Terminology

ABA Routing Number: a unique bank identifying number that directs electronic ACH deposits to the proper bank. This number precedes the account number printed at the bottom of the check.

ACH: Automated Clearing House. A regional organization used by member banks to electronically transfer funds between members.

AMEX: Abbreviation for American Express, an organization that issues travel and entertainment cards and acquires transactions.

Account Number: A unique sequence of numbers assigned to a cardholder account that identifies the issuer and type of financial transaction card.

Acquirer: A licensed member of MasterCard and/or VISA (or its agent) which maintains merchant relationships, receives all bankcard transactions from the merchant, and initiates that data into an interchange system.

Acquiring Bank/Merchant Bank: The bank that does business with merchants enabling them to accept credit cards. A merchant has an account with this bank and each day deposits the value
of the day’s credit card sales. Acquirers buy (acquire) the merchant’s sales slips and credit the tickets’ value to the merchant’s account.

Address Verification System: A method of reducing fraud in mail order, telephone order, and Internet transactions by using cardholder billing address information in the authorization request. (Checks to see that the billing address given by the customer matches the credit card.) If you opt not to use AVS, VISA and MasterCard will not support your transactions and will charge you an additional 1.25% on those sales. Most merchant accounts come with AVS at no extra charge.

Adjustments: Used to process disputes or discrepancies with other financial institutions.

Audit Trail: For recording purposes, messages created as a by-product of data processing runs or mechanized operations.

Affinity Card: A credit card issued in conjunction with an organization or collective group; for example, profession, alumni, retired persons association. The card issuer often pays the organization a royalty.

ATM Interchange Fee: The fee paid to the Acquirer Member by the Issuer Member for a STAR ATM Transaction as established from time to time by the STAR Network.

ATM System: The telecommunications and processing system operated by or on behalf of an Acquirer Member to process STAR Transactions initiated through the Acquirer Member’s STAR ATMs or STAR POB Terminals. The ATM System includes all elements of the processing system from the ATM or POB Terminal to the interface with the STAR Switch.

Authentication: The process by which Authentication Tokens are verified to establish the identity of a STAR Account Holder.

Authorization: The act of ensuring the cardholder has adequate funds available against his or her line of credit. A positive authorization results in an authorization code being generated, and those funds being set aside. The cardholder’s available credit limit is reduced by the authorized amount.

Average Ticket: The average size of a merchant bankcard transaction. Generally used in pricing decisions and calculations.

Back-end Processor – The entity that receives authorized/captured transactions for processing through interchange to the cardholder’s banks for the billing out of transactions on cardholder’s statement.

Balance Transfer – The process of moving an unpaid credit card debt from one issuer to another.

Bank Account – Bank account number for the merchant to which funds will be deposited.

Bank Identification Number – The 6 digits on the credit card assigned by the Federal Bureau of Standards that identify the card issuing institution.

Bankcard – A payment card issued by a bank and accepted by merchants. The credit card is the most common form of a bank card.

Basis Point – Discount rates are expressed as basis points. For instance, 1 basis point is expressed as .0001 or .01%

Batch – Is a collection of credit card transactions that are saved for submitting at the end of the business day.

Batch Close – The process of sending a batch to the financial institution for settlement.

Batch fee – A batch fee (also known as a batch header fee) can be charged to a merchant whenever the merchant “settles” their terminal. Settling a terminal, also known as “batching”, is when a merchant sends their completed transactions for the day to their acquiring bank for payment. Some providers perform this automatically. It is important to close a batch every 24 hours or a higher rate will be assessed by Visa or Mastercard.

Bill Backs – A bill back is a relatively new price model and a variation on interchange plus pricing. It has some variations but the basic concept is that the merchant pays interchange on the statement that the transactions took place and then pay all other fees, like dues, fees and assessments, etc on the next month’s statement. It requires a great deal of time to research the actual cost per transaction with the bill back system. Some merchants feel this form of pricing is very misleading.

BIN – See Bank Identification Number (VISA)Buckets – qualified, mid-qualified, non-qualified.

Breach Security Coverage: Value-added service that offers up to $100,000 in coverage to offset the costs of an actual or suspected data breach.

Business Credit Card – Usually issued to corporate executives or business owners in order to keep business expenses separate from personal charges more easily. 

