Glossary of Credit Card Processing Terms
A:
Account Number: A unique sequence of numbers assigned to a Cardholder account that identifies the Issuing Bank and type of financial transaction card.
ACH: Automated Clearing House – An electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches and transfers electronic funds into and out of the merchant’s bank account.
Acquirer (or acquiring bank): A member of a Card Association, for example MasterCard and/or Visa, which maintains merchant relationships and receives all bankcard transactions from the merchant.
Acquirer Processing Fee (APF): A Visa per-item fee since July 2009. The fee is on all Visa branded authorizations acquired in the U.S. regardless of where the issuer/cardholder is located. Currently this fee is 1.95 cents per authorization.
Address Verification Service (AVS): When a card is not swiped, the address must be verified to combat possible fraud. This feature is used primarily by mail or telephone order and ecommerce merchants but can be used by retail merchants when a card cannot be swiped. A prompt appears on the software or terminal asking the merchant to enter the numerical value of the cardholders billing address, the Zip Code and, on occasion the CVV / CID code of the Cardholder so that the address can be verified. Complete AVS is a service that verifies the Cardholder’s billing address. Visa and Discover Card-Not-Present transactions will be downgraded to a higher interchange rate.
AMEX: The normal abbreviation of American Express.
Annual /Membership Fee: This is a once per year fee by the merchant account provider. Many merchant account providers will charge an annual fee or membership fee to increase their revenues.
APF (Acquirer Processing Fee): A Visa per-item fee since July 2009. The fee is on all Visa branded authorizations acquired in the U.S. regardless of where the issuer/cardholder is located. Currently this fee is 1.95 cents per authorization.Assessments: Fees charged to the Acquirer by Visa/MasterCard/Discover to maintain the Interchange system.
Authorization Fee (sometimes called a transaction fee): A fee charged for every response a merchant receives through a terminal.
Authorization Code: The code sent by the Issuing Bank in response to an authorization request to indicate that a credit card can be accepted as payment.
Average Monthly Volume: Total amount of sales for the year divided by 12 months.
Average Ticket: Total net merchant sales divided by the number of transactions.
B:
Bank Identification Number (BIN): The first six digits of a VISA or MasterCard account number, which identifies the bank that issued the card.
Basis Point: One hundredth of a percentage point (.01%). Discount rates are assigned as basis points. For example 0.50% = 50 basis points; 1.00% = 100 basis points.Batch: The group accumulated credit and debit card transactions stored in the terminal, software, or Host.
Batch Header Fee: Fee charged the merchant by some merchant account providers to settle the transactions at the end of the day or shift. A typical batch header fee is 25 to 35 cents per settled batch.
Batch Number: A number identifying a group of credit card sales transactions that may have occurred in one or more days.
C:
Card Not Present: An environment where the credit or debit card cannot be physically presented to the merchant. Card-Not-Present includes, but is not limited to, Mail Order, Telephone Order, and eCommerce Transactions.
Card Present: The processing environment where the payment device is physically presented to the Merchant by the Cardholder as the form of payment at the time of sale.
Cardholder: The person to whom a credit or debit card is issued or a person authorized to use the card.
Cardholder Data: One or more of the following data elements pertaining to a Cardholder’s account: Card number, Cardholder name (if applicable), Card account activity, Cardholder account balance, and/or such other data applicable to the Merchant’s Card program.
Card Type: A description of the credit card, Visa, MasterCard, Discover, American Express, Diners, JCB, etc.
Cash Advance: A transaction in which a Cardholder gets cash from a member financial institution or ATM. The advance is added to the balance owed on the credit card account by the Cardholder and interest is charged.
Chargeback: A chargeback happens when the cardholder or the Issuing Bank disputes a charge. The funds for the disputed purchase are debited from the merchant’s account, or “charged back”, and returned to the cardholder while the dispute is being resolved. The merchant must provide documentation that follows certain guidelines set up by card associations to prove that the charge is valid before the funds will be returned.
Chargeback Reason Code: A numerical code that identifies the specific reason for the chargeback. Each card association has its own chargeback codes.
Check Guarantee: A service which guarantees check payment (up to a limit defined for the account) provided that the merchant follows correct procedures in accepting the check.
Check Verification: A service that tells a merchant whether a check writer has been reported for writing bad checks, but it does not guarantee payment if the check bounces.
China Unionpay: A credit card issued in China that has become more widely accepted in the United States in recent years due to the growing number of Chinese and Asian business people traveling and working here.
