Merchant Credit Card Processing Glossary
ABA Routing Number
This 9-digit number is assigned by the American Banker’s Association and is used to identify individual banks. When performing an ACH transfer from one bank account to another, this number is used to assist the electronic routing of funds.
Acceptor
A business that has qualified to accept credit or debit cards as payment.
Account Number
The unique sequence of numbers given to a cardholder's credit card account and that is embossed on the face of the credit card.
Account Testing
A fraud scam in which criminals verify whether a credit card account number is valid. The perpetrators submit an authorization request but not a sales draft. If the account is valid, it is then used for larger fraudulent transactions. Examiners should be cognizant that the term "account testing" is also commonly used to refer to transaction testing of cardholder accounts during the examination process and is separate and distinct from account testing as used to refer to the fraud perpetration discussed above.
ACH (Automated Clearing House)
The Automated Clearing House (ACH) Network is a highly reliable and efficient nationwide batch-oriented electronic funds transfer system governed by the NACHA OPERATING RULES which provide for the interbank clearing of electronic payments for participating depository financial institutions. The Federal Reserve and Electronic Payments Network act as ACH Operators, central clearing facilities through which financial institutions transmit or receive ACH entries. ACH payments include: direct deposit of payroll, Social Security and other government benefits, and tax refunds; direct payment of consumer bills such as mortgages, loans, utility bills and insurance premiums; business-to-business payments; E-checks; E-commerce payments; Federal, state and local tax payments.
Acquiring Bank
A bank that contracts with merchants to accept, process, and settle credit card transactions. The acquiring bank is the entity that maintains the merchant relationships and collects cardholder transaction data from those merchants (either directly or via a third party). It then initiates that data into an interchange system, subsequently receives payment from the issuer, and pays the merchants. Acquiring banks typically provide charge-back processing and other back-office services and are also known as acquirers or merchant banks.
Address Verification Service (AVS)
AVS is a service that helps reduce chargebacks and fraud by verifying a cardholder’s billing address with the credit card company before the transaction is approved. AVS is used to reduce the risk involved in Mail Order / Telephone Order and Internet / eCommerce transactions.
Adverse Retention
The phenomenon in which the bank inadvertently retains a disproportionately high number of potentially bad accounts (for example, unprofitable or overly problematic accounts).
Adverse Selection
The phenomenon in which a disproportionately high number of potentially bad credit risks respond to an offer.
Affinity Cards
General purpose credit cards offered by two organizations: one the lender and the other usually a non-financial group. The issuer often donates a portion of the fees or charges (sometimes referred to as a royalty) to the non-financial group. Use of the card often entitles the cardholder to special discounts or deals from the non-financial group.
Agents
Entities that source merchants or cardholders, serve as a gateway, or provide other services for the bank.
Agent Bank
A bank that, by agreement with an acquirer, participates in that acquirer's merchant processing program. It may or may not be liable to the acquirer for losses incurred on its merchant accounts.
API (application program interface)
The specific method prescribed by a computer operating system, or by another application program, by which a programmer writing an application program can make requests of the operating system or another application. Unlike a GUI (graphical user interface), which is a direct user interface, the API interfaces with an operating system or a program.
Articles of Incorporation
This is a legal document that identifies the principals of a corporation and the terms under which a corporation was created.
Associations
The organizations (VISA and MasterCard) that provide rules, advertising, and settlement services and that promote the card brand for their member financial institutions. Banks must be a member to offer the applicable Association's credit card services. Membership rights and obligations are specifically defined by the Associations.
Authorization
The process of obtaining permission from the issuing bank to accept the card for payment. Authorization entails assessing the card's transaction risk and reserving the specified amount of credit on the cardholder's account if approved. If a merchant does not comply with Association rules regarding authorizations, payment to the merchant may be withheld or a subsequent charge-back may occur. Authorization processes vary between merchant types.
Authorization Code
This code is given by the credit card issuer and authorizes a specific transaction. This number should be saved for future reference.
Authorization Fee
A communication charge for each transaction (Sale, Credit, Void), and each time a merchant closes a batch of transactions.
Authorization Code
A code that a credit card issuing bank returns in an electronic message to the merchant's POS equipment that indicates approval of the transaction. The code serves as proof of authorization.
