Automated Clearing House (ACH): An ACH transaction is an electronic fund transfer that is routed through the Federal Reserve Bank from a checking or savings account.
ACH Reject: This occurs in the midst of processing a credit card transaction when a bank tries to deduct funds from a cardholder’s account, but there are insufficient funds in the account to cover the charge. An ACH ‘reject’ is similar to an overdraft in a personal checking account.
Acquiring Bank or Processor: A financial institution that maintains agreements with merchants for the sole purpose of accepting credit card payments.
Address Verification System (AVS): A fraud-protection tool in credit card processing equipment which verifies that the billing address provided by the cardholder matches the address on file at the card-issuing bank. Because we do not have the ability to verify the shipping address, delivery to alternate addresses is not recommended.
Authorization: Formal authorization by a cardholder’s bank of an approved credit card transaction.
Authorization Fee: A fee charged by the acquiring bank to send transaction information through the card association’s network and return an approved or declined response.
Batch: A file within the merchant’s card processing equipment that stores all authorized transactions pending settlement until end of day when the batch closes (also see batch settlement).
Batch Settlement: The current (open) batch in the merchant’s card processing equipment is sent to the processor in one file at the end of the day, or other designated time period. Transmitted batches are often referred to as closed batches. Once received, the processor finalizes the transaction and transfers funds to the merchant’s bank account. A batch can be closed manually by the merchant but most equipment is set up to automatically settle at a specified time each day.
Card Associations: A card association is a network of issuing banks and acquiring banks that process payment cards of a specific brand. Familiar examples include Visa, MasterCard, Discover and American Express.
Card-Not-Present Transaction: A transaction where the cardholder or the card is not present; thus, the card cannot be swiped at a terminal for authorization. Card-not-present transactions include those conducted over the Internet, by phone or by mail.
Card-Present Transaction: A face-to-face transaction where the cardholder and the card are present; thus, the card can be swiped at a terminal for authorization or an imprint can be taken of the card and the cardholder is present to sign the receipt.
Cardholder Information Security Program (CISP): Visa’s program to ensure compliance with the Payment Card Industry Data Security Standard (PCI DSS).
Chargeback: Occurs when a customer contacts their card-issuing bank to dispute a transaction on their statement. The most common chargeback reasons include fraud, merchandise not received and customer dissatisfaction.
Custom Payment Services (CPS): A qualification that applies to a broad range of Visa fees that represent the lowest rates for a given category.
CVV2, CVC2 or CID: Card Verification Value 2 (CVV2), Card Validation Code 2 (CVC2), and Card Identification (CID) numbers refer to the 3-digit numbers on the back of Visa, MasterCard and Discover cards, and the 4-digit number on the front of American Express cards. Like AVS, the card code verification tool accepts or rejects transactions based on the code provided by the cardholder. This tool is used primarily for Internet, phone and mail order transactions.
Debit Card: Debit cards are used in place of cash or checks to pay for purchases. The cardholder must enter a PIN number to enable a transaction, which involves withdrawal of funds from his or her checking account. Debit cards look like credit cards, but, unlike credit cards, they are not attached to a line of credit.
Debit Transaction: A transaction involving a debit card.
Decline: A transaction that is rejected for payment by a cardholder’s bank.
Discount Rate: This is essentially a fee, calculated as a percentage of a sale (including shipping and handling charges plus taxes) and charged by an acquiring bank to process a credit card transaction. A merchant service provider extends the discount rate to their customers.
Domain Name: A name that corresponds to the numeric address of a computer linked to the Internet; domain names are easier to remember than a long numeric address. A domain name is often the same as that of an organization and appears in its full website address. For example, “Google” is the domain name in the following address: www.google.com.
Durbin Amendment: A provision of the United States federal law that limits the amount card brands can charge through interchange on certain debit card transactions. It was passed as part of the Dodd-Frank financial reform legislation in 2010.
Effective Rate: A percentage rate that is calculated by taking total processing fees divided by total processing volume. Note: some pass through fees from the networks are assessed in later months so make sure you are applying them correctly in your calculations. Including occurrence fees such as one-time chargeback or change fees can also make the rate appear higher than it really is.
