Payment Solutions for your Business

Glossary BankCard Terms

Account Number - A unique sequence of numbers assigned to a card account identifying the issuer and type of financial transaction card.

ACH (Automated Clearing House) - A group of U.S. processing institutions that have networked together to exchange (clear and settle) electronic debit/credit transactions. All electronic draft capture (EDC) merchants receive credit for their deposits via ACH, and discount fees are debited from all merchants via ACH.

Acquirer - A financial institution that establishes and maintains merchant accounts for the acceptance of card transactions. An acquirer is often referred to as a merchant bank.

Address Verification Service (AVS) - Verifies the cardholder's billing address at the time of the authorization request. If someone uses a stolen card AVS can detect this for you. If the address doesn't match, the transaction can still be approved at the merchant's discretion.

Authorization - A procedure by which card issuers either approve or decline a merchant's request for authorization. Authorizations are based on the cardholder account status and available credit.

Authorization Code - A response number from the card issuer that identifies whether there are sufficient funds available on the card to accommodate the transaction. It also checks to make sure no blocks have been placed on the account. An authorization is not a guarantee of a sale, nor does it guarantee against a chargeback.

Authorization/Transaction Fee - This amount is charged each time a card transaction is submitted for authorization. The fee generally ranges from $.20 to $.50.

Automated Teller Machine (ATM) - An unattended, self-service terminal activated by a card and cardholder validation method (CVM) that provides cash withdrawals. It also may perform other functions including basic banking functions such as deposits, account transfers, balance inquiries, etc.

ARU (Audio Response Unit) - ARU occurs when the merchant calls an appropriate authorization center, and keys in "exact" cardholder and purchase information through the telephone keypad. The authorization centers stores and records the specific data "key-entered" and an electronic voice provides the merchant with an authorization number over the phone that the merchant MUST write on the sales draft. If more than two errors are key-entered, the ARU system rolls over to a "live" operator to obtain the information. The system also rolls over to "live" operators for referrals.

Average Ticket - The average dollar amount of sales drafts processed within a given month.

Bank Card - A payment card issued by a financial institution, for example, Visa and MasterCard credit cards.

Bank Card Transaction or Transaction - Transactions between the merchant and a cardholder for the sale or rental of goods or provision of services are evidenced by a sales drafts or credit voucher, or, where permitted by agreement between the bank and merchant, by an electronic equivalent of a draft or credit voucher, which the merchant presents to the bank for processing through the interchange system. (See Transaction.)

Batch - Collection of captured transactions submitted for settlement. It is important to find out if your merchant bank requires you to close the batch manually and/or if it's closed automatically at the end of day.

BIN (Bank Identification Number) - The 4-6 digit identification number assigned to both cardholder and merchant banks.

Cancellation Fee - A fee assessed to a merchant following the closure of their merchant account (also referred to as a termination fee). Note: Not all processors charge a cancellation fee. Check your merchant agreement or call your processor to inquire.

Capture - Submission of an approved authorization for processing and settlement, after the services have been rendered or the product has been shipped.

Cardholder - Person who opens a card account for making purchases.

Card Identification Data (CID) - Discover® Network's equivalent of Card Security Codes. Please refer to Card Security Codes.

Card Imprint - Printing appearing on a sales draft, credit voucher, or cash advance draft. A mechanical device (Imprinter) is used to produce the imprint. It includes the embossed characters of the credit card. Imprints are valuable for protecting against possible chargebacks and cardholder disputes. (See Imprinter.)

Card Security Codes - A three-digit number laser-printed on the signature panel on the back the card. It follows either the complete account number or the last four digits of the account number.

Card Verification Code2 (CVC) - MasterCard's version of Card Security Codes. Please refer to Card Security Codes for additional information.

Card Verification Value2 (CVV2) - Visa's equivalent of Card Security Codes. Please refer to Card Security Codes.

Cash Advance - A cash loan obtained by cardholder through presentation of his/her credit card at a bank office or automated teller machine.

Cash Dispenser - The simplest form of ATM that permits only cash withdrawals.

Chargeback - A dispute by the cardholder of a transaction which is returned to the Acquirer.

Check Authorization - The process of determining whether a checking account balance is sufficient to cover a purchase or withdrawal of funds. Authorization can be obtained by telephone, credit card terminal, or automated teller machine (ATM).

Clearing and Settlement - The process of exchanging financial transaction details between an acquirer and an issuer to facilitate posting and reconciliation of a cardholder's account. (See ACH.)

