Glossary:
Merchant Credit Card Account Terminology


ACH (automated clearing house)

A form of electronic payment. ACH is designed to be like an electronic check. An ACH money transfer takes two (2) business days unlike a bankwire which takes place the next business day. Usually there is no cost for an ACH money transfer as opposed to a bank wire which incurs a cost. The networks of participating organizations that use the ACH network settle and clear electronic debit transactions through the automated clearinghouse.

Acquiring Bank

A financial institution that provides merchant accounts. A merchant account allows you to accept credit cards. All merchant accounts must be sponsored by a bank that is a member of the Visa and Mastercard "associations". These banks actually deposit the funds into the merchants checking account.

Address Verification System

The Address Verification System compares the numerical part (house, po box or apartment number and also the zip code) of the cardholders billing address with the billing address that the customer entered when the transaction information was entered.

Approval Code or Authorization Code

The 6-digit code returned to the merchant upon approving a transaction.

Authorization & Settlement

Authorization is the process of checking for available credit in the cardholder's credit card account. A positive authorization reduces the cardholder's available credit and reserves the funds for settlement.

Bank Card

A Visa or MasterCard credit card. It is called a bank card because it is issued by a bank, unlike an American Express or Discover card, which is issued directly from Amex or Discover.

Batch

A collection of transactions that have been made in a single day and generally submitted together as one batch at the end of day.

Card Holder

The owner of the purchasing credit card is referred to as Card Holder.

Charge Back

A charge disputed by the credit card holder is called a chargeback.This results in chargeback/retrieval fees to the merchant so it it alwys best to try to resolve any customer disputes before a chargeback occurs. If the cardholder is successful in his dispute, the disputed funds are withdrawn from the merchants bank account. Funds are often taken out during the period that the dispute remains unresolved pending the resolution of the dispute.

Credit card

The plastic card bearing the name and account number assigned to a cardholder as well as the bank name tht issued the card. Credit cards are issued with a set credit limit and expiration date.

CVC2 (card validation code 2) & CVV2 (card verification value 2)

VISA and MasterCard implemented a security feature known as “CVV2” and “CVC2”. These are the three-digit numbers printed on the back side of the card. The three-digit code helps validate that the cardholder has the card in his/her possession, and the account is legitimate. You can include the code in your transaction and expect to receive a “match” or “no match” response. If you are using a shopping cart, make sure it is capable of collection these numbers. You are also not allowed to store these numbers.

American Express cards often have a four-digit security code on the front of the card above the account number and Discover cards also has a three-digit code very similar to Visa and Mastercard.

Debit card

The plastic card used to complete a bank account withdrawal from a cardholder's bank account. Unlike a credit card, debit card purchases are deducted automatically from the cardholder's account.

Discount Rate

The percentage of each transaction that the processor charges for your Visa and Mastercard transactions done through your merchant account.

Internet Merchant Accounts

An account that allows merchants to accept card payments over the Internet.

Issuing Bank

The bank that issues the customer the credit card and transmits funds to the business owner's merchant account when a transaction takes place. The issuing bank debits the cardholder's account for the amount of the purchase and bills the cardholder as part the the customer's monthly statement.

Mail Order/Telephone Order (MOTO)

Transactions initiated by the customer using the mail or telephone, rather than through retail terminals or over the Internet.

Merchant Account Holder

A business owner (a sole proprietor or corporation) that accepts credit cards for their business.

Merchant Bank

The bank that provides merchant accounts to merchants, thereby giving the merchants the ability to accept credit cards.

Merchant Provider

A third party company providing merchants with merchant accounts. Providers have relationships with banks that operate merchant accounts. Providers either have their own processing system to process or validate transactions, or they act as resellers of third parties' processing systems.

Monthly Minimum

The monthly minimum is the minimum monthly charge a merchant must pay in discount rate fees. If the merchant's sales for the month result in his paying discount rate fees greater than or equal to the agreed minimum monthly amount, no further fee is charged. However, if the merchant's sales for the month do not generate sufficient discount rate fees to cover the minimum then the difference between the amount of actual fees generated and the monthly minimum is charged to the merchant.

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.

PIN (personal identification number)

A code that allows the issuer of a card to authenticate the cardholder for the purpose of approving a transaction. The cardholder enters his/her PIN into a PIN pad. The PIN is required to complete an ATM/Debit card transaction.

Point of Sale Terminal (POS)

Also known as a credit card terminal, this is the actual machine that the merchant swipes a credit card through in order to initiate a credit card transaction. These are most common in retailor resturant environments.

Processing Solution

A terminal, software or virtual productthat enables a merchant to do a transaction with his merchant account and payment processor, for the purpose of verification and approval of transactions.

Real-Time Processing

Credit card processing completed online, while the customer is still on the website.

Recurring Transactions

A transaction in which a cardholder has given a merchant permission to periodically charge the cardholder's account.

Reserve

A reserve is often required for higher risk merchants. In the case of a reserve, a portion of the merchant's funds are held by the merchant account provider for a specified amount of time as security for future contingencies, including chargebacks.

Secure Socket Layer (SSL)

A secure web protocol designed to ensure cardholder information is safe during the ordering process.

Settlement

The process by which transactions that have been authorized are sent to the processor for payment to the merchant.

Smart Card

A card which contains a computer chip that stores electronic "money." It's similar in function to a prepaid calling card.

Terminal ID (or TID)

The number assigned to a credit card transaction device (such as a POS terminal). It identifies the merchant’s equipment to the processor.A TID is also used for payment gateways and other software applications.

Transaction Fee

A per transaction cost that is usually expressed in "cents" per transaction that a merchant provider or processor charges the merchant for each transaction.

Travel and Entertainment Cards

Credit cards issued by companies such as American Express and Diners Club/Carte Blanche.

Virtual Terminal

The credit card processing is completed online by the merchant and on the merchants computer instead of a traditional credit card swiping machine. This type of transaction could occur when a merchant takes an order over the telephone and then keys in the customer's information on the computer. So the computer takes the place of the swiping machine.

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.