POS & payments glossary
POS terms, in plain English
Plain-English definitions of the point-of-sale and payments terms that actually affect what you pay — interchange, lock-in, effective rate, KDS, and more. Built to be quoted: each term is a one-sentence answer.
POS and payments vocabulary is designed to make comparison hard. Here's the jargon decoded, with the terms that move your costs first. For the deeper math, see processing fees explained and what a POS costs.
| Term | Definition |
|---|---|
| POS (point of sale) | The hardware and software a business uses to ring up sales, take payment, and record the transaction. Modern POS also handles inventory/menu, reporting, and staff. |
| Payment processor | The company that moves a card payment from the customer's bank to yours and charges a fee to do it. Some POS systems lock you to one processor; open ones let you choose. |
| Interchange | The portion of a processing fee paid to the customer's card-issuing bank (~1.5%–1.65% + ~$0.10 on consumer credit cards). Set by Visa/Mastercard and non-negotiable. |
| Assessments | The card networks' (Visa/Mastercard) own cut of a processing fee, around 0.13%–0.15%. Also non-negotiable. |
| Processor markup | The processor's margin on top of interchange and assessments — the only negotiable part of a card fee. Lock-in removes your ability to shop it. |
| Flat-rate pricing | One blended processing rate (e.g. 2.6% + 15¢) regardless of card type. Simple; costs more at higher volume. See processing fees explained. |
| Interchange-plus pricing | True interchange + a fixed, disclosed markup (e.g. + 0.30% + 10¢). More transparent and usually cheaper above ~$15K–$25K/month in card sales. |
| Effective rate | Total processing fees ÷ total card sales for a period — the real percentage you pay. The only fair way to compare two processors. |
| Processor lock-in | When a POS only works with the vendor's own processing, so you can't negotiate. Square, Toast and SumUp are fully locked; Clover is device-locked. |
| Card-present / card-not-present | Card-present = the card is tapped, dipped or swiped in person (lowest rates). Card-not-present = keyed-in, online, or on file (higher rates and risk). |
| KDS (kitchen display system) | A screen in the kitchen that replaces paper tickets, routing orders from the POS to the line. Core to restaurant POS. |
| MID (merchant ID) | The unique account number that identifies your business to the card networks and processor. |
| Chargeback | A forced reversal when a customer disputes a charge with their bank. Too many can raise your processing risk profile or trigger fund holds. |
| Fund hold / reserve | When a processor freezes or withholds your deposits over risk concerns — a recurring complaint with aggregators like Square and PayPal. |
| EMV | The chip-card security standard. EMV-capable hardware shifts fraud liability away from the merchant for in-person chip transactions. |
| NFC / contactless | Tap-to-pay over near-field communication (Apple Pay, Google Pay, tap cards). Standard on modern POS readers. |
| Offline mode | The ability of a POS to keep ringing sales without internet and sync when the connection returns — vital for food trucks and pop-ups. |
| Matrix inventory | Tracking a product across variants (size × color) as separate SKUs — a core retail POS feature. |
| Omnichannel | Selling in-store and online from one synced catalog and inventory. Shopify POS is the benchmark here. |
| Early-termination fee (ETF) | A penalty for cancelling a POS or processing contract before its term ends. Common on multi-year restaurant and reseller deals. |
Frequently asked questions
What does POS stand for?
POS stands for 'point of sale' — the hardware and software a business uses to ring up a sale, take payment, and record the transaction, plus inventory, reporting and staff tools.
What is interchange in card processing?
Interchange is the part of a processing fee paid to the customer's card-issuing bank, typically about 1.5%–1.65% + $0.10 on consumer credit cards. It's set by the card networks and can't be negotiated.
What is an effective processing rate?
Total processing fees divided by total card sales for a period. It's the real percentage you pay across all card types and is the only fair way to compare processors.
What is the difference between card-present and card-not-present?
Card-present means the card is physically tapped, dipped or swiped in person, at the lowest rates. Card-not-present means keyed-in, online or stored-on-file payments, which carry higher rates and more fraud risk.