Glossary of Terms

Acquirer: A Visa / Master Card Affiliated Bank or Bank/Processor alliance that processes credit card transactions for businesses and is always looking to acquire new merchants.

Address Verification Service (AVS): As part of a keyed credit card authorization, the cardholder’s given address is compared to the card issuers’ records to deter fraud and ensure accuracy. The result of the authorization is determined with a code given by the terminal. The most favorable interchange rates are given when the information matches completely.

Adjustment: A processing error is corrected by adjusting it with the acquirer. The adjustment could occur due to duplication or a chargeback (cardholder dispute). The dollar amount of the adjustment is debited or credited to the merchants DDA account.

Authorization: The card is verified to ensure that it has sufficient funds (credit) to cover the transaction amount. Every sale has an authorization. The POS equipment will show an approval response in the form of a code that comes from a card issuing financial institution that can verify availability of funds to make the purchase. See also Point of Sale.
Approval -- Transaction was accepted.
Decline -- Transaction was not accepted.

Authorization Code: A code that a credit card issuing bank gives back in an electronic message sent to the merchant's POS equipment that notes approval of the transaction. The code serves as proof of authorization.

Auto Close: Terminal feature that allows an automatic end-of-day batch closing at a specified time, without having to be initiated by the merchant.

Automated Clearing House (ACH) File: A file with directions for the exchange and settlement of electronic funds passed between financial institutions. It represents debits and credits to be deducted from an account automatically as they occur.

Average Ticket (Average Sale): The average amount of a merchant's regular sale. The average ticket amount can be found by dividing the total sales volume by the total number of sales over a specific period of time

Bankcard: A credit card given by a Visa or MasterCard-sponsored financial institution. (American Express, JCB, Discover, Diners Club, etc., are issued directly from their respective operations, not through banks.)

Batch: Captured credit card transactions that are accumulated awaiting POS settlement.
Call Center -- response needs more information, merchant needs to call the toll-free authorization phone number.

Capture: The submission of an electronic transaction for financial settlement. Authorized credit card sales need to be captured and settled in order for a merchant to receive funds for those sales in a timely manner. See also Settlement.

Cardholder: Any individual that holds a payment card account (bankcard or otherwise). Individual that uses a credit card to purchase goods and services.

Card Issuing Bank: EFT Network Member-Bank that has a credit card or debit card "purchasing service" for account holders. Example: Citibank and the Citibank Visa Card that they issue.

Card Not Present: A transaction in which the card is not present at the time of the sale (mail order or telephone order). Credit card data is entered manually into the terminal, instead of swiping a card's magnetic stripe through the terminal.

Chargeback: The event of a credit card transaction being billed back to the merchant after the sale has been settled. Chargebacks are initiated by the card issuer on the behalf of the cardholder. Most cardholder disputes involve delivery failure or dissatisfaction in the product or service. Cardholders are urged to obtain satisfaction from the merchant before disputing the charge with the credit card issuer.

Close Batch: The process of sending a batch for settlement.

Code 10 Authorization: A code 10 is used if you suspect a card is fraudulent at the time of the transaction. The merchant can call their voice authorization phone number and ask for a code 10. The voice operator will then instruct the merchant on how to proceed.

Corporate Card: Credit or charge cards that are issued to businesses to cover business expenses such as travel and entertainment. It includes the multiple payment card brands of purchasing cards, corporate cards, business cards, and multi-utility fleet cards. Visa and MasterCard have special procedures for passing billing information back to the card issuing bank so that it is 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, or a higher pass through fee will be incurred.

Credit (Reversal): Void of an authorized transaction (sale) that hasn’t been settled. If supported by the card issuer, a reversal will automatically "undo" an authorization and return it to the open-to-buy balance on the cardholder's account. Some card issuers do not support reversals.

DDA Account: Demand Deposit Account, where funds are deposited and fees are withdrawn. It is otherwise known as the merchant's home town bank account.

Debit Card: Payment card in which funds are withdrawn directly from the cardholder's checking account at the point of sale (online debit on a Debit Network) or after batch settlement (off-line debit on a Credit Card Network).

Discount Rate: Percentage of sales amounts that the bankcard acquirer or T&E card issuer charges a merchant for the settlement of the transactions.

Electronic Date Capture (EDC): Process of electronically authorizing, capturing & settling a credit card transaction.

Footer: This is the text printed at the bottom of a sales receipt. A merchant can customize the footer (i.e., Have a Nice Day, No Refunds or Exchanges, Thank You for Shopping With Us, etc.). A recommended terminal for this is the Nurit 2085.

Interchange: Interchange is the standardized electronic exchange of financial & non-financial data that is associated with sale and credit data between the merchant acquirers and card issuers on varying types of MasterCard and Visa transactions.

Interchange Fee: This is a fee that is paid by an acquirer to an issuer for transactions that are entered into interchange. The interchange fee is a percentage applied to the dollar value of each transaction, according to Visa/MasterCard regulations. There are many categories of interchange. Both Visa and MasterCard each have their own criteria for their own categories. A transaction needs to meet the specified criteria for a category in order for that category's rate to be applied. Transactions are analyzed individually, so varying interchange rates may apply within a single batch of transactions.

