Genesis Credit Card Processing – Glossary
Merchant Services Website Glossary
I found this great merchant service glossary for those looking to understand the payment services jargon:
Account number-A numeric code assigned to a cardholder account identifying the issuer and type of financial transaction card.
Acquirer- An accredited financial member that presents transaction data into interchange, either directly or indirectly, while upholding the merchant relationship and receiving the data from the merchant or card acceptor.
Authorization- A procedure where a transaction is approved by or on behalf of an issuer; allowing the payment sales validation to be understood by telephone, authorization terminal or the merchant.
Authorization Code- While processing a particular Visa card transaction you will receive a code that advises you that you have acquired the authorization. Note: You should write this on the sales draft.
Automatic Clearing House (ACH) - A nationwide electronic funds transport network which facilitates participating financial establishments to dispense debit entries and electronic credit to bank accounts and to settle such admissions.
Automated Teller Machine (ATM) - A free-standing, magnetic stripe-reading workstation that accepts loan payments; dispenses cash; enables a bank customer to order transfers among accounts and compose account inquiries; and accepts deposits.
Address Verification System (AVS) - In 1996, Visa/MasterCard command center introduced a new parameter requiring all businesses who manually key in the bulk of their credit card transactions to have a particular fraud prevention element on their credit card processing equipment. This element is referred to as an address verification system (it verifies to see that the billing address given by the consumer matches the credit card). If you opt not to use VISA, AVS, and MasterCard will not support your transactions and will charge you an extra 1.25% on those sales.
Bankcard -A debit or credit card supplied by a financial establishment or bank, such as a Maestro card or MasterCard.
Bank Rate - Also known as “Discount Rate.” This is a percentage of each transaction that the bank charges as per Master Card and Visa Rate requirements. All banks are obligated to have at least 3 rate structures: Imprinted or phone authorized rates (the highest rate e.g… 2.62%), Face to face retail (typically the lowest rate e.g.. 1.49%). And a rate for Phone, Mail and Internet rates (slightly higher e.g… 2.24%). It is extremely important to properly classify the way you will accept credit cards so that you can attain the best rate structure.
Business Profile - The Associations (Visa, MasterCard) categorize all merchant types into one of three categories (1) Internet; (2) Mail Order Telephone Order (MOTO); or (3) Swiped Accounts. Interchange Rates will fluctuate depending on the business type.
Batch - A compilation of credit card transactions saved for presenting at one time, generally each day. Batch fees are charged to persuade a merchant to submit his or her transactions at once, rather than throughout the day. Merchants who do not have real-time verification systems must submit their transactions physically through a POS terminal.
Cancellation Code – There is a specific code that a car rental or lodging merchant provides to a cardholder when a cancellation occurs. This code proves that the cardholder cancelled a reservation.
Capture - The settlement and processing of a credit card transaction once it has been submitted. Real-time processing software and POS terminals capture transactions to propose to credit card terminals or merchant account suppliers.
Cardholder -An individual that has been issued or has been approved to use the card.
Cash Disbursement - The cardholder can obtain cash or traveler’s checks at a qualified and approved agent or branch of a member financial establishment, or cash at an ATM, the transaction will post to the cardholder’s MasterCard account.
Charge Back - A Charge Back typically happens when a card holder questions a credit card transaction with the credit card issuer. The issuing credit card company initiates a charge back against the merchant account. The sum of the disputed transaction is instantly withdrawn from the merchant’s bank account. The merchant has 10 days in which to challenge the charge back with proof of delivery, proof of purchase, or signature, etc. A charge back fee is more often than not assessed to the merchant on top of the actual transaction. See also retrieval request.
Charge Back Defense - A consumer, who states he did not place an order, did not receive his goods or services, can ask his issuing bank to charge back the merchant. The Issuing Bank sends the charge back request to the merchant bank, which forwards it to the merchant requesting to validate the charge. Information such as the customers signature, an invoice or folio, the amount, shipping documents, the shipping address (used in AVS during the authorization) are needed to defend against a charge back.
Clearing - The exchanging of financial transaction details between an issuer and an acquirer to assist in posting of a cardholder’s account and reconciling a customer’s settlement position.
Co-Branded Card - A credit card supplied equally by a merchant and a member bank, bearing the “brand” of both.
“Code 10″ Authorization - Is a voice authorization code that can be originated, when a customer is acting suspiciously or you suspect a card is stolen or fake.
Commerce Server - A Web server that inhibits the software needed for processing customer orders via shopping cart programs, the Web, dynamic inventory databases, and online payment systems. Commerce servers are generally secure servers.
Corporate Card - A bankcard or credit card issued to corporations/companies for the use of business expenses for company employees. The company is usually responsible for any abuse of the card.
Credit Card - A plastic card having a magnetic stripe assigned to a cardholder that has a limit on how much credit is available. It can be used to purchase services, goods or to obtain cash withdrawals on credit, for which a cardholder is then billed by an issuer for repayment. Either the credit extended can be paid at once or on an installment basis.