Authorization Response
An issuing financial institution's electronic message reply to an authorization request, which may include:
- Approval - transaction was approved
- Decline - transaction was not approved
- Call Center - response pending more information
Auto Close
A terminal feature that allows an end-of-day batch closing to occur automatically at a specified time, without having to be initiated by the merchant.
Automated Clearing House (ACH) File
A file with instructions for the exchange and settlement of electronic payments passed between financial institutions. It represents debits and credits to be deducted from an account automatically as they occur.
Average Ticket Size (AVT)
This is the average Visa / MasterCard dollar amount that a merchant anticipates per sale.
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Backroom Operations
The operational functions that are performed by the acquirer or issuer to facilitate the day-to-day processing of credit card transactions.
Balance Transfer
The process of moving an unpaid credit card debt from one issuer to another. Bank Identification Number (BIN) A series of numbers assigned by Visa to its member financial institutions to identify each institution for acquiring and issuing processes. The term ICA is used by MasterCard and is similar to a BIN. VISA BINs start with 4, and MasterCard ICAs start with 5.
Basis Points
One basis point is 1/100 of 1%. For example, 50 basis points is 0.5%. In merchant processing terms there are three distinct categories: Qualified, Mid-Qualified, and Non-Qualified. Concerning the discount rate, there is an increase of basis points from Qualified to Mid-Qualified and an increase from Mid-Qualified to Non-Qualified.
Batch Close
The process of sending a batch to the financial institution for settlement.
Batch Processing
The credit card transactions remaining on a merchant’s terminal are stored in an “open” batch. They will remain there unless the merchant “batches out”. Once the merchant batches out, the daily sales are submitted for processing, and the batch is now “closed” or “settled”.
Behavior Scores
Results of statistical scoring systems that are often used to increase collection efficiency and decrease collection costs. The system is usually based on internally-derived information about the consumer's behavior, such as payment history, card usage patterns, and so forth.
Billing Cycle
The time (number of days) between billing statements. It is the period between the previous statement date and the current statement date during which both credit and debit transactions are accumulated for billing, usually about 30 days.
Billing Statement
The bill (printed record) sent by a card issuer to the customer. It is usually sent monthly and includes, but is not limited to, itemization of activity on the account, including balance, purchases, payments, credits, finance charges, and other account activity.
Business Financials
Business Financials are a set of reports including a: Profit and Loss Statement, Balance Statement, and Statement of Cash Flow.
Business Type
A merchant’s business type is determined by type of transactions processed.
- Retail - Merchants in a face-to-face environment that sell tangible goods. These merchants use conventional terminals and most transactions are usually swiped.
- Service - Merchants in a face-to-face environment that sell services like automobile repair or plumbing. These merchants use conventional terminals and may either swipe transactions or key them in and take a manual imprint.
- Restaurant - Merchants in a face-to-face environment who sell prepared foods. These merchants use conventional terminals and most transactions are usually swiped.
- Hotel – Merchants in a face-to-face environment that sell lodging and hospitality services. These merchants use conventional terminals and either swipe or key in their transactions.
- Mail Order / Telephone Order (MOTO) - Merchants in a non-face-to-face environment that sell tangible goods through mail order or over the telephone. These merchants use software or conventional terminals and all transactions are keyed in.
- Internet - Merchants who process transactions over the internet. The cardholder types in their credit card information online and the transaction is processed in seconds.
Bust-Out Scams
Cons in which a seemingly legitimate merchant opens a valid account with an acquirer and, after a brief period of normal sales activity, deposits a large number or high dollar amount of fraudulent transactions. Once payment for the transactions is received, the merchant empties its deposit account and disappears. Merchants in bust-out scams often make applications to several acquirers at the same time.
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Capture
The submission of an electronic credit card transaction for financial settlement. Authorized credit card sales must be captured and settled in order for a merchant to receive funds for those sales.
Card
A valid credit card issued under license from Visa U.S.A, Visa International Inc., or MasterCard International, Inc. or any other valid credit card accepted by a merchant.
Card Association
Visa / MasterCard or any other card issuer that provides cards that are accepted by a merchant.
Card Processor
A party that provides transaction processing and other services for an issuing bank or an acquiring bank. It is an Association member, or an Association-approved non-member acting as the agent of a member, that provides authorization, clearing, or settlement services for merchants and members. Some banks act as their own card processors while other banks use third parties for card processing (there are card-issuer processors and card-merchant processors, and some third parties are both).