Capture: The process of acquiring account information from a payment card required for processing. This occurs at the point of sale either by swiping the card through a card reader or by manually entering the information.

Card Not Present (CNP): A payment card transaction where the cardholder/card are not physically present — for example, in an online or mail/telephone order sale.

Card Present: A payment card transaction where the cardholder and payment card are both present. Sometimes referred to as a face-to-face transaction.

Chargeback: Occurs when a cardholder disputes a transaction with the card issuer. The issuer initiates a retrieval request against the merchant account and the disputed amount is withdrawn from the account until the matter is settled. The merchant is given 10 days to dispute the chargeback with proof of purchase or delivery. The merchant account provider imposes a chargeback fee on the merchant to handle the process.

Chargeback fee: The chargeback fee, not to be confused with a refund, which is simply a merchant refunding a transaction. In the Visa and Mastercard rules, the merchant’s processing bank is 100% responsible for all the transactions that the merchant performs. This can leave the provider open to millions of dollars of potential losses if the merchant operates in an illegal or risky manner and generates many chargebacks. The providers pass this cost on to the merchant, but if the merchant is fraudulent or simply does not have the money, the provider must pay all the costs to make the card holder whole.  Usually, these potential chargebacks are corrected when the merchant’s processing bank sends over more details about the transaction. Some providers charge a fee for this service, known as a “Retrieval Request”. A chargeback can also be related to a fraud or similar dispute that the card holder is claiming to the merchant. This fee can be charged by some providers whether the chargeback is successful or not and is not dependent on the amount of the chargeback. Currently both Visa and Mastercard require all merchants to maintain no more than 1% of dollar volume processed to be chargebacks. If the percentage goes above, there are fines starting at $5000 – $25,000 to the merchant’s processing bank and ultimately passed on to the merchant. In all cases, a successful chargeback will cost the merchant the chargeback fee, usually $25-$50, plus the cost of the transaction and the amount processed.

Chargeback Period:  The number of days from the transaction processing date during which the issuer may initiate a chargeback, typically a six month period.

Check Guarantee: A service that guarantees payment on each check presented. The guarantee service collects any returned items and the merchant typically follows a stringent set of procedures.

Co-Branded Card: A co-branded credit card is sponsored by both the issuing bank and a retail organisation such as a department store or an airline. Cardholders may get benefits such as discounts or free merchandise from the sponsoring merchant based on account usage and terms.

Commercial Cards: A general name for cards typically issued for business use and may include Corporate Cards, Purchase Cards, Business Cards, Travel and Entertainment Cards.

Credit Card Imprinter: A very basic device used to create a receipt for a credit card transaction. Sometimes referred to as a “knucklebuster”, these flatbed imprinters have fallen out of favor in recent years and have been largely replaced by printers linked to a credit card terminal.

Credit Card Processing: The complex electronic process of transacting and verifying a credit card transaction. Once authorized, the process initiates an ACH transfer of funds from the issuing bank to the credit card processor, who then deposits the transaction proceeds into the merchant’s account.

Credit Card Processor: An entity that handles the electronic verification and initiation of Electronic Funds Transfers (EFT) in to the ACH system on behalf of clients. The term is used interchangeably with merchant services provider, merchant account provider or merchant acquirer.

Credit Card Reader, also known as a Credit Card Swiper: an electronic device used to read data stored on the magnetic stripe of a credit card. The credit card swiper collects all of the information needed to process a credit card transaction at the point of sale. Magnetic stripe data typically includes the card holder’s name and account number, credit card expiration date and the Card Security Code (CSC), also called the Card Verification Value (CVV).

Custom Payment Service (CPS): Visa’s regulations for the information that must be submitted with each transaction. Transactions must meet CPS criteria in order to qualify for lowest transaction processing fees available. Similar to MasterCard’s Merit system.  

Database: A collection of data organized and designed for easy access, e.g., a collection of customer names and addresses.

Data Encryption: The process of transforming processing information to make it unusable to anyone except those possessing special knowledge, usually referred to as a key.

Debit: A charge to a customer’s bankcard account.

