A
Account number
A unique sequence of numbers assigned to a cardholder account that identifies the issuer and type of financial transaction card.
Acquirer
A licensed member that maintains the merchant relationship and acquires the data relating to a transaction from the merchant or card acceptor and submits that data into interchange, either directly or indirectly.
Address Verification
Only applies to merchants who are not swiping transactions. This fee is usually included with transaction fees. AVS provides merchants with valuable address and zip code lookup on each cardholder, and is used to help reduce fraud. AVS is mandatory by Visa and MasterCard on all keyed accounts where cards are not going to be swiped.
Annual Fee
Simply an annual charge for the convenience of having a merchant account.
Application Fee
Charged for an account setup on new merchant account applications.
Authorization
A process defined in operations regulations whereby a transaction is approved by or on behalf of an issuer; commonly understood to be receiving of a sales validation by the merchant, by telephone, or authorization terminal.
Authorization Code
A code that notifies you that you have obtained the authorization for a specific Visa card transaction
Automated Teller Machine (ATM)
An unattended, magnetic stripe-reading terminal that dispenses cash; accepts deposits and loan payments; enables a bank customer to order transfers among accounts and make account inquiries.
AVS (Address Verification System)
In 1996, Visa/MasterCard headquarters introduced a new regulation requiring all businesses who manually key in the majority of their credit card transactions to have a special fraud prevention feature on their credit card processing equipment. This feature is referred to as an address verification system (it checks to see that the billing address given by the customer matches the credit card). If a merchant elects not to use AVS, VISA and MasterCard will not support the transactions and will charge an additional 1.25% on those sales.??
B
Bank Card
A debit or credit card issued by a bank or other financial institution, such as a MasterCard.
Bank Rate
Also known as "Discount Rate." This is a percentage of each sale that the bank charges as per Visa and MasterCard Rate requirements. All banks are required to have at least 3 rate structures. Face to face retail (usually the lowest rate e.g.. 1.49%). Phone, Mail and Internet rates (usually higher e.g.. 2.24%). And a rate for imprinted or phone authorized rates (highest rate e.g.. 2.62%). It is very important to correctly classify the way credit cards will be used in order to achieve the best rate structure.??
Batch
A collection of credit card transactions saved for submitting at one time, usually each day. Merchants who do not have real-time verification systems must submit their transactions manually through a POS terminal. Batch fees are charged to encourage a merchant to submit his or her transactions at one time, rather than throughout the day.??
Batch Header
Charged when settling the daily batch of transactions and for the transfer the settled funds into the merchant bank account.
C
Cancellation Code
The code that a lodging or car rental merchant gives to a cardholder. The cancellation code confirms that the cardholder did, indeed, cancel a reservation.
Capture
The submission of a credit card transaction for processing and settlement. POS terminals and real-time processing software capture transactions to submit to merchant account providers or credit card processors.
Cardholder
The customer to whom a card has been issued or the individual authorized to use the card.
Cash Disbursement
A transaction that is posted to a cardholder's MasterCard card account in which the cardholder receives cash at an ATM, or cash or travelers checks at a branch of a member financial institution or at a qualified and approved agent of a member financial institution.
Chargeback
A chargeback occurs when a card holder disputes a credit card transaction with his or her credit card issuer. The card issuer initiates a chargeback against the merchant account. The amount of the disputed transaction is immediately withdrawn from the merchant's bank account, and the merchant has 10 days in which to dispute the chargeback with proof of purchase, signature, proof of delivery, etc. A chargeback fee is usually assessed to the merchant on top of the actual transaction. See also retrieval request.
Chargeback Defense
A customer who does not receive his goods or services, or says he did not place an order, can ask his issuing bank to charge back the merchant. The Issuing Bank sends the chargeback request to the merchant bank, which forwards it to the merchant asking to validate the charge. Information such as the amount, an invoice or folio, customer signature, or shipping documents, and the shipping address (used in AVS during the authorization) are needed to defend against a chargeback.
Chargeback Fee
Chargeback fees and retrieval fees are related to a customer or issuing bank disputing a transaction that was processed. The merchant who charged the transaction is notified of the dispute via postal mail, email, fax, or a combination. A merchant will have a chance to refute the dispute by providing a written response and documentation.
