant account

A type of business account that briefly holds card payments before they're transferred to the business's regular bank account.

Merchant cash advance

An advance of cash repaid from a business's future sales, often as a share of daily card revenue. It can be fast to get, but is usually one of the more expensive forms of financing.

Multi-lender platform

A setup where one application is shown to several lenders — increasing the chance of an approval and letting lenders compete for the customer.

O

Origination fee

A one-time fee some lenders charge to set up a loan, often taken from the amount received or added to the balance.

P

Payment gateway

The technology that securely captures and sends a customer's payment details for approval — the online equivalent of a card terminal.

Payment processor

The company that handles the movement of money between the customer's bank, the card networks, and the business's account.

PCI DSS

The security rules every business must follow when storing or handling card data, to keep cardholder information safe.

Point-of-sale financing

Financing offered at the moment of purchase — in person or online — so the customer can choose a payment plan while checking out.

Prequalification

A quick check that estimates whether a customer is likely to be approved, usually with a soft credit check that doesn't affect their score.

Promotional financing

Plans like “no interest if paid in full within 12 months” — where interest can be charged retroactively if the balance isn't paid off within the promotional window.

S

Settlement

When approved payments are batched and the money actually lands in the business's account — typically within a couple of business days.

Soft credit check

A background credit review used for things like prequalification. It doesn't affect the applicant's credit score.

U

Underwriting

The process a lender uses to review an application — income, credit history, the purchase itself — and decide whether to approve it and on what terms.