Counterfeit Card - An instrument or device embossed, printed, or otherwise bearing Visa, MasterCard or Discover Network marks, so as to purport to be a Visa, MasterCard or Discover Network issued by a member affiliate; but that is not a Visa, MasterCard or Discover Network because the embossing or printing thereon was not authorized, or because the Visa, MasterCard or Discover Network has been altered or re-fabricated.

Credit - A transaction to reverse a previously authorized and settled charge placed against a cardholder's account.

Credit Slip - Document showing the return of merchandise by a cardholder to a merchant. Also known as credit voucher.

Credit Card Transaction - The action by which a merchant charges or credits a cardholder's card. At the same time, it provides details of funds acknowledged as payable by the acquirer, the card acceptor, or both to the issuer.

CTMF (Combined Terminated Merchant File) - A file maintained by MasterCard, reported to by members to identify merchants and businesses that have experienced financial loss, excessive cardholder disputes, or other problems related to the acceptance of credit cards.

Data Capture - The collection, formatting, and storage of a cardholder's credit card transaction information in computer memory. Most point-of-sale devices perform data capture functions.

Doing Business AS (DBA) - A trading name of a merchant, which appears on business signs, customer literature, etc.

Demand Deposit Account (DDA) - A commercial checking account that is used as the depository account for a merchant's credit card deposit. (See Deposit Account.)

Debit Card - A plastic card used to initiate a debit transaction. In general, these transactions are used primarily to purchase goods and services and to obtain cash, for which the issuer debits the cardholder's asset account. Debit transactions require the cardholder to enter a Personal Identification Number (PIN) to validate the transaction.

Decline - A response that may be issued by the card issuer when a credit or debit transaction is attempted.

Deposit Account - A business checking account designated by the merchant through which all bankcard transactions and adjustments will be processed by the bank.

Discount Rate - The percentage of each transaction charged to the merchant. The discount rate charge is the lowest for transactions that carry the least amount of risk, and higher for transactions that carry more risk of fraud and chargebacks.

Down Load - Loading of data (usually a program) from an acquirer's computer system to a merchant's credit card terminal.

Electronic Commerce Transaction - A non-face-to-face online transaction that uses electronic media over a public (such as the Internet), or private (such as an Extranet) network.

Electronic Draft Capture (EDC) - A system in which transaction data is electronically captured at the merchant location and transmitted for authorization and clearing processing.

Electronic Funds Transfer (EFT) - A paperless transfer of funds initiated from a bankcard terminal, computer, telephone instrument, or magnetic tape.

Expired Card - A card in which the embossed or encoded expiration date has passed.

Expiration Date - The date embossed on the card beyond which the card must not be honored.

Face-to-face Transaction - A transaction by where the card and cardholder are both present at the merchant's location to facilitate the magnetic stripe of the credit card being read by the merchant's terminal or a manual imprint being obtained.

Financial Institution - Any commercial bank, federal, or state savings and loan association, federal or state savings bank, or credit union. (See Bank Card)

Fraudulent Transaction - A transaction where a cardholder's account number or credit card was used without the cardholder's consent or authorization.

Hologram - A laser-created photograph that produces a three-dimensional image. Used as an anti-counterfeiting measure on bankcards.

Imprinter - A device used by the merchant to produce an image of the embossed characters of the bankcard on all copies of sales drafts and credit slips. (See Card Imprint)

Interchange - System managed by Visa and MasterCard where data is exchanged between the Issuer and Acquirer.

Interchange Fee - The amount paid by the merchant bank (acquirer) to the cardholder institution (issuer) on each sales transaction. Interchange rates vary according to the type of merchant (retail, travel, and entertainment, mail order, etc.) and the method or processing (paper, EDC).

Issuer - Financial institutions, that allow their customers (cardholders) to access deposit accounts and credit lines through payment cards, such as credit or debit cards.

Magnetic Stripe - A stripe located on the back of a card. This stripe contains magnetically encoded cardholder account information.

Magnetic Stripe Reader - A device capable of reading the encoded information contained within the magnetic stripe of a credit card, debit card, ATM card, etc.

Mail Order - A transaction engaged in by a cardholder through correspondence with a merchant. (See also Non-Face-to-Face Transaction.)

Manual Entry - Also known as key-entered; manual entry is a transaction where the credit card number, expiration date, and transaction information are entered by hand into a terminal or computer.

Merchant - Any business having met the qualification standards of Visa, MasterCard and Discover® Network and has been approved by an acquiring member, to accept credit cards as payment for goods and services.