Cardholder
The person who the credit card is issued to and whose name is embossed upon the face of the card.
Cardholder Information Security Program (CISP)
A Visa program that establishes data security standards, procedures, and tools for all entities-merchants, service providers, issuers, and merchant banks-that store Visa cardholder account information. CISP compliance is mandatory.
Card Issuer
The financial institution or company that has provided a card to a cardholder.
CEBA Bank
The term CEBA comes from the enactment of the Competitive Equality Banking Act of 1987 (CEBA) which established conditions for special-purpose credit card banks. A CEBA bank is a special kind of issuing bank. It may only accept time and savings deposits of $100M or more. It is often affiliated with a retailer and offers private label cards for use at the affiliated organization. It may, however, issue general purpose VISA or MasterCard accounts.
Chargeback
A transaction that is returned as a financial liability by the issuer and/or the cardholder to the acquirer and most often to the merchant for resolution after the sale has been settled. It is generated when a cardholder disputes a transaction or when the merchant does not follow proper card acceptance procedures. The issuer and acquirer research the facts to determine which party is responsible for the transaction, and strict Association rules must be followed. If the charge-back is upheld and the merchant cannot or does not cover it, the acquirer must cover it.
Clearing
The exchange of transaction details between an acquirer and an issuer which posts the transaction to the cardholder's account and reconciles it for settlement.
Check Conversion
A check protection service by which a merchant scans a check image and converts it into an electronic transaction, similar to a PIN-based debit, for which the merchant is paid immediately. Check conversion requires a check imager peripheral.
Check Digit Verification
An algorithm that is performed on the primary account number (PAN) to ensure that numbers were not transposed or miskeyed. The result is the last position of the account number, or check digit. It is performed to validate a credit card number. Many card issuers use the MOD-10 Check Digit routine.
Check guarantee
A check protection service by which a merchant guarantees he or she will receive payment for a check, even in the event of insufficient funds. Check guarantee requires a check reader peripheral.
Checklister
A system that acts as the gatekeeper of merchant processing. Applications are entered into the system, checked for completeness, and are summarized to quickly determine the status of a file.
Code 10 Authorization
This is a voice authorization code that you might initiate when you suspect a card is stolen or fake, or when a customer is acting suspiciously.
Commercial Cards
Credit or charge cards issued to businesses to cover expenses such as travel and entertainment and procurement. Includes the multiple payment card brands of purchasing cards, business cards, corporate cards and multi-utility fleet cards. Visa and Master Card now have special procedures for passing billing information back to the card issuing bank so that it can be displayed on card holder statements; this is a program for promoting the use of credit cards for business purchases by providing purchase tracking to business users. New regulations require that this billing information be passed back with the transactions, otherwise a higher pass through fee will be incurred.
Compliance
A process where Visa® or MasterCard® resolves disputes between members arising from violations of the International Operating Regulations.
Contingent Liability
Contingent Liability refers to a situation created when a merchants processes transactions before the date a cardholder receives the goods or services purchased. Travel agencies and mail order / telephone order merchants pose contingent liability risks to the bank.
Copy Request
A request by a card issuer to a merchant bank for a copy or facsimile of a sales receipt for a disputed transaction. Depending on where sales receipts are stored, the merchant bank either fulfills the copy request itself or forwards it to the merchant for fulfillment. A copy request is also known as a retrieval request.
Corporate Card
Charge card designed for business-related expenses, such as travel and entertainment. Please see Commercial Card.
Corporate Resolution
A document used by a corporation that designates individuals to allow them to act as signers on behalf of the company.
Credit Report
A credit report is run on every signing principal on the merchant account application and is used to make approval decisions.
Credit (Reversal)
Nullification of an authorized transaction (sale) that has not been settled. If supported by the card issuer, a reversal will immediately "undo" an authorization and return it to the open-to-buy balance on a cardholder's account. Some card issuers do not support reversals.
CVC2
See CVV2. Card verification code 2 (CVC2) is MasterCard's term for this security code.
CVV2
Card verification value 2. CVV2 a 3 digit code printed on the back of a Visa card—is an important security feature that protects Internet and phone transactions from fraud. CVV2 ensures that the credit card number is legitimate and that the card is in the possession of the purchaser.
