Glossary of Credit Card Processing Terms
The world of card processing has a lot of jargon and definitions that aren’t commonly known by merchants. Capital Processing Network has created this list of definitions in order to help people understand some of the terminology used in the merchant account industry.
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Automated Clearing House. A form of electronic payment designed for electronic checks.
The bank that provides a business with a merchant account.
Verification of a credit card transaction which confirms that the card's available credit or debit limit is not exceeded.
Address Verification System. A system designed to verify that the billing address entered on a transaction, usually online, matches the address on file.
A 28% fee that can be charged by the IRS, and taken directly from settlement amounts, if the merchant account has not properly validated its TIN number.
A debit or credit card accepted by merchants.
One one hundredth of a percent. 100 basis points would be one percent. Credit card transaction fees, discounts, and downgrades may be expressed in basis points added to a tier or interchange rate.
A group of credit card transactions that are submitted for payment. Typically, a company will batch out transactions at the close of the business day, but some businesses may batch out multiple times in one day.
Payment of the interchange rate on transactions with all other fees assessed on the next month's statement.
The use of fingerprint or retina authentication for identity verification. Currently not in widespread use for financial transactions.
The point at which a credit card number is submitted for settlement.
Brand-level companies like Visa, MasterCard, and American Express, which define rules associated with using their brand for credit card transactions.
Card Not Present
A transaction performed without the physical presence of the card, such as one done over the phone or online. A "present" card would typically be swiped through a reader. Card Not Present transactions generally cost more because there is a higher risk of fraud.
Transactions where the card is swiped through a reader. These transactions usually have the lowest rates.
The owner of a debit or credit card.
A customer dispute regarding a credit card. Chargebacks may arise from fraud, customer service issues, or forgotten transactions. Most merchants try to avoid chargebacks due to the expense of the dispute process and the danger of higher fees on future transactions.
Check Imaging Device
A peripheral device that can be added to a credit card reader to verify checks on a system such as Telecheck.
A credit card machine peripheral that uses radio frequencies to read credit cards with embedded RFID microchips or phones with NFC chips to transfer data. Many fast food operations have contactless readers built into their terminals.
A bank card which accesses a line of credit which must be reimbursed. Credit cards may revolve, or must be settled on a monthly basis.
CVV or CVC
A numeric security code found on the signature line of MasterCard and Visa Cards, or on the front of American Express cards. Usually requested for online or phone-based transactions.
Subtraction of the discount rate from daily transactions. An alternative is Monthly Discount, which makes it easier to get an overall breakdown of transaction expenses.
The fee for handling a transaction. Named because it is the amount that is "discounted" from the total sale price by the credit card processor.
An inexpensive card reader that plugs into a smartphone (or tablet) headphone jack. Not all dongles are PCI-compliant, and the services that use them are generally more expensive than standard merchant accounts.
A higher rate paid for a transaction when a merchant, or sale, does not meet the requirements for the base rate.
Legislation that limits the amount that can be charged on debit transactions, the Durbin Amendment has made it more attractive for merchants to encourage customers to use Debit cards, since fees may be significantly lower than credit cards.
A card (Electronics Benefits Transfer) issued by a government agency for the payment of cash assistance or unemployment benefits. Many EBT cards have Visa and MasterCard logos and look just like standard debit cards.
The bundled rate that combines all fees including the discount rate and various assessments.
Short for Europay, MasterCard, and Visa, EMV is a standard for smart cards which is being implemented in 2013 and rolled out to merchants. Cards with electronic chips or contactless features follow the EMV standard.
Early Termination Fee. A charge that may be assessed when a business switches from one credit card processing company to another.
A credit card designed to be used for expenses related to business vehicles, such as fuel or repairs. Fleet cards may only be accepted at specific gas stations or repair shops. Voyager and Wright Express are fleet cards.
A branded payment card that can be created for in-store purchases. Merchants of all sizes can get gift cards created for their stores if they have the right credit card processing services.
Hand Keyed Transactions
Transactions entered manually into a credit card machine, either because the magnetic stripe on the card is bad or because the card is not present.
A fee held back on merchant credit card transactions to cover disputes and/or chargebacks.
The old fashioned "knuckle buster" that imprints a card number on a carbon-copy receipt.
Exchange of data between an acquiring bank and issuing bank.