Chip Card: A card (debit or credit) that carries an embedded computer chip with memory and interactive capabilities so that it can be updated. Also called an integrated circuit card or chip card.
Code 10: A response to an authorization request. The Issuing Bank is asking the merchant to confiscate the card and return it to the Issuing Bank.
Corporate Card: A bankcard issued to companies for use by company employees. The liability for abuse of the card typically rests with the company, not with the employee. Corporate Cards are VISA, MasterCard, American Express or other types of cards that are issued to a company for use by its employees. A Corporate Card allows a company to better track and control employee spending. A Corporate Card is generally issued to a specific employee and has the name of that employee embossed on it as well as the name of the company.
Cross Border Fee: This is a MasterCard fee charged on sales in the United States using a credit card issued outside the United States. Currently, the fee is 0.40% per sale.
Currency Conversion: The service provided by the associations that converts the transaction currency to the billing currency.
CVV / CID Code: The 3 or 4 digit Security Code that can be found on the back of a credit card. For American Express, the Security Code can be found on the front of the card. CVV stands for Card Verification Value. At American Express, CID stands for Card Identification Number.
D:
Data Capture: The collection, formatting, and storage of information in computer memory. Data Usage Fee This Discover Card fee applies to all settled transactions, including sales, credits and cash advances. The fee is 1.85 cents per transaction.
Debit: A charge to a cardholder’s bankcard account or funds electronically removed from a merchant’s account.
Debit Card: A card that allows the Cardholder to pay for purchases by having the amount taken directly from his or her bank account. It is not a credit card or a charge card.
Decryption: The method of unscrambling encrypted information. See “Encryption.”
Demand Deposit Account (DDA): The bank checking account to which the merchant’s deposits are made or funds debited.
Discount Rate: The fee charged to a merchant for processing credit card transactions. Also called “Discount Fee,” “Base Rate or Fee,” “Monthly Rate or Fee,” or just “Rate” or “Fee.”
Downgrades: A downgrade occurs when the merchant does not meet the card association requirements for a transaction and as a result the transaction is moved to a lower level of interchange. The merchant pays a higher rate for downgrades.
Dues and Assessment Fee: Visa, MasterCard, and Discover charge this fee on every sales transaction. Currently, Visa and MasterCard charge 0.11% per sale and Discover charges 0.10% per sale.
E:
Electronic Draft/Data Capture (EDC): Sending the information about each credit card transaction to the Issuing Bank electronically through the point of sale terminal.
Encryption: The method used to scramble financial information for security purposes. For example, all Personal Identification Numbers (PINs) are encrypted when transmitted for authorization.
F:
Factoring: The coercion or bribery of a legitimate merchant to process another merchant’s transactions (often fraudulent) in return for payment. Not allowed under card association rules.
Force: Allows the merchant to enter a transaction if unable to process under the regular sale key. Also called an “Offline sale” or Ticket Only.
G:
Gateway (also called Payment Gateway): Some Point of Sale systems (the device where you swipe the card or key enter the card data) and all eCommerce shopping carts need to send the transactions through a special routing system called a “gateway”. The gateway routes the transaction to the MAP. There can be both monthly and per-transaction costs to the merchant for this service.
H:
I:
Imprinter: A device used by a merchant to imprint card information onto a sales draft. Commonly known as a “Knuckle-Buster”.
Interlink: A national debit network owned by VISA International.
Interchange Fees: The fees deducted from the transaction amount by the Issuing Bank to cover the cost of the process. The Acquirer pays the net amount to the Issuing Bank.
International Acquirer Fee: This is a Visa fee charged on sales in the United States using a credit card issued outside the United States. Currently, the fee is 0.45% per sale.
International Processing Fee: This is a Discover fee charged on sales in the United States using a credit card issued outside the United States. Currently, the fee is 0.40% per sale.
International Service Access Fee: This is a Visa fee charged on sales in the United States using a credit card issued outside the United States. Currently, the fee is 0.40% per sale.
International Service Fee: This is a Discover fee charged on sales in the United States using a credit card issued outside the United States. Currently, the fee is 0.45% per sale.
Independent Sales Organization (ISO): Another name for a registered Member Service Provider (MSP). ISO’s represent the Acquiring Bank in building and maintaining merchant portfolios. (see Member Service Provider)
Issuing Bank: The financial institution that issues Visa™ or MasterCard™ credit or debit cards to the cardholders (your customers). If you look at your own credit or debit card, you will see the issuing bank’s name on either the front or the back of the card. Discover™ and American Express™ are both card associations and the card issuers.