Credit Card Processors (or third-party processors) – Merchant services suppliers that deal with the details of processing credit card transactions between credit card issuers, merchants, issuing banks, and merchant account providers. Before contracting for credit card processing services, website operators establish their own merchant account.
Currency Conversion - The process (procedure) by which the transaction currency is converted into the currency of settlement or the currency of the issuer (For Example: Visa or MasterCard) for the purpose of facilitating transaction authorization, clearing and settlement reporting. The currency of transaction is determined by the acquirer (For Example: Issuer Visa or MasterCard); the currency of the issuer is the preferred currency used by the issuer, and most often, the currency in which the cardholder will be billed.
DDS (Digital Data Storage) debit card - Consumer use this financial instrument in lieu of cash. Debit cards deduct purchases made directly from the cardholder’s account replacing checks. Visa and MasterCard are now offering banks and other financial institutions their debit cards.
Debit Card - A plastic card issued by a financial institution that can be used to purchase goods and services or to obtain cash. The cardholder’s asset account is debited by the issuer.
Digital Wallet - Software that allows Ecommerce transactions. A customer must establish an account with the credit card processor before they can make a purchase.
Discount Rate - See “Bank Rate.”
Draft/Sales Draft - A way of keeping a record to document that a service or good was purchased.
Electronic Commerce Indicator (ECI) - An indicator that tags transaction data from an Internet transaction and sends it to Visa and MasterCard. Merchants must use an approved ECI compliant payment gateway if the majority of their sales are via the Internet.
Electronic Draft Capture (EDC) – A system where processing and storage of transaction data is captured at the merchant location.
Electronic Funds Transfer (EFT) - A way to transfer funds via a telephone instrument, computer, terminal or magnetic tape. Making transfers convenient and paperless.
Emboss - The raised characters printed on a bankcard or merchant credit card.
Equipment - A terminal (like the VeriFone Tranz330), Software or the Internet that conduct credit card transactions electronically by using Electronic Draft Capture (see EDC).
Factoring - The acquisition of “accounts receivable,” or debts owed, in exchange for immediate payment at a reduced rate. Rather than take a percentage of the transaction or other fee, some ISOs in the Ecommerce world choose to process credit card transactions through their own merchant account, instead of an account established by the merchant. Factoring of credit card debt is illegal.
Floor Limit - A dollar amount that limits the use to determine which Visa card transactions that must get authorized. Let’s say your business has a floor limit of $1000, any transaction over this amount will need to get an authorization. Note: For any transaction amount for all mail orders, telephone, and airlines an authorization would be necessary.
Holdback - A reserve that holds a portion of the revenue from a merchant’s credit card transactions. The merchant account lender uses this reserve to cover possible charge back fees, disputed charges, and other expenses. There is a time frame that is used to determine when holdbacks are turned back over to the merchant. Note: Where holdbacks are concerned, a merchant account lender almost never has to pay interest.
Imprint – An impression made from a customer’s card that will show up on the draft. It’s a guaranteed way to demonstrate that the card was present when the sale was made. Note: If you use a magnetic-stripe-reading terminal it will create an electronic imprint that includes the correct point-of-sale (POS) entry code.
Imprinter -A piece of equipment that produces a copy of the embossed information on the bank or credit card. The information will show up on all the copies of credit slips and sales drafts.
Interchange Fee - The Card Association charges a fee to retrieve the billing information from the cardholder’s (issuing bank), in order for the merchant to get the funds into his bank (merchant bank). Interchange fees are determined by capturing suitable data including address, electronic signatures, and the card swipe and following all credit card regulations. The timeliness it takes to settle the transactions can also affect these fees.
ISO (Independent Service Organization) - A firm or organization that will take a percentage of sales or charge a transaction fee in order to process online credit card transactions. A merchant account must be established before a merchant can contract for ISO services, even though some claim that a separate merchant is not necessary. Also see factoring.
Issuer – MasterCard enters into a contractual agreement with the member (issuer) that will gain the privilege of dispersing the MasterCard cards.
Issuing Bank – When a credit or bank card purchase is made, the purchaser’s bank must issue out the payment to the merchant’s account. The customer’s account will then be billed for the purchase amount.
Magnetic Stripe –On every bank or credit card there is an encoded magnetic strip which holds the cardholders account information. ISO Standards 7810, 7811, and 7813, have specific magnetic and physical characteristics for the magnetic stripe.
Magnetic Stripe Reader – Also known as a card swipe reader, which is a device that translates the date from the magnetic stripe of the issued bank or credit card.
Mail Order/Telephone Order (MOTO) - A mail or telephone order sale in which the buyer has ordered merchandise from the seller that will be credited or debited to a bankcard account.
Member - Master Card International Incorporated offers programs that an institution can become a participant of.
Merchant – A business, corporation or firm which entered into an agreement, where they will accept debit or credit cards, whenever properly presented.