Clearing
The process of exchanging financial transaction details between an acquirer and an issuer to facilitate posting of a cardholder's account and reconciliation of a customer's settlement position.
Cobranded Card
A credit card issued jointly by a member bank and a merchant, bearing the "brand" of both.
"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.
Commerce Server
A Web server that contains the software necessary for processing customer orders via the Web, including shopping cart programs by Applied Merchant Systems, dynamic inventory databases, and online payment systems. Commerce servers are usually also secure servers.
Corporate card
A bankcard issued to companies for use by company employees. The liability for abuse of the card typically rests with the company and not with the employee.
Credit card
A plastic card bearing an account number assigned to a cardholder with a credit limit that can be used to purchase goods and services and to obtain cash disbursements on credit, for which a cardholder is subsequently billed by an issuer for repayment of the credit extended at once or on an installment basis.
Credit card processors
(Third-party processors) Merchant services providers that handle the details of processing credit card transactions between merchants, issuing banks, and merchant account providers. Web site operators usually must first establish their own merchant account before contracting for credit card processing services.
Currency conversion
The process by which the transaction currency is converted into the currency of settlement or the currency of the issuer for the purpose of facilitating transaction authorization, clearing and settlement reporting. The currency of transaction is determined by the acquirer; the currency of the issuer is the preferred currency used by the issuer, and most often, the currency in which the cardholder will be billed.
D
DDS (digital data storage) debit card
A financial instrument used by consumers in place of cash. Unlike a credit card, debit card purchases are deducted automatically from the cardholder's account, like a check. Visa and MasterCard now offer debit cards through banks and other financial institutions.
Debit Card
A plastic card used to initiate a debit transaction. In general, these transactions are used primarily to purchase goods and services and to obtain cash, for which the cardholder's asset account is debited by the issuer.
Debit Transaction
Charges apply when swiping cards with a pin-pad attached to the terminal. It only applies to debit cards and is a fixed transaction fee.
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.
Discover Network Access Fee
Starting on July 1, 2009, Discover is cooperating with Visa, who is introducing a U.S. Acquirer Processing Fee (APF). The fee will be $0.0195 on all Discover branded authorizations acquired in the U.S. regardless of where the issuer/cardholder is located.
Draft/Sales draft
A record (usually paper) used to document that a good or service was purchased.
E
EBT Transaction Fee
Charged when processing food stamp or similar transactions.
Electronic Commerce Indicator (ECI)
A system in which the transaction data from an Internet transaction is tagged with this indicator and sent on to Visa or MasterCard. It is a requirement (October 1st, 2000) for all merchants with a majority of sales via the Internet to use an approved and ECI compliant payment gateway. Hand keying of credit card numbers in to standard credit card terminals would not capture and pass on the ECI, therefore this method is not compliant.
Electronic draft capture (EDC)
A system in which the transaction data is captured at the merchant location for processing and storage.
Electronic funds transfer (EFT)
A paperless transfer of funds initiated from a terminal, computer, telephone instrument, or magnetic tape.
Emboss
The process of printing identifying data on a bankcard in the form of raised characters.
Equipment
Most credit card transactions are conducted electronically by using Electronic Draft Capture. Typically this is performed by terminal or via the Internet.
F
Factoring
The purchase of debts owed, or "accounts receivable," in exchange for immediate payment at a discount. In e-commerce, the term is often applied to ISOs that offer to process credit card transactions through their own merchant account rather than through an account established by the merchant, in exchange for a percentage of the transaction or other fee. Factoring of credit card debt is illegal.
Floor limit
A specific dollar limit used to determine which Visa card transactions you must authorize. If your business has a floor limit $1,000, you must get authorization for any transaction over that amount.
H
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.
I
Imprint
A physical impression you make from a customer's card which appears on the draft. This proves that the card was present when the sale was made.
Imprinter
A device to produce an image of the embossed characters of the bankcard on all copies of sales drafts and credit slips.
Interchange Fee
The fee that the Card Association charges the merchant to get the funds into his bank (merchant bank) and to get the billing information to the cardholder's bank (issuing bank). Interchange fees are based on following credit card regulations and capturing appropriate data including card swipe, address, and electronic signature as needed. These fees are also based on the timeliness of the settlement of transactions..