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DDA Account
This is the merchants Demand Deposit Account, otherwise known as the merchant's home town bank account.
Debit Card
Payment card whose funds are withdrawn directly from the cardholder's checking account at the time of sale (online debit on a Debit Network) or after batch settlement (off-line debit on a Credit Card Network).
Debit Networks
A multitude of companies that honor card transactions by debiting the cardholder’s checking account for the purchase amount. Debit Networks are smaller than their credit based counterparts and are more numerous.
Deposit Correction Notice (DCN)
Adjustments (debits or credits) made for an out-of-balance condition due to various problems in the transmittal. The correction is made by the merchant's acquirer at the time of capture prior to being sent out for interchange.
Digital Wallet
A consumer account set up to allow e-commerce transactions through a particular credit card processing system. Before the consumer can make a purchase, he or she must first establish an account with the credit card processor, who provides an ID and password. These can then be used to make purchases at any Web site that supports that transaction system. CyberCash's "Digital Coin" system is an example of a digital wallet system.
Direct Marketing
Direct Marketing is a scenario where a merchant solicits business to people who did not ask to be solicited, otherwise know as “junk mail”. Direct Marketing is often confused with “Mail Order / Telephone Order”. A merchant that sends catalogs or brochures to their prior customers or current subscribers is not a direct marketer. A merchant that sends catalogs or brochures to everyone is a targeted area IS considered a direct marketer.
Discount Rate
The fee, as a percent of sales volume, an acquirer charges a merchant for processing sales transactions. This is also referred to as the merchant discount. Examiners must be cognizant that the term "discount rate" is used in banking for other purposes as well (for instance, when referring to a certain borrowing rate from the Federal Reserve Bank).
Doing Business As (DBA)
The DBA is the business name displayed by the merchant, either with a sign in a physical store or on a website on the internet. Each merchant requires a separate application for each DBA.
Dynamic Currency Conversion (DCC)
A service, which is facilitated by a merchant at the point of sale with either a third party agent or through its merchant bank. The DCC allows a cardholder to see the transaction amount in his or her billing currency and the merchant's pricing currency. This way, the cardholder knows exactly how much the goods or services cost, and is able to make value judgments quickly and easily.
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eCommerce
eCommerce stands for Electronic Commerce. eCommerce is the process of buying or selling goods or services via the internet. This is most commonly done though a merchant’s or service provider’s website and usually involves an online catalog and shopping cart. Payments are processed with an online gateway such as USFSG Exchange Payment Gateway.
Edit Rejects
The rejection of a sales draft by Visa or MasterCard before a transaction processes through interchange, but after it has been paid by the acquirer.
Electronic Benefits Transfer (EBT)
A government-funded cash assistance program that distributes payments such as Food Stamps and Temporary Assistance for Needy Families (TANF) on cards that can be swiped and used with POS terminals.
Electronic Date Capture (EDC)
Process of electronically authorizing, capturing and settling a credit card transaction.
Electronic Data Interchange (EDI)
The electronic communication of business transactions, such as orders, confirmations and invoices.
Electronic Funds Transfer (EFT)
The transfer of money initiated through an electronic terminal, automated teller machine, computer, telephone, or magnetic tape. EFT also applies to credit card and automated bill payments.
Electronic Ticket Capture (ETC)
With an ETC system, sales ticket information is “grabbed” electronically. The magnetic strip on the back of a credit card holds the buyer’s information. When a card is swiped by the merchant through a terminal, the buyer information is read by the computer system and is merged with the sales information. The ticket is then processed in such a way that is the same as if the merchant made a manual deposit at a bank. This process is normally done in a batch of tickets at the end of the day.
Electronic Transactions Association (ETA)
ETA is the association for the electronic payments industry and serves the needs of organizations who offer transaction processing products and services. ETA is an international association with over 400 member companies spanning 7 different countries.
Electronic Wallet (E-Wallet)
Software, residing as a plug-in in the Web browser, that enables a cardholder to conduct online transactions, manage payment receipts and store digital certificates. Like your real wallet, your digital wallet stores your credit card number and shipping details. This wallet initiates the data encryption in a SET transaction.
Exception File
A list of lost, stolen, counterfeit, fraudulent, or otherwise invalid account numbers kept by individual merchants or their third-party processors. The exception file should be checked as part of the authorization process, particularly for transactions that are below a merchant's floor limit.
