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Glossary of Credit Card Processing Terms

A

Automated Clearing House (ACH): A credit and debit processing organization that clears and settles electronic debit and credit transaction with other organizations or associations.

Acquirer: A merchant bank or financial institution that initiates and maintains credit card processing agreements with merchants so they can accept and process Visa and MasterCard transactions.

Address Verification Service (AVS): AVS helps reduce fraud on card not present transactions. Merchants use AVS to verify a cardholder’s billing address on keyed “card not present” transactions (internet, mail or phone).

Annual Fee: Yearly account fee charged by some merchant service providers. (Also referred to as membership fee, risk assessment fee)

Application Fee: Onetime fee to cover cost of merchant account approval and paperwork processing.

Authorization: The financial institution that issued the cardholder’s Visa/MasterCard or “issuer” provides an authorization code verifying the credit card is valid and credit is available for the sale amount. A temp hold on funds or “soft charge” will automatically fall off the cardholder’s card after 4-5 business days if the merchant does not capture or settle the authorized transaction.

Authorization Code: Authorization code provided by card issuer verifying card is valid and credit is available. See Authorization.

Automatic Bill Payment: An agreement between a merchant and a cardholder that allows recurring automatic charges for a service, subscription, or membership.

B

Basis Points: 1/100th of a percentage point.

Batch Processing: A merchant’s credit card processing terminal or software will batch out usually once a day and send all of the transaction data to the processor for settlement. This usually happens after the close of business each day.

C

Card-Not-Present: Keyed credit or debit transactions that are processed from mail, phone or internet sales.

Card Present: Swiping a credit card through a terminal or using a manual imprinter to capture an imprint and signature.

Cardholder Information Security Program (CISP): A standard of rules that companies must follow in order to be compliant that store or process cardholder information and credit card data.

Chargeback: A reversal of a credit or debit transaction due to cardholder dispute.

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CVV2: Three digit security codes printed on the back of most Visa, MasterCard and Discover cards. On American Express it’s 4 digits and located on the front right top corner. By asking a customer for this code it usually means they have it on their person.

D

Discount Rate: A fee charged by the processor that is based on a percentage of the total transaction amount. Normally accompanied by a transaction fee. The average discount rate for a qualified swiped transaction is 1.75%-1.99%; keyed qualified transactions can range from 2.20%-2.50%.

G

Online Payment Gateway: A browser based application that allows a website or its shipping cart to authorize credit card transactions in a real time, secure environment. The online payment gateway connects the shopping cart to the processor.

Gateway fees: Monthly charge for online payment gateway and secure server access. Average gateway fees range from $15-$40 per month with a $0.10-$0.25 per transaction fee for Address Verification Service (AVS).

I

Imprint: the impression of the front of a credit card on a paper receipt made by a credit card imprinter. Used by a merchant that processes face to face transactions but does not have a terminal that prints receipts.

Imprinter: A manual imprinter allows a merchant to capture an imprint of the credit card and customer signature on a credit card receipt. This should be kept on file as proof of authorization in case of a dispute or chargeback.

Internet Merchant Account: A internet merchant account allows the merchant to accept credit card payments from customers over the internet.

Issuing Bank: approves and Issues the credit or debit card to the cardholder.

K

Keyed: A “keyed” transaction is one that is manually entered on a terminal keypad or credit card processing software like an online payment gateway.

M

Member Alert To Control High Risk Merchants (MATCH): Electronic bulletin board used to track merchants whose accounts have been reported as “terminated” by other processors.

Merchant Bank: Financial institution (acquirer) that provides Visa/MasterCard processing services and support

Monthly Minimum: The discount rates & transaction fees on Visa/MasterCard transactions must add up to this amount each month or the processor will charge the merchant the difference. Monthly minimums range from $15-$25 a month.

Monthly Bank Statement: Monthly statement mailed or e-mail by the processor to the merchant that reflects the previous months transaction activity to include all rates, fees, and adjustments.

MOTO: Mail or telephone orders

P

Programming Fee: Charged by a merchant services provider for programming your credit card terminal.

R

Reserve: An additional percentage in addition to the normal discount rate a processor will hold back due to a merchant’s prior processing history or if their business is deemed of higher risk than normal.

Retrieval Request: When a cardholder disputes a credit card transaction with a merchant the issuing bank will initiate a retrieval request for transaction information. The merchant will normally have to provide proof of authorization, shipping and other information requested.

S

SSL Certificate: Certificate installed on a secure server which is used to identify the user (merchant) and encrypt the credit card data and other sensitive information.

Secure Sockets Layer (SSL): Encrypts the flow of data between web server and browser to ensure all sensitive information is only accessible by the parties involved.

Standard Industry Code (SIC): The SIC code is a four digit, numeric identifier used to identify a business or organizations product and/or service.

T

Transaction Fee: A fee charged on a per transaction basis for using the network to authorize or decline a transaction.