J:
Japanese Credit Bureau (JCB): A credit card issued in Japan that has become more widely accepted in the United States in recent years due to the growing number of Japanese business people traveling and working here.
K:
L:
M:
Maestro: A national debit network owned by MasterCard.
Magnetic Stripe: A stripe on a bankcard that is magnetically encoded with Cardholder account information.
Mail Order/Telephone Order (MO/TO) Transaction: For MO, a Transaction that occurs when the Cardholder uses the mail to make a purchase from a Merchant and for TO, a Transaction that occurs when the Cardholder uses a telephone to make a purchase from a Merchant.
MAP (Merchant Account Provider): The company the merchant signs up with to do the card processing. This could be an acquirer/processor, a financial institution, or an ISO. Generally, it is the company whose name is on the merchant agreement.
MasterCard: MasterCard International Incorporated.MasterCard International Incorporated: A public international bankcard association governed by a board of directors that licenses members to issue cards and/or accept merchant drafts under the MasterCard Program. MasterCard owns and operates its own international processing network.
MasterCard Support Fee: This is a MasterCard fee charged on sales in the United States using a credit card issued outside the United States. Currently, the fee is 0.55% per sale.
Member: An entity or financial institution that registers to be a member of VISA USA and/or MasterCard International. Once registered, a member is licensed to issue credit cards to cardholders.
Merchant: Any business that has met the qualification standards of MasterCard and/or VISA, has been approved by any acquiring member, and accepts MasterCard and/or VISA cards as payment for goods and services.
Merchant Agreement (Merchant Processing Agreement): Any agreement that Merchant has entered into for processing services, which agreement is either with Servicer or another entity that, directly or indirectly, transferred its rights under such agreement to Servicer.
Merchant Application: Any document containing information regarding Merchant’s business that is submitted to Servicer and Member in connection with Merchant’s application for processing services, including any additional location form(s) and any documents submitted by Merchant as a part of the bid process, if applicable.
Merchant Category Code (MCC): Code used by MasterCard to identify what products and services a merchant offers.
Merchant Discount Rate: The fee charged to a merchant for processing credit card transactions. Also called “Discount Fee,” “Base Rate or Fee,” “Monthly Rate or Fee,” or just “Rate” or “Fee.”
Merchant Identification Number (MID): Each merchant is assigned a unique identification number that is used to locate information concerning the merchant and their accounts.
Merchant Service Provider (MSP): Usually an independent salesperson, office or company who contracts with a bank or a processor to sell credit card processing, equipment, and services to the merchant, and sometimes provide back office functions such as settlement and chargeback/retrieval management, equipment-related customer service, paper storage and retrieval, and supplies. Also known as Independent Sales Organizations (ISOs)
Minimum Discount Fee: The minimum discount fee a merchant agrees to pay each month based on his or her expected sales volume. A merchant will be charged the actual amount of fees generated or the minimum discount fee, whichever is greater.
MO/TO: Mail Order/ Telephone Order.
N:
NABU (Network Access and Brand Usage) Fee: MasterCard implemented this per-item fee in April, 2009 for all U.S. based sales and credit/refund transactions. Currently, this fee is 1.85 cents per sale and refund.
Non-Qualified Rate: The discount rate level at which the transaction qualifies when it did not meet any of the qualifications for the other lower rates. All paper merchants will qualify at this level, as will all business cards.
O:
Off-Line Debit Card: A debit card that does not deduct funds from the checking account immediately. Transactions are processed like a regular credit card and funds are not deducted for 24-72 hours. No Personal Identification Number (PIN) is needed to process the transaction.
On-Line Debit Card: A debit card that deducts funds from the checking account immediately. A Personal Identification Number (PIN) is needed to process the transaction so the merchant must provide a PIN pad that faces the customer.
P:
Payment Card Industry (PCI) Data Security Standard: The data security regulations, including maintaining Cardholder account data in a secure environment, and other data security best practices endorsed by the major card associations including Visa and MasterCard, as such may be amended from time to time. Visa requires that Merchants and their agents comply with CISP. MasterCard requires that Merchants and their agents comply with SDP.
PCI Fee: Some merchant account providers charge a Processing Card Industry fee to cover the cost they incur to perform certain functions to test and monitor merchant PCI compliance.