Interchange Pass thru Credit
Rates set by the credit card associations consist of a long list of different percentage and transaction fees. The difference in fees are based on risk factor such as: credit card brand, type of credit card, type of transaction, i.e. online, in-store, phone order, and category of industry and the size of the organization accepting the credit card transactions.
Interchange Pass thru Debit
Rates set by the credit card associations consist of a long list of different percentage and transaction fees. The difference in fees are based on risk factor such as: credit card brand, type of debit card, type of transaction, i.e. online, in-store, phone order, and category of industry and the size of the organization accepting the credit card transactions.
Internet Gateway Fee
Only applies if using an Internet Payment Gateway. It does not apply for software or a terminal use. The gateway fee is a monthly fee assessed by the gateway provider, and is usually billed directly by the gateway provider.
Internet Gateway Set-up Fee
Charged when account is setup.
Internet Transaction Fee
Transaction fees are separate from the banks that provide a merchant account, although some providers provide a single transaction statement seemingly providing a single service.
ISO (independent service organization)
A firm or organization that offers to process online credit card transactions, usually in exchange for transaction fees or a percentage of sales. Merchants must generally establish a merchant account before contracting for ISO services, although some ISOs claim not to require separate merchant accounts. .
Issuer
The member that enters into a contractual agreement with MasterCard to issue cards.
Issuing bank
The bank that maintains the consumer's credit card account and must pay out to the merchant's account in a credit card purchase. The issuing bank then bills the customer for the debt.
Select a letter below to see all the terms under it and their definitions.
M
Magnetic Stripe
The magnetically encoded stripe on the bankcard plastic that contains information pertinent to the cardholder account. The physical and magnetic characteristics of the magnetic stripe are specified in ISO Standards 7810, 7811, and 7813.
Magnetic Stripe Reader
TA device that reads information recorded on the magnetic stripe of a card. Also known as a card swipe reader.
Mail Order/Telephone Order (MO/TO)
A transaction initiated by mail or telephone to be debited or credited to a bankcard account.
MasterCard Network Access Fee
Starting on July 1, 2009, MasterCard is cooperating VISA, who is introducing a U.S. Acquirer Processing Fee (APF). The fee will be $0.0185 on all MasterCard branded authorizations acquired in the U.S. regardless of where the issuer/cardholder is located.
Member
An institution that participates in the programs offered by the credit card company.
Merchant
A retailer, or any other person, firm, or corporation that (pursuant to a merchant agreement) agrees to accept credit cards, debit cards, or both, when properly presented.
Merchant Account
A specialized bank approved and issued account to process credit card transactions. One of three parts needed to accept credit cards. Other parts required, a local bank checking account (to deposit funds) and a Processing Solution (to access your merchant account).
Merchant Bank
A bank that has entered into an agreement with a merchant to accept deposits generated by bankcard transactions; also called the acquirer or acquiring bank.
Merchant Identification Number
The number a financial institution assigns to a merchant to identify your business.
Monthly Minimum
This is a fee that is imposed if your credit card charges do not add up to their monthly minimum amount. For example, your monthly minimum is $25 a month. If your discount rate was 2.25% and you processed $1000.00 in credit card volume, $22.50 is charged to the account plus an additional $2.50 (the difference of the $25.00 minimum and actual discount fees).
Monthly Basic Service Fee
Charged by the processor or merchant service provider regardless of the number of transactions.
Monthly Minimum Discount Fee
A minimum amount that the processor or merchant account provider demands in fees. It is only charged is credit card fees do not meet or exceed this minimum.
MOTO (mail order/ telephone order) discount rate
The discount rate charged by the merchant account provider for credit card transaction in which the actual credit card was not available to the merchant. MOTO discount rates are generally higher than swipe discount rates to account for the increased chance of fraud or nonpayment.
P
Payment gateway
The code that transmits a customer's order to and from a merchant's bank's transaction-authorizing agent ? usually a MAP (merchant account provider).
Payment gateway provider
A company that provides code and/or software for an e-commerce site to enable it to transfer information from its shopping cart to the acquiring bank, and on through the rest of the credit card transaction. See also payment gateway.
Personal Identification Number (PIN)
A four-to-twelve character secret code that allows an issuer to positively authenticate the cardholder for the purpose of approving an ATM or terminal transaction occurring at a point-of-interaction device.