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Face-To-Face
In a face-to-face environment, transactions take place with the cardholder and merchant face-to-face. The cardholder either swipes the terminal or signs an imprinted sales draft. This type of transaction has the lowest discount rate as it is considered low risk.
Federal Tax ID Number
This is a 9-digit number assigned by the IRS and is used to track business taxes. All applications are required to specify their Federal Tax ID number. Some smaller merchants who are sole-proprietors may use their personal Social Security Number in place of a Federal Tax ID number.
First Data Corporation (FDC)
First Data is an American payment processing company headquartered in Greenwood Village, Colorado. First Data is a provider of electronic commerce and payment solutions, and the company's chief rival is TSYS.
Fleet Cards
Private label credit cards designed mainly for repairs, maintenance and fueling of business vehicles.
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Gateway
Also referred to as a “payment gateway” or “electronic gateway”. A gateway is software that authorizes credit card or electronic check transactions over the internet.
Gateway Page
Also known as a "jump," "doorway," or "bridge" page. In order to optimize a Web site's ranking with search engines, some Webmasters build gateway pages, pages customized to each search engine with specific meta tags and keywords. These pages are intended to appeal to search engine robots, and aren't always visible to customers who visit the Web site.
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High-Risk Chargeback Monitoring Program (HRCMP)
A Visa program that notifies merchant banks when a high-risk merchant has a chargeback-to-transaction rate of over one percent.
High-Risk Merchant
High risk merchants are a specific classification of merchants with a higher risk of customer sales disputes, higher risk of returns and a higher risk of chargebacks. Any online business is considered high risk because the credit card is not present for verification. USFSG specializes in high risk merchants and provides a list of not all but many products/services/business types considered high risk.
Holdback
A portion of the revenue from a merchant's credit card transactions, held in reserve by the merchant account provider to cover possible disputed charges, chargeback fees, and other expenses. After a predetermined time, holdbacks are turned over to the merchant. Note: Merchant account providers almost never pay interest on holdbacks.
Host
A website is “hosted” on the internet by a computer. The computer where the website resides is the host.
Hypercom
Hypercom is a popular manufacture of processing hardware.
HTTPS
HTTPS is a secure protocol usually with an encryption strength of 128bits. HTTPS allows for secure communication between computers and makes it almost impossible for a 3rd to decipher the communication.
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ICS (Internet commerce service)
The services an Internet commerce provider offers to enable clients to handle many facets of their business on the Internet.
IC Verify
IC Verify is a type of payment software for PCs and is produced by First Data.
Imprinter
A slide-type device used to create an embossed image of the credit cards characters on to a transcription slip. It is a necessity for all merchants to have a manual imprinter for special case where a physical imprint may be needed.
Independent Contractor / Independent Sales Organization (IC/ISO)
This is an acronym for a registered sales representative, people that have been contracted by a company to sell its merchant processing services throughout the nation.
Integrated Point of Sale (IPOS)
Acronym for “smart” terminals. These are credit card terminals, owned by the same merchant that can be set-up to communicate with each other even if they are in different locations or have different merchant numbers.
Interchange
The process of authorization and settlement of card transactions through VISA or MasterCard. Interchange includes the transmittal of cardholder information, transaction data, and fees.
Interchange Fee
The amount card associations charge acquirers for each card transaction they process. The card associations pay the interchange fee to the issuer as compensation for expenses incurred in providing lines of credit to cardholders. The acquirer's cost is passed on to merchants as a part of the discount rate.
Internet Merchant
See "Business Type"
Internet Payment Gateway
A payment gateway is a service that gives merchants the ability to perform real-time credit card authorizations from a web site over the Internet.
Issuing Bank
Any Visa or MasterCard member bank that has a contractual relationship with the cardholders that allows for them to issue cards.
Keyed
When transactions are "keyed" the information from a credit card is typed into the credit card processing equipment (like a terminal or a computer) manually. This allows the merchant to accept credit cards when the card is unavailable such as an over the phone transaction or if the magnetic strip on the back of the card is unreadable to the credit card terminal.
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Level I Processing
Purchases made with personal credit cards issued from U.S. banks qualify as Level I transactions. This means that the only information the merchant must pass to process the transaction is the merchant's name, transaction amount, and the date.