Fees charged by a card association in order to pass funds and billing information between merchant banks, issuing banks, and other organizations. Interchange fees may vary by the type of card used, and these fees are typically marked up by processing companies.
Independent Sales Organization. An organization that processes credit card transactions on behalf of another entity. Most processors are Independent Sales Organizations of major banks.
The bank that issues a credit card and pays the merchant account on settlement.
Low Risk Portfolio
A grouping of merchant accounts from companies that have a lower risk of fraud or chargebacks. Capital Processing Network features a low risk portfolio.
Member Alert To Control High Risk. A list of individuals and merchants that have had merchant accounts terminated for cause. It is very difficult for merchants on MATCH to get new merchant accounts.
Typically, Merchant is used to describe a company that is accepting credit and debit cards. In the parlance of processors, "merchant" can also describe non-profits and individuals with credit card terminals, regardless of their actual business type.
A special account designed to process payments typically generated through credit card terminals, payment gateways, and other sources that process debit and credit cards.
Merchant Cash Advance
A cash advance to a merchant that is paid back based on a percentage of proceeds from debit and credit card transactions.
Merchant Identification Number. A number used to identify a merchant in a transaction.
Among tiered rates, mid-qualified rates apply to keyed (non-swiped) transactions. A mid-qualified rate can also be applied if charges are not batched in a timely manner.
A smartphone app that allows for multiple credit cards to be stored electronically. Phones with NFC chips can make payments without the physical presence of a credit card.
A base fee for card processing. Generally a merchant must generate a small amount in fees or must make up the difference.
Mail Order - Telephone Order. Credit card transactions that originate over the phone, or through order forms. Prior to the widespread acceptance of the Internet, catalog and mail order companies were the most common MOTO sources.
Next Day Funding
Payment within 24 hours for charges batched before a certain time. It may be necessary to batch out early (example: before 8PM) to get next day funding if it is available to you.
Among tiered rates, the non-qualified rate is generally the highest rate charged because it does not meet any of the requirements for lower rates.
Fee for re-swiping declined cards.
A service that authorizes payments for e-businesses and online retailers. Essentially a gateway connects users to a financial institution for data transmission.
Payment Card Industry Data Security Standard. This is a set of rules designed to prevent security breaches and fraud using credit and debit cards.
A peripheral device added to a credit card terminal or POS system in order to accept personal identification numbers from debit card transactions.
Point Of Sale. Terminals that are integrated into electronic sales and ordering systems. Generally POS terminals are found in restaurants, gas stations, and supermarkets.
A credit card terminal that only works with one processing company. Many name-brand terminal manufacturers will create proprietary terminals for larger customers.
Among tiered rates, the qualified rate is the lowest rate, and often the one quoted by processing companies. This usually applies to transactions where the card is present, and the card itself is not a rewards, mileage, or corporate card.
Changing the firmware on a credit card terminal to work with a different processor. This may not be possible with all terminal or processor types.
The crediting of a merchant account for charges made on credit and debit cards.
A fee which may be charged to set up or transfer a merchant account. Generally this fee is designed to recoup charges from third-party organizations that may charge for authorization, security, and underwriting.
A credit card which may either have an electronic contact pad or contactless microchip that passes information between the card and a reader. (See EMV cards.)
A machine that accepts credit card information, typically through a swiper, numerical keypad, or contactless reader technology. Most terminals also print receipts for transactions.
A billing level for transaction fees. In credit card processing, the 3 main tiers are Qualified, Mid-Qualified, and Non-Qualified.
Taxpayer Identification Number. The IRS validates TIN numbers, which may either be EIN numbers for corporations or Social Security Numbers for sole proprietorships.
A line added to a credit card receipt so tips can be added, typically at restaurants or beauty salons. A terminal may need to be programmed to add a tip line to a receipt.
The replacement of a credit card number with a "token," which is a substitute number that is nearly useless to a data thief. Merchants can use tokens like cards for recurring billing and adjustments, but tokens have no value to identity thieves. First Data's Transarmor is a popular tokenization source.
A fee for transactions processed through a merchant account.
A system, created by First Data, that encrypts credit card numbers and replaces them using Tokenization, in order to prevent fraud and data theft.
Submission of payment processing information by telephone, where an authorization code is presented to the merchant.
A credit card terminal that uses cellphone technology to authorize cards in locations (craft fairs, carnivals, construction sites, delivery areas) that do not have fixed communications or power capabilities.