Point of Sale (POS) terminal
A small device that allows you to slide the credit card through to make a charge. This is what most retail stores have. It is fast, easy and accurate to make a charge on a customer's credit card within seconds. It is also known as a terminal machine.
Processing Solution
A device, software or virtual product that allows you to connect to a Merchant Account. Without a processing solution, like a credit card terminal, there would be no way to verify, approve and deposit credit card transactions.
Purchasing Card
Designed to help companies maintain control of purchases while reducing the administrative cost associated with authorizing, tracking, paying, and reconciling those purchases.
R
Real-Time Processing
Having your customer's credit card information validated and processed for you automatically. The credit card will be charged and the money will be deposited into your bank account all automatically. This is perfect for an internet-based business.
Receipt
A hardcopy document representing a transaction that took place at the point of sale, with a description that usually includes: date, merchant name/location, primary account number, amount and reference number.
Recurring Fees
Regular, usually monthly, charges for maintaining a merchant account. Recurring fees include the discount rate, transaction fees, statement fee, and monthly minimum.
Retrieval Fee
A retrieval request occurs when a cardholder cannot remember a credit card transaction or the bank wants order information for some reason. The card issuer initiates a retrieval request, in which the merchant has 10 days to respond with the order information or the retrieval request will turn into a chargeback. There is usually a retrieval request fee issued against the merchant also in these cases.
Retrieval Request
A retrieval request is what happens when a cardholder cannot remember a credit card transaction, or the bank wants order information for some reason. The card issuer initiates a retrieval request, in which the merchant has 10 days to respond with the order information or the retrieval request will turn into a chargeback. There is usually a retrieval request fee issued against the merchant also in these cases.
S
SSL (secure socket layer)
A system for encrypting data sent over the Internet, including e-commerce transactions and passwords. With SSL, client and server computers exchange public keys, allowing them to encode and decode their communication.
Settlement
The process by which merchant and cardholder banks exchange financial data and value resulting from sales transactions, cash disbursements and merchandise credits.
Setup fees
Fees charged for establishing a merchant account, including application fees, software licensing fees, and equipment purchases.
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.
Swipe discount rate
The discount rate charged by a merchant account provider for transactions in which a credit card is available for inspection by the merchant. Swipe discount rates are generally lower than MOTO discount rates because the merchant can match signatures and perform other checks for fraud or misuse.
T
T & E Draft Capture Transactions
Abbreviation for Travel and Entertainment. When an airline, car rental company or hotel acts as the agent of an airline, car rental company, or hotel, and the terminals electronically authorize and capture transaction data, eliminating the need for a paper deposit, the accumulation of that data constitutes a draft capture.
Third-party processing
Processing of transactions by parties acting under contract to issuers or acquirers.
Touchtone Capture Transaction Fee
When only a touch pad is used to process a transaction, the capture of that information constitutes a touchtone capture.
Transaction
Action between a cardholder and a merchant or a cardholder and a member that results in activity on the cardholder account.
Transaction Date
The date a cardholder effects a card purchase of goods, services, or other things of value, or effects a cash disbursement.
Transaction Fee
A charge for each credit card transaction, collected by the MAP (merchant account provider) or ISO.
V
VISA Network Access Fee
Starting on July 1, 2009, Visa is introducing a U.S. Acquirer Processing Fee (APF). The fee will be $0.0195 on all Visa branded authorizations acquired in the U.S. regardless of where the issuer/cardholder is located.
Voice Authorization Fee
An approval response obtained through interactive communication between an issuer and an acquirer, their authorizing processors, or stand-in processing, through telephone, facsimile, or telex communications.
Voice AVS Fee
Address Verification Service (AVS)-a method of reducing fraud in mail order/telephone order transactions by using cardholder billing address information in the authorization request.
W
Wireless Activation Fee
Most carriers charge an activation fee for setting up new service. If the wireless service is obtained through the merchant provider, the cost is recovered through the monthly bill.
Wireless Network File Build
Accumulation of data contained on a wireless network warrants a fee.
Wireless Network Access
A wireless service fee is charged on a wireless merchant account by a carrier to provide wireless service making it possible for a merchant to process credit cards remotely.
Wireless Transaction Fee
A wireless transaction fee is charged in addition to the merchant account transaction fee on wireless merchant accounts. The wireless transaction fee is usually charged by the wireless network provider and not by the merchant service provider.