We have crafted an easy-to-understand vocabulary page to make understanding the world of digital cash registers easier to understand. Enjoy!
Equipment Vocabulary
Point of Sale (POS) Terminal
Think of a POS terminal as the physical centralized digital cash register that allows for inputting orders and connecting to your other devices like printers, card readers, handheld card terminals.
Handheld Card Reader
An extension of the POS that allows you to capture card transactions
Handheld Card Terminal
An extension of the POS that allows for both capturing card transactions AND entering in order information.
Processing Vocabulary
Merchant Services Provider
A salesperson who sells the processing and POS equipment.
Interchange
A fee that a restaurant pays to transfer money after processing a Mastercard or Visa transaction at your restaurant. Usually it’s a percent of the transaction plus a small fee and is determined by the banks. There are a range of interchange rates (called Card Schemes or Card Networks) for premium “points” cards at the high end, while debit cards are at the low end of fees.
Interchange Averaging
Many people are not aware there are Card Schemes charging different interchange fees for the different styles of credit cards. Some merchant services providers might take the average of these interchange fees add basis points as a way to simplify the billing you see.
Basis Points
Basis Point(bp) is a finance term simply another way of saying 1/100th of a percent. Let’s use an example:
1 basis point = .01%
There is nothing else to learn, it’s just a term people selling financial products like to use. In practice you might see it used in the following way:
“Your processing will be 70 basis points above interchange.”
In this example, if interchange is around 2%, then your processing fee will be around: 2 + (.01 * 70) = 2.7%
Cash Discount
A discount offered to customers from the understood PRIMARY advertised price posted at the door, website, and menu for paying with cash.
Notes on Cash Discount: In practice, many unscrupulous merchant services sales people and companies have distorted the term “cash discount.” In an attempt to “get the sale,” many merchant services sales people, acting as an expert advisor to the restaurant owner, suggest the restaurant create a surcharge and mislabel it as a “cash discount.” A surcharge is different from a cash “discount” and in practice this sales technique is 100% illegal without exception. However many merchant services providers instruct restaurant owners to operate this way. Why? Because the merchant services providers can make much more money versus the classic way they make money on normal processing and adding basis points. As an example:
There are different ways merchant services sales people make their money, one is adding “basis point” or a percentage to the baseline fee it costs to do a transaction. As an example, if a merchant services sales person makes their money by charging 50 basis points above a 2% interchange, your cost is 2.5% and the merchant services person will be making .5% on every transaction. However if the cash discount price charged as a surcharge is 4%, then the merchant services provider is making 2% (200 basis points) on every transaction…increasing their profits by 400 percent!
The restaurant owner is the one that takes the risk for this illegal sales technique, not the merchant services provider. A restaurant owner can be fined or sued when finally caught by a city inspector or a restaurant patron familiar with the law.
Data Vocabulary
Re-Marketing
A method of capturing a restaurant customer’s email and then selling them goods and services from another business.