Level II Processing
Level II transactions normally involve corporate cards issued from a U.S. bank. Transactions that qualify for Level II processing cost the merchant less than Level 1 transactions. To qualify for Level II, a transaction must be passed with: merchant name, transaction amount, date, tax amount, customer code, merchant postal code, tax identification, merchant minority code, and merchant state code.
Level III Processing
Of the 3 different levels of credit card processing, Level III provides the lowest transaction processing rate. But, in order to qualify for the lowest rate, Level III transactions must be passed through the processing system with much more detailed transaction information that Level I or II transactions. Because so much information must be transmitted, not all terminals are equipped to process Level III transactions. Purchases that qualify as Level III transactions generally are made with government credit card or corporate cards.
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Mail Order/Telephone Order (MOTO)
MOTO is a short version to describe businesses that conduct sales via mail and telephone/fax.
MCC
The Internal Revenue Service (IRS) has published an optional revenue procedure that allows users of Visa commercial payment products to use Merchant Category Codes (MCCs) to determine which payment card transactions are reportable to the federal government on IRS Form 1099-MISC (Miscellaneous Income).
MCommerce
A term used to represent wireless e-commerce or the ordering of goods via wireless solutions like Cell phones, smart phones/iPhones.
Merchant Account
A merchant account is a type of bank account that allows businesses to accept payments by debit or credit cards. A merchant account also serves as an agreement between a retailer, a merchant bank and payment processor for the settlement of credit card and/or debit card transactions.
Member Alert to Control High-Risk Merchants (MATCH)
As a way to control high-risk Merchants, MATCH is an alert system that uses an electronic bulletin board to track businesses and people when their merchant account has been reported “terminated” by an acquiring bank.
Merchant Bank
This is the bank that holds the merchant account. When someone buys a product and/or service from a merchant, the merchant bank will place the needed funds into a merchant account in exchange for the right to collect the debt that is owned by the purchasing consumer.
Merchant
Collective term applied to Web-based eTailers who may have online storefronts.
Merchant Category Code (MCC)
See "SIC Code."
Merchant Service Provider (MSP)
This is a bank or other firm that provides processing for credit card transactions. Most MSP's provide merchant accounts.
Merchant Identification Number (MID)
This is the number that the FDC assigns to a merchant to identify them along with the credit card processors that they use. It is not to be confused with a merchant processing account number or Terminal Identification Numbers (TIDs).
Merchant Underwriting
Merchant underwriting & approval policy helps control credit risk. The policy is effective in designating and targeting merchants who meet the acquiring banks processing criteria. The policy also acts as a an agreement between the third party billing agent & the acquiring banks as to what information is needed from the merchants to measure the merchant against the acquiring desired list of criteria. The policy also outlines and lists what information is needed from the merchant, for the merchants agreement.
Micropayments
The payment acceptance method used by merchants who offer products, services, or information for a few cents to a few dollars. Processing these small payments with a merchant account would significantly reduce the amount of profit you would gain from the sale. USFSG has developed a Micropayments rate program to significantly reduce the expenses associated with processing small sales tickets.
Mobile ProPayment
Mobile ProPayment is a gateway and for businesses wishing to process credit card transactions in real time via a smart phone/iPhone. Intended for businesses of any size that need/want to expand their mobility and sell goods and services outside of their normal place of business.
Monthly Volume (MV)
With Visa and MasterCard transactions, a merchant account is approved to process up to a maximum dollar volume. American Express, Discover, and any other card processing volumes are not included into the calculated monthly volume. This is a major consideration for the underwriter of the file and can determine the type of documentation that will be required for the file.
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Off-Line
An operating mode in which terminals are not connected to a central computer. Responses are governed by guidelines, set by the issuer, which are housed in the terminal or in a supporting device.
Off-Line Transaction Processing
Capture of order and credit card information for later authorization and transaction processing through a traditional card swipe terminal or through a computer.
On-Line
An operating mode in which terminals are connected to a central computer and have access to the data base for authorization, questions and file changes.
Over the Counter
Indicates merchants that submit actual sales drafts for payment (paper merchant) to a local bank for payment.
