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Glossary of Terms

Acquirer
A member of the Visa/MasterCard Associations who enters into a merchant agreement and then processes the merchant’s transactions into Interchange.
AMEX
American Express. Has 2 main acquiring programs. ESA is a direct program in which merchants are credited for and billed directly by American Express for accepted volume. OnePoint is a full-acquiring program in which the third party processor credits and bills the merchant on behalf of American Express
Approval Code
The process in which the merchant obtains approval for a credit/charge transaction at the point-of-sale. Bank cards are authorized for three main reasons: to control cardholder’s line of credit, to reduce fraud losses, and to reduce the likelihood of chargebacks. The Approval Code is displayed on each receipt.
Authorization
The process in which the merchant obtains approval from the card issuing bank for a credit/ charge transaction at the point-of-sale.
Average Ticket
The average dollar amount of each merchant bankcard transaction. Generally used to determine pricing.
Basis Points
A basis point is 1/100th of a percent. 50 basis points (sometimes indicated as “bps”) is 1/2 of 1% or .50 numerically.
Batch
Usually a day’s worth of transactions, including sales, credits (refunds), voids, etc. to be processed by the acquirer. Term used primarily when referring to Electronic Draft Capture merchants.
Cardholder
A person who wishes to use a bank card as a convenient way of payment that provides immediate credit, nearly universal acceptance, and the protection of not
Card Processing Fee
A fee charged to the merchant by either their merchant bank or third party processor. The processing fee is often a part of the overall discount rate paid by the merchant for processing services.
Chargeback
A transaction that is challenged by a cardholder or card issuing bank and sent back through Interchange to the merchant bank for resolution.
Check Guarantee
A service which guarantees payment of a check, up to a defined limit, provided the merchant follows proper steps in accepting the check.
Check Verification
A service which accesses a database of bad check writers to confirm the check writers has not previously written any bad checks. This service then relays this information to the merchant electronically.
Credit Card
A card used as a form of payment. A credit card balance may be reduced over time with set minimum payments every billing period. A finance charge set at a certain percentage rate is charged to the amount carried over to the next pay period.
DBA
(Doing Business As) Refers to the name a business uses for marketing purposes. The name a business is “known as” – often the same as their legal/ IRS name, but not necessarily.
DDA
(Demand Deposit Account) Refers to the checking, savings, or money market account a merchant uses to accept deposits and debits for processing services.
Decline
A authorization response notifying a merchant that a sale may not be completed because the cardholder does not have open to buy availability on his/her credit card account, card is expired, or stolen, etc.
Discount Rate
The fee an acquirer charges a merchant to process their daily credit card deposit transactions.
eCommerce
Refers to merchants that have an Internet presence and accept electronic payments that are initiated by cardholders via the Internet.
EDC
(Electronic Draft Capture) A technology where a terminal electronically captures data for authorization, balancing, and submitting for settlement.
Expiration Date
The date embossed on a credit card that indicates the last day the card may be used.
Equipment Lease
A financial transaction, separate from the merchant agreement, in which the third party processor supplies a financing relationship to a merchant for the purpose of financing POS equipment.
Gateway
A Internet portal which provides secure transmission of electronically captured transactions. Can be used in conjunction with ecommerce merchants and/ or POS equipment.
Gross Deposit
(Also known as Monthly Discount.) Submitting bankcard sales and credits at the face amount. The discount is later deducted by the acquirer.
Imprinter
A hand or electronic machine which overlays the merchant’s name and ID number on sales drafts, as well as the cardholder’s name and card number. (Utilized as a last resort when EDC is not available.)
Interchange
The system through which Visa/MasterCard/Discover members exchange authorization, processing, and settlement information.
ISO
(Independent Sales Organization) See Third-Party Processor.
Issuer
Cardholder’s bank or the bank which has issued a MasterCard, Visa, or other credit card to an individual.
MO/TO
(Mail Order/ Telephone Order) A merchant who does not accept face-to-fact or ecommerce transactions.
Merchant Authorization
The means of receiving sales validation for the merchant, by telephone or authorization terminal, to guarantee payment to the merchant.
Merchant Bank
Participating merchant banks sign up merchants (stores, restaurants, and other retail establishments) to accept bank cards. A merchant bank will quote discount rates, develop merchant service relationships, and settle transactions through the Interchange network.
Merchant Fraud
The act of submitting sales drafts which are not the result of legitimate sales for the purpose of defrauding the services, the client bank, or individual cardholders. Fraud includes knowingly accepting lost, stolen, or counterfeited credit cards.
MID
(Merchant Identification Number) A number assigned to a merchant as a reference for accessing and monitoring their account.
Net Payment
Payment to the client for sales drafts less credits minus the appropriate client’s discount fee. (Also referred to as Daily Discount.)
Off-line
An operating mode in which terminals are not connected to a central computer source for period of time. The current active files are not being authorized until a later time.
Payment Processing
The process by which transactions are settled.
PCI-DSS Compliance
(Payment Card Industry–Data Security Standards) a set of requirements for enhancing payment account data security. These standards were developed by the PCI Security Standards Council, which was founded by American Express, Discover Financial Services, JCB International, MasterCard Worldwide and Visa, Inc. to facilitate industry-wide adoption of consistent data security measures on a global basis. The standard aims to increase awareness and promote best practices in the handling of sensitive information as a means to minimizing identity theft and fraudulent transactions.
POS System
(Point-of-Sale System) An electronic system which accepts financial data at or near retail selling locations (store check-out) and transmits that data to a computer or authorization network for reporting activity, authorization and transaction logging.
POS Terminal
A device placed in a merchant location which is connected to the bank’s system via telephone or Internet and is designated to authorize, record, and forward data by electronic means for each transaction.
Private Label Card
A credit card that can be used only by the specific store that issued it.
Retrieval Request
Request of the merchant to provide a legible reproduction of a sales draft. Most chargebacks begin as retrieval requests.
Residuals
The rolling profit acquired from each active merchant account. It is made up of the fees that are billed in excess of Schedule A expenses.
Schedule A
Addendum to the Agent Agreement which details itemized expenses for services to be resold by the Sales Agent.
Settlement
The process by which transactions are financially accounted for. Merchants are paid, fees are calculated, and cardholders are deducted.
SIC Code
(Standard Industrial Classification Code) Indicates what industry a business establishment is classified as.
T & E Card
Travel & Entertainment card that typically requires payment in full each month. Examples are American Express & Diner’s Club.
Terminal
A device that has many varied uses depending on the model. These uses may include transaction authorizations, terminal date capture, and end-of-day submission.
Third Party Processor
Service bureaus in the transaction processing business. Many third party processors have formed their own sales force which sell directly to merchants in competition with merchant banks for control at the point-of-sale.
TIN Validation
(Tax Identification Number) Validation. An IRS requirement as of 2011 in which acquirers are responsible for verifying that each merchant account contains proper IRS reporting name and Tax ID number.
Transaction Fees
A per item fee set by the bank card associations as part of their total Interchange fees. This fee is paid to the card issuing bank along with the base rate fee as a remittance for incurred expenses.
VISA/ MasterCard Agreement
A written agreement between a merchant and a bank containing their respective rights, duties, and warranties with respect to acceptance of bank cards.
Voice Authorization
Instead of electronically calling out for an authorization, the merchant dials in manually and speaks with the credit card operator.
Void
The total elimination of a captured transaction in a terminal as a result of a clerical error or customer cancellation while still at the point-of-sale.