Internet Service Provider (ISP): The Web Site Hosting company that provides a home for merchant’s web site. They usually resell and/or support the services of a Secure Gateway Provider and/or ISO or Agent or Bank.

Issuing Financial Institution: Financial institution that gives credit to a cardholder through a bankcard account. The financial institution issues a credit card to a cardholder and bills the cardholder for purchases against the bankcard account. It’s also referred to as the cardholder's financial institution.

Manual Close: This type of batch close must be initiated by the merchant on a daily basis, instead of an auto close at a pre-set time.

Merchant: A business that has the capability to accept credit cards. A merchant is also customer of a processor/acquirer.

Merchant Identification Number (MID): This unique number is generated by a processor/acquirer and is specific to individual merchant locations. This number is used to verify identity of the merchant during processing of daily transactions, rejects, chargebacks, adjustments, end-of-month processing fees, etc.

Magnetic Stripe: The magnetic tape attached to the back of credit cards that contains identifying data, such as account number and cardholder name.

Mail Order/Telephone Order (MOTO): Mail, email, or telephone transactions that are keyed in. Card-not-present transactions.

Network: A Company and a system that are used to authorize and capture credit card transactions.

Non-Qualified Transaction Fees (NON-Qual): Bankcard sales transactions that don’t meet the set Visa/MasterCard criteria for that particular merchant and are processed at a higher interchange rate. An example of this is a merchant that is retail (card present) who processes a card-not-present transaction (manually enters card data instead of swiping the magnetic stripe through the terminal). The merchant will pay the difference between what they should have paid on retail and what the transaction actually qualified for (card not present). This difference is called a non-qualified interchange fee.

PC Software: A software program that is created to perform a specific function on a person’s computer. Examples would be accounting systems, order entry and fulfillment, manufacturing systems, ticketing, reservations, etc. The application is built or purchased by the merchant, and needs to be interfaced with a credit card authorization system in order to be able to utilize on-line transaction processing.

Private Label Cards: Credit, store-value, or debit cards that can be used only in a specific merchant's store. Private label cards are also known as proprietary cards.

Point Of Sale (POS): The location where a credit card transaction is performed with the cardholder present, like a retail store. The card is magnetically read, and the cardholder's signature is needed as insurance against the transaction. The most secure transaction possible.

POS Terminal: Equipment that is used to capture, transmit and store credit card transactions at the time of sale.

Processor: The company that routes an Authorization Request from a point of sale device to Visa or Master Card, and then arranges for Fund Settlement to the merchant. They are traditionally accessed via direct dial out modems connecting to the system.

Processing Network (Vendor): The medium of data transport between the merchant application and the card processor. This company authorizes and captures credit card sales.

Procurement/Purchasing Cards: Charge cards that are utilized by businesses to cover purchasing expenses, such as raw materials and office supplies.

Reserve Account: A reserve account is one method that ACH Processor's use to mitigate risk. Processors require that merchants maintain a Reserve Account at the Processor's Sponsoring Bank. This allows the Processor to put a hold on funds in this account in the event that fraud has been detected or a large number of returns is received. Merchants with good credit and business history can usually meet the expectations of ACH Processors for covering returns and are not always required to keep a reserve account. In the cases where a reserve is required, the minimum-reserve-balance in the account is set at 20% of the anticipated processing volume. New merchants are allowed to build up their reserve by sending in transactions which are not withdrawn until the minimum reserve balance is reached; after that, the merchant is allowed to withdraw the excess funds for transfer to their home town bank.

Sales Draft (Ticket): A receipt showing an obligation on the cardholder's part to pay money (i.e., the sales amount) to the card issuer. This is the paper that is signed when making a purchase by credit card. Sales draft data can be captured electronically and sent to be processed over the phone lines. Also see Electronic Data Capture.

Secure Payment Gateway: Secure Payment Gateway companies assist other Processors in conducting secure business on the internet using Secure Socket Layer (SSL) technology. A system is provided that passes credit card data, authorization requests, and authorization responses over the internet using encryption technology.

Settlement: A batch is sent to the network for processing and payment. For non-bankcards, the merchant is paid directly from the issuer (less applicable fees) and then bills the cardholder. For bankcards, the acquirer pays the merchant (less applicable fees) with funds from Visa/MasterCard. The bankcard issuer in turn bills the cardholder for the amount of the sale. Also see Capture.

Shopping Cart Software: -This application provides a means of capturing a customer’s Credit Card information, but they rely on the Software Module of the Secure Gateway Provider, in conjunction with the Secure Payment Gateway, to conduct secure Credit Card transactions online. Any shopping cart can work with any Secure Gateway Provider. The only requirement is that some computer code be written or provided to communicate with the Secure Gateway of choice, and that this code be integrated into the Shopping Cart Application.

Smart card: A credit-type card that stores account information electronically in the card itself.
Software: A POS Terminal Application, PC, or Internet Application that runs transactions and associated administration.

T & E Cards: Credit or charge card used by businesses for travel and entertainment expenses. Examples of these cards are American Express, DIners Club, Carte Blanche and JCB. Also see Corporate Card.

Terminal: Equipment used to capture, transmit and store credit card transactions.

Terminal Identification Number (TID): A unique number assigned to each POS terminal.

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