Per-Transaction Fee (or per-item): A fee that can be charged to a merchant for each transaction that is processed. Not all merchants are charged this fee, depending on their merchant agreements.
Personal Identification Number (PIN): A number that must be entered by the customer before an ATM will allow access to the customer’s bank accounts. Also used at a retail establishment when a customer pays for a purchase with an ATM or on-line debit card.
PIN Pad: A secure device with an alphanumeric keyboard which conforms with the Laws, Payment Network Regulations, and requirements established from time to time by Servicer, and through which a Cardholder may enter a PIN.
Point Of Sale (POS): The actual location where a transaction takes place. For example, when a retail purchase is made, the store is the point of sale.
Point Of Sale (POS) Terminal: A device at the merchant’s establishment that connects via telecommunication lines to a central computer. Authorization, recording, and transmitting of transactions performed through the terminal.
Processing: The procedure by which the merchant sends the information about each credit card transaction to the Issuing Bank.
Processor: This is the company with the big computer/server system that routes the card transactions to the card association network which in turn routes the transaction to the issuing bank or directly to American Express™ for authorization.
Purchasing Card: A card encoded with additional information that can be gathered and supplied to a company by the Issuing Bank. A bank that has a contract with the company issues the cards and they look just like a regular VISA or MasterCard. Purchasing Cards are used mainly for B2B or by the government for food stamps and other government programs.
Q:
Qualification Level: Each transaction is assigned a Qualification Level at Interchange. The level assigned depends on how well the transaction met the requirements for the merchant’s industry. For example, for a retail merchant’s transaction to be assigned the Qualified level, the card must be swiped, the terminal must be settled each day, and all other criteria for that level must be met.
Qualified Rate: The discount rate level at which the transaction best qualifies when it meets all card brand requirements.
R:
Recurring Transaction: A transaction charged to the cardholder (with prior permission) on a periodic basis for recurring goods and services, i.e., health club membership, book-of-the-month clubs, etc.
Reference Number: The number identifying each transaction on the monthly statement sent to the Cardholder. The reference number is used if a retrieval request becomes necessary.
Retrieval (Request): A request by the Issuing Bank to the Acquirer for a copy of the actual sales slip from a transaction. The initial step that the Issuing Bank takes when either the Issuing Bank or the Cardholder disputes a transaction and a request to retrieve information is sent through the Acquirer to the merchant to provide the sales slip. A sales slip can be requested for a number of reasons, including:• The cardholder is questioning a sale • The cardholder needs a copy for tax purposes • The Issuing Bank is questioning a sale.The merchant has a certain time frame in which to respond with the retrieval request. If the request was in support of a disputed sale and the merchant fails to respond within the allotted time, the dispute will be resolved in favor of the cardholder, resulting in a chargeback to the merchant. (A request for tax purposes cannot result in a chargeback.)
Rewards Card: This type of credit card offers some type of reward to the cardholder for using the card on a regular basis. Rewards can be a small percentage of cash back, discounts at local stores, gas cards, frequent flyer miles, or chances to earn points that can be used for gifts and services selected by the credit card company.
S:
Settlement or Settling: The sending through the Interchange of the credit card transactions accumulated by the merchant in the terminal or Host so the merchant can be paid for them.
Smart Cards: The Smart Card, also known as the Chip Card, contains a computer chip embedded in the plastic. When read by a special terminal designed to interact with the embedded chip, the card can perform a number of functions or access data stored in the chip. These cards can be used as cash cards or as credit cards with a preset credit limit.
Standard Rate: The discount rate level at which the transaction qualifies when it did not meet any of the qualifications for the other lower rates. All paper merchants will qualify at this level, as will all business cards.
Swipe: Running a credit card’s magnetic stripe through a reader that interprets the data encoded on it.
T:
Terminal Identification (TID) Number: The unique number assigned to each point of sale terminal that tells the processors Host which merchant a transaction came from and where an authorization is to be sent.
Terminal Provider: A company that supplies credit card hardware and software to a merchant
Terminated Merchant File (TMF): A file listing of merchant’s names and their principals whose bankcard relationship has been terminated for some reason by an acquirer. Operated jointly by MasterCard and Visa
U:
V:
Visa: A national association, public company governed by a board of directors, that licenses its members to issue VISA cards and accept VISA sales drafts. VISA owns and operates an international processing system and provides a number of various services to its members, Cardholders and merchants.