Payment Gateway
A payment gateway is a separate service and facilitates the authorization and settlement or funding of a credit card transaction. You submit a credit card transaction on behalf of your customer via the gateway to the processor; the processor submits the transaction to the credit card network; the credit card network routes the transaction to the customer’s credit card issuing bank; the customer’s bank approves or declines the purchase and passes the transaction results back to the credit card network; the credit card network relays the results to the processor; the processor relays the results to the gateway and the gateway stores the results and sends them to the merchant and/or customer.
Payment Processor
A company that attends to the actual processing of a credit card transaction, to be distinguished from the merchant account bank which merely acts as the recipient of the transaction proceeds.
Personal Identification Number (PIN)
This is the number that is assigned by the bank to cardholders for identification purposes. It can be used as an electronic signature so that ATM transactions and debit card transactions may take place without the card holder’s written signature. PIN numbers are also used in online payment processing.
Pin Pads
This is a small box-type terminal attachment with a 10-key pad. They are used so that a cardholder may enter their PIN number and are commonly used for debit card transactions.
PCI Compliance
The major credit card issuers created PCI (Payment Card Industry) compliance standards to protect personal information and ensure security when transactions are processed using a payment card. All members of the payment card industry (financial institutions, credit card companies and merchants) must comply with these standards if they want to accept credit cards. Failure to meet compliance standards can result in fines from credit card companies and banks and even the loss of the ability to process credit cards.
PCI DSS
The Payment Card Industry Data Security Standard (PCIDSS) is a set of comprehensive
Requirements; aimed at enhancing payment account data security. This standard was developed by the founding payment brands of the PCI Security Standards Council, including American Express, Discover Financial Services, JCB International, MasterCard Worldwide and Visa Inc. Inc. International, to help facilitate the broad adoption of consistent data security measures on a global basis.
Point of Sale (POS)
Point of sale is the physical location where the sale is completed, normally referring to the POS terminal which is the credit card terminal equipment.
PTC Software
PTC software is a ETC type 7 software product.
Purchase Cards
Government agencies or corporations may issue their employees Purchase Cards. A Purchase Card is a credit card, but unlike a regular credit card it can only be used at certain types of merchant locations.
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Qualified Discount Rate
Qualified: A qualified rate is the percentage rate a merchant will be charged whenever they accept a regular consumer credit card and process it in the correct manner defined by Visa & MasterCard. This is usually the lowest rate a merchant will incur when accepting a credit card. The qualified rate is created based on the way a merchant will be accepting a majority of their credit cards. For example, for an internet merchant, the internet Visa / MC interchange categories will be defined as Qualified, while for a physical retailer only transactions swiped through or read by their terminal in an ordinary manner will be defined as Qualified.
Mid Qualified: Mid-qualified cards, conversely, are Visa or MasterCard’s cards with rewards or frequent flyer miles associated with them. As the customer uses theses cards, they accumulate special rewards or free miles which can be applied toward future airplane trips. Therefore, the rate for processing these cards is higher than the qualified rate.
Non Qualified Discount Rate: A non-qualified rate is charged when a merchant fails to batch out in the required timeframe, and/or authorization and settlement amounts do not match and /or missing address verification and/or acceptance of international, corporate, government, or business credit cards.
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Real-Time processing
The processing of a credit card transaction immediately after the purchase has been made. Real-Time is the preferred choice for Internet-based merchants.
Refund Policy
Refund Policies depend on the merchant. The merchant decides how and to what extent they can guarantee their products or services to cardholders. Refund or return policies that are very liberal can do a lot to reduce the number of charge-backs that a merchant receives.
Retail
See "Business Type"
Rolling Reserve (a.k.a. hold back)
A portion of the revenue from a merchant's credit card transactions, held in reserve by the merchant account provider to cover possible disputed charges, chargeback fees, and other expenses. After a predetermined time, holdbacks are turned over to the merchant. Note: Merchant account providers almost never pay interest on holdbacks.
Routing Number
See "ABA Routing Number"
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Secure Socket Layer (SSL)
A security feature that keeps Internet communications private and ensures they have not been forged or tampered with.
The exchanging of data or funds between the acquirer and the issuer. Settlement includes funding the merchant for the transaction and paying any necessary fees due to the issuer or acquirer for processing the transaction.
Shopping Cart
A shopping cart is a software application that typically runs on the computer where your Web site is located (the Web server), and allows your customers to do things such as searching for a product in your store catalog, adding a selected product to a basket, and placing an order for it.