Employer Identification Number (EIN): This is the business equivalent of a Social Security number but the Internal Revenue Service will issue an EIN to anyone, including individuals, who must pay withholding taxes on employees. This tax identification number can also be referred to as the TIN.
EMV: EMV cards are smart cards that store their data on chips in addition to magnetic stripes. The cards must be physically inserted into a reader.
Interchange Fee: A fee set by credit card associations and paid by the acquiring bank to the cardholder’s bank to cover the cost of converting a charge on a cardholder's card to a cash deposit into the merchant’s checking account, as well as additional costs and profit. The interchange fee is included in the discount rate merchants pay to the acquiring bank or merchant service provider for processing credit card transactions.
Issuing Bank: A bank issuing credit and/or debit cards.
Merchant Account: An account with an acquiring bank that enables a business or other organization to accept credit cards. The payment gateway is usually provided in conjunction with the merchant account but it is a separate service.
Merchant Identification Number (MID): A unique number an acquiring bank assigns a merchant identifying his or her business.
Mid-Qualified Transaction: A transaction awaiting authorization of the billing address by the cardholder’s bank, special card types such as government or corporate cards or a transaction keyed into a POS terminal (rather than registered in a swipe). Qualified, mid-qualified and non-qualified all refer to the discount rates assessed by an acquiring bank in a tiered pricing model. The mid-qualified rate is higher than the qualified rate, but lower than the non-qualified rate because the transaction partially qualifies.
Monthly Minimum Fee: A charge assessed by the acquiring bank when the monthly minimum requirements to cover maintenance costs for a merchant account are not met. The total dollar amount paid for the discount rate on all transactions is calculated at the end of the month. If the total is less than the monthly minimum fee, the merchant is charged the difference.
Non-Qualified Transaction: A transaction that does not meet qualifications for authorization by the card-issuing bank such as receipt of a valid billing address or completion of batch settlement within three days. Qualified, mid-qualified and non-qualified all refer to the discount rates assessed by an acquiring bank in a tiered pricing model. Non-qualified is the highest rate because the transaction does not meet CPS qualifications.
On File Fee: Acquiring banks and merchant service providers charge this fee to merchants for generation of a monthly statement, including detailed information about their monthly transactions. Other names for this fee can be statement fee, customer service fee or monthly service fee.
Payment Card Industry-Data Security Standards (PCI-DSS ): PCI-DSS is a set of standards created by card associations including Visa, MasterCard, American Express and Discover to promote secure handling of credit card data. It is required that every merchant comply with the standards set forth within PCI-DSS. Throughout the course of each year, every merchant must go through a questionnaire and potentially a system scan to ensure that they are complying with these standards. There are programs available to assist you in this process. Please call our team for more information related to PCI-DSS or visit the official PCI Website at http://www.pcisecuritystandards.org/.
Processor or Acquiring Bank: A financial institution that maintains agreements with merchants for the sole purpose of accepting credit card payments.
Purchase Cards: These are essentially credit cards used by employees of businesses (where they are often called “company credit cards”), government agencies or other organizations. Purchase cards work like credit cards, but often carry restrictions for employees on where they may be used.
Qualified Transaction: A transaction that qualifies for an acquiring bank’s lowest discount rate. Qualified, mid-qualified and non-qualified all refer to the discount rates assessed by an acquiring bank in a tiered pricing model.
Retrieval Request: Occurs when a cardholder’s bank asks a merchant for documentation of a sale. Retrieval requests are generated for a variety of reasons, including cardholder disputes, point-of-sale errors or fraud inquiries. A retrieval request is not a chargeback but could lead to one if sufficient documentation is not provided.
Secure Socket Layer (SSL): A communication protocol that permits secure transmission of sensitive information, such as credit card details, over the Internet.
Statement Fee: Acquiring banks and merchant service providers charge this fee to merchants for generation of a monthly statement, including detailed information about their monthly transactions. Other names for this fee can be on file fee, customer service fee or monthly service fee.
Terminal ID Number (TID): A number assigned by an acquiring bank or merchant service provider to a merchant’s terminal device or POS system.
Truth Lending Act of 1968: A Federal Law implemented by the Federal Reserve in 1968 to protect all U.S. cardholders in their dealings with lenders and creditors.
Void: Occurs when a merchant reverses an approved transaction before settlement.