Merchant Agreement - A written contract between a merchant and an acquirer that details their respective rights responsibilities, and warranties.

Merchant Bank - The financial institution selected by the merchant where their business checking account will be maintained. This account is used for all debits and credits to be processed for the merchant account.

Merchant Category Code (MCC) - A classification code identifying the merchant's business type with MasterCard.

Merchant Identification Number - A number each merchant is provided under the card acceptance agreement, which is unique to that merchant.

Merchant Plate - A plastic or metal plate containing merchant information such as the merchant name, merchant account number, city and state. The merchant plate is affixed to the imprinter so that the merchant information can be embossed on the sales drafts.

Merchant Statement - A summary of merchant transactions, which is produced and mailed to a merchant on a monthly basis. The monthly fee usually includes the customer service and statement fee. The fee generally ranges from $10 to $25.

Monthly Minimum - A monthly minimum may be charged for merchants. For example, if a $25 minimum fee is charged, and you do not incur $25 worth of processing fees (discount rate plus per authorization fees) in a month, you will be charged the difference. Generally, if you process $1,000 a month, you will not be charged this fee as you will have met your monthly minimum.

Monthly Service Fee - The monthly service fee usually includes customer service support and the statement fee.

Monthly Volume - The total dollar amount of all sales accepted for Visa, MasterCard or Discover Network in a given month.

Negative Deposit - This occurs when the dollar amount of credit vouchers submitted for deposit to the deposit account exceeds the dollar amount of sales drafts submitted for deposit.

Non-face-to-face Transaction - This is a transaction where the card and cardholder are not present at the merchant's business location at the time of the sale. Mail order, telephone order, and electronic commerce transactions are examples of non-face-to-face transactions.

Other Fees - Other fees may be charged for merchant accounts, such as checking account changes, chargeback fees, batch header fees, etc.

Paper Draft - Sales slips, credit slips, cash disbursement slips, drafts, vouchers, and other obligations indicating use of a credit card or card account. (See sales drafts)

PIN (Personal Identification Number) - A four to twelve character secret alphanumeric code that enables an issuer to positively authenticate the cardholder for the purpose of approving an ATM or terminal transaction occurring at a point-of-interaction device.

Preauthorized Order - A cardholder's written authorization to make one or more charges to the cardholder's account at a future date.

Point-of-Sale - The merchant's location where a customer makes a purchase.

POS Terminal - A POS Terminal is a bankcard-processing device that communicates and transfers data via telecommunication lines. Authorizations and transaction transmittals are examples of transactions performed through the POS terminal.Recurring Payments/Recurring Transactions A transaction by which the cardholder gives permission to a merchant to place charges on the cardholders account regularly (i.e., monthly billings of magazine subscriptions or fitness club dues).

Receipt - A hard copy (paper) document recording a transaction. The receipt usually includes: date, merchant name/location, cardholder's account number, amount of sale or credit/return, and authorization code.

Sales Slip (Draft) - Paper forms that merchants give to cardholders as evidence of purchases or credit/returns made to the cardholders credit card accounts. Sales slips are also referred to as charge slips, sales drafts, or sales tickets.

Settlement - The process by which the merchant transmits authorized transactions to the acquirer for payment.

Setup Fee - This is a one time fee to set up the merchant account. The fee generally ranges from $49 to $99.

Split Sale - Preparation of two or more sales drafts for a single transaction on one card account in order to avoid authorization procedures and/or to circumvent the applicable floor limit.

Standard Industry Code (SIC) - A classification code identifying the merchant's business type with Visa.

Telephone Order - A credit card transaction that is completed between the merchant and the cardholder via the telephone.

Terminal - A small box-like device that is placed at the merchant location to electronically process credit card transactions. Attached to a telephone line at the merchant location, the terminal is capable of authorizing, capturing, and settling credit card transactions. (See Point-of-Sale Terminal)

Transaction - Any action between a cardholder and a merchant that results in activity on the cardholder's and merchant's account.

Transaction Date - The date a cardholder affects a card purchase or goods, services, or other things of value or effects as cash disbursement.

Transaction/Authorization Fee - This amount is charged each time a card transaction is submitted for authorization and is in addition to the discount rate.

Voice Authorization - Occurs when the merchant calls the appropriate authorization vendor and provides the operator with "exact" cardholder and purchase information over the phone. The authorization center operator records the specific data and provides the merchant with an authorization number over the phone that the merchant MUST write on the sales draft. The authorization operator may direct the merchant to contact the Issuing bank or decline the authorization. (see ARU)

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