Smart Card
A plastic card containing a computer chip that can store electronic "money." Unlike a credit card, a smart card can only spend out the dollar amount its owner has already put into the card account. It's similar in function to a prepaid calling card but is available for all purchases.
Smartphone
A smartphone is a mobile phone offering advanced capabilities, often with PC-like functionality. There is currently no industry standard definition of a smartphone. A smartphone is simply a phone with advanced features like e-mail and Internet capabilities.
Standard Industry Code / Merchant Category Code (SIC / MCC Code)
These are four-digit, numeric codes that identify merchant business types. There are thousands of SIC codes and all of them are defined by VISA International in the Visa USA Merchant Data Manual.
Statement Fee
A charge levied each month for maintenance of your merchant account, preparing your statement, etc.
Swipe
This is physical act of sliding a card through the credit card processing equipment. The machine then reads the magnetic strip on the back of the credit or debit card. An alternative way to accept the credit card, or debit card would be to manually key in the information. However, swiping a card is far more beneficial because it documents the physical presence of the card at the point of sale. All swiped transactions are face-to-face which lessons the chances of credit card fraud.
Swipe Discount Rate
The discount rate charged by a merchant account provider for transactions in which a credit card is available. Swipe discount rates are generally lower than MOTO discount rates because the merchant can match signatures and perform other checks for fraud or misuse.
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Terminal Identification Number (TID)
The Terminal Identification Number identifies specific serial-numbered pieces of equipment.
Test Transaction
After downloading a fresh terminal or changing it in some way a test transaction should be done by the merchant to make sure that the terminal is ready to accept a credit card. The following points should be remembered when asking the merchant to complete the test transaction:
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A test transaction should never exceed the amount of $0.10.
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Make sure that the merchant voids the transaction immediately after it has been completed or at least before they batch out. It must be voided not to be confused with credited.
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A test transaction is the only time when a merchant is permitted to use their own credit card in their own terminal. The merchant should definitely be advised of this condition.
Trade Reference
Trade references are the businesses that extend credit or have business relationships with a merchant account applicant. These are needed to see if an applicant makes bill payments in a timely manner and also purchases goods and services from outside sources.
Tranz
See "VeriFone"
Travel and Entertainment (T&E)
This is the term is used when referring to cards like American Express credit cards (Amex) or Diners Club cards. The difference between this type of program and a pure credit card program is that the card holder would normally pay them off every month. Discover card is commonly considered to be a T&E card type but technically it is not.
Transaction Fee
The per transaction fee is the fee charged by the processor to process each transaction. This fee is charged on every transaction, regardless of whether or not the transaction is approved or declined. It is charged on all types of debit/credit cards.
TSYS
Total System Services, Inc. is the second largest processor of merchant acquirers and bank credit card issuers.
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Unique Transactions
A transaction that cannot be categorized as a retail sale or a cash advance, and for which there are special merchant classification codes. An acquirer with such merchant activity must have written approval from MasterCard and/or Visa for a bankcard relationship with the merchant.
US Data Service Group, Inc. – USDSG™
Parent Corporation of US Financial Services Group.
USFSG ™
A subsidiary of US Data Services Group, Inc. and a premier provider of merchant credit card processing and payment gateway solutions.
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VeriFone
VeriFone is a company that manufactures electronic payment equipment. Some of their well known processing terminals include the Tranz 380, Tranz 330, Tranz 460, also the P250 Printer and the PinPad 1000.
Virtual Terminal
An Internet-based portal used for processing card transactions. Brick-and-mortar merchants may use an online payment gateway to process card transactions online without a POS terminal or card processing software. Online merchants must have an online payment gateway to enable their business for ecommerce. Also called an online payment gateway.
Voice authorization
An authorization obtained by telephoning a voice authorization center.
Void
The reversal of an approved transaction i.e. one that has been authorized but not yet been batched out and settled. If the transaction had previously been "settled" then it would require the merchant to process a refund, return, or credit in order for that transaction to be reversed
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White Plastic Fraud
Merchant fraud committed when legitimate account numbers (such as obtained from discarded sales draft carbons) are embossed on blank or altered cards. Fraudulent sales drafts are then imprinted from the cards and deposited to the merchant's account.
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