Merchant Account –In order to process credit card transactions a merchant must get approved and be issued a specialized bank account. There are several requirements which include a Processing Solution (to access your merchant account) and a local bank checking account (to deposit funds).
Merchant Bank – The bank that has agreed to accept a merchants deposits generated by bankcard transactions: also known as the acquiring bank or the acquirer.
Merchant Identification Number - To identify your company or business a financial institution will assign it a specific number.
Monthly Minimum – There is a minimum amount for credit card charges that must be met every month otherwise fee will be charged. An example of this would be- you have a minimum of $25 per month. If the discount rate is 2.25% and your credit card volume processed was $1,000.00, 22.50 plus 2.50 will be charged to your account to meet the $25.00 minimum.
MOTO (Mail Order/Telephone Order) Discount Rate – For mail or telephone credit card orders there is a discount rate charged by the merchant account lenders for the transaction, because the actual credit card was not available to the merchant. Due to the increased chance of nonpayment and fraud, MOTO discount rates are usually higher than swipe discount rates.
Payment Gateway – A code that sends out a consumer’s order to and from a merchant’s bank’s transaction-authorizing agent usually a MAP (merchant account provider). See also payment gateway provider.
Payment Gateway Provider –A provider that enables the Ecommerce site to transfer information from the shopping cart, to the acquiring bank with software or a code to complete the credit card transaction. See also payment gateway.
Personal Identification Number (PIN) – A secret code that is four-to-twelve characters, a cardholder is given or chooses when issued a bank or credit card. The purpose is for the cardholder’s protection, to accurately approve terminal or ATM transactions at the point-of-interaction device.
Point of Sale (POS) Terminal – Also known as a terminal machine, it’s a device that allows you to slide the credit card through to make a purchase. Grocery stores, restaurants, and most retail stores use these terminals for credit card authorizations. It takes only a few seconds and is accurate, fast, and easy to make charges on a customer’s credit card.
Processing Solution - A virtual product, software or device, like a credit card terminal that gives you the ability to verify, approve and deposit credit card transactions by allowing you to connect the Merchant Account.
Purchasing Card - Intended to help companies reduce administrative costs associated with paying, tracking, authorizing, reconciling, and maintaining control of purchases.
P-Cards – A Purchasing Card that allows goods and services to be purchased while helping companies reduce administrative costs and help control small purchases. Most companies are now using P-Cards as an alternative to paper invoices.
Real-Time Processing – Perfect for an internet-based business, by allowing your customer’s credit card information to be processed and validated for you automatically. A very quick way to receive the money into your bank account while charging the credit card almost instantaneously.
Receipt - At the point of sale, a cardholder will receive a hardcopy document representing the transaction that just took place. Most receipts include: merchant name/location, date, amount, primary account number, and reference number.
Recurring Fees - Monthly fees that are assessed for upholding a merchant account, fees that will normally reoccur are: monthly minimums, transaction fees, discount rates, and statement fees.
Reserve Account – See “Holdback.”
Retrieval Request - A retrieval request is initiated when a bank wants order information for some reason, or the cardholder cannot remember a credit card transaction. The retrieval request will turn into a charge back, if the merchant does not respond within 10 days with the order information. In most cases there is a fee associated with a retrieval request against the merchant.
Risk-Adjusted Rates - Many Credit Policy Requirements have been developed by The Associations (MasterCard, Visa) to recognize proper risk classification such as: sales method, customer type, delivery dynamics, location, principal’s personal credit report, and business longevity.
SSL (Secure Socket Layer) – The technique for date processed over the Internet to be encrypted, including Ecommerce passwords and transactions. SSL enables servers and clients to encode and decode their communication exchanged through their public keys.
Settlement – The exchange of financial information between the cardholder and the merchant, emerging from sale proceeds, merchandise credits, and cash disbursements.
Setup Fees - Required costs for creating a merchant account, purchasing equipment, licensing software, and application fees.
Smart Card - A plastic card that stores electronic “money” in a computer chip. Its purpose is similar to a prepaid calling card; however it is available for all purchases. Smart cards are only able to retrieve the actual dollar amount that has been deposited on it.
Stored Value Cards - Currency is deposited with the issuer, and is comparable to a debit card. Except for one important variation stored value cards are anonymous while debit cards are typically issued in the name of individual account holders.
Swipe Discount Rate - Merchant account providers impose a discount rate for transactions where a credit card is obtainable for inspection by the merchant. MOTO discount rates are higher, because the merchant doesn‘t have access to the actual credit card and cannot match signatures to check for fraud or misuse.
Third-Party Processing – Issuers or Acquirers having parties acting under contract processing transactions.
Transaction – An activity on a cardholders account between the merchant and the cardholder or member and the cardholder.
Transaction Date – The date a cardholder makes a purchase of things of value, services, or goods, or takes cash withdrawals.
Transaction Fee – A fee is charged for each credit card transaction in the amount of $0.20 up to $1.00, collected by the MAP (merchant account provider) or ISO.
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