Debit Card: Debit cards behave and act just like a credit card, except that the funds are immediately withdrawn from the cardholder’s bank account. A credit card on the other hand is billed to you each month, and may contain interest charges. You do not have to pay off credit cards each month, while with debit cards there is no balance to pay off, as the money comes directly out of your bank account There are two types of debit transactions, one is called offline debit (Signature), and the other is called online debit (PIN). With offline debit, the customer signs a receipt and does not enter a PIN. The transaction travels through the Visa/MasterCard Network. With online PIN debit, the customer must enter their PIN number and the transaction is authorized over a debit network directly. Online debit requires additional equipment (i.e., a pinpad), and can only be used in a card present environment where the card is swiped. Offline debit however can be used in both swiped and card not present situations (i.e., Internet ecommerce websites) since no PIN is entered. All standard merchant accounts allow offline debit transactions to run through the account as if it was a standard credit card.

Debit Transaction: A bankcard used to purchase goods and services and to obtain cash, which debits the cardholder’s personal deposit account.

Decline OR Declined: The denial of an Authorization Request by, or on behalf of, an Issuer Member.

Deposit Account: An Access Account, other than a Credit Account, maintained by a Member for processing transactions. Deposit Accounts include checking, NOW, savings, share draft, and such other depository accounts as are legal under Applicable Law.

Deposit Credit: See Credit Deposit.

Discount Fee: Fees charged by a merchant account provider to its clients for processing services, plus interchange and assessments paid directly to the credit card associations and issuing banks.

Discount Rate: An amount charged a merchant for processing its daily credit card transactions.

Doing Business As (DBA): Refers to the specific name and location of the merchant establishment where credit card purchases are made. 

E-Check: The electronic equivalent of a paper check.

EBT: Electronic Benefits Transfer, an electronic system in the U.S. used by state governments to provide financial and material benefits (including unemployment and food benefits) via a plastic debit card.

Effective Rate: A simple but effective benchmark revealing the real, actual percentage of fees that a Merchant is charged on all transactions. The easiest way to figure out your effective rate: Total Costs / Amount Processed = Effective Rate  For example, if you processed $100,000 in credit card transactions and your total costs for processing this amount was $3,200, your effective rate would be 3.2%.  After you calculate your effective rate, if it’s higher than 2.5% contact us.  Although processing fees are unavoidable, the objective is to pay as little as possible in order to maximize your profits while still offering your customers the ability to pay for goods and services with credit cards.

Electronic Banking: A form of banking in which funds are transferred through an exchange of electronic signals between financial institutions, rather than an exchange of cash, checks or other negotiable instruments.

Electronic Bill Payment (E-pay): An alternative to paper checks for paying bills. Consumers can use PCs, telephones, screen phones or ATMs to send electronic instructions to their bank or bill payment provider to withdraw funds from their accounts and pay merchants. Payments may be made either electronically or by a paper check issued by the bill payment provider.

Electronic Check Acceptance or ECA: A system that captures banking information off a paper check and converts it into an electronic item processed through the Automated Clearing House network. With ECA, checks are processed similarly to credit cards, and the paper check is returned to the consumer at the point of sale.

Electronic Commerce (E-commerce): The transacting of business electronically rather than via paper. Many online stores refer to their business as e-commerce i.e. Amazon.

Electronic Funds Transfer (EFT): An automated transfer of funds using an electronic medium rather than conventional paper-based payment methods. EFT is any financial transaction originating from a telephone or electronic terminal, or from a computer or magnetic tape.

Electronic Wallet: Also known as an e-wallet, it allows the user to charge payment for goods and services to their card without using the card. Software on the user’s mobile device securely stores credit card account and payment information and works in conjunction with complimentary software on the merchant’s end.

EMV: EMV, or EuroPay, MasterCard and Visa, is a microchip-based technology designed to reduce fraud at the point-of-sale. Banks are beginning to issue payment cards with these embedded chips, which also support contactless payments.

Encryption: The process of translating data into secret code (encoding) to ensure secure transmission. An effective way to help ensure data security, it is also referred to as end-to-end encryption (E2EE).

Financial Institution: Any organization in the business of moving, investing or lending money, dealing in financial instruments, or providing financial services. Includes commercial banks, thrifts, federal and state savings banks, saving and loan associations, and credit unions.

Flat Rate= The most popular service provider offering a flat rate is Square, a simplified, but typically more expensive, choice for many new businesses.  The benefit of using Square is the flat rate of 2.75% per swipe and 3.5% + 0.15 for every manually-entered transaction, $99 for the Square Stand and $29 for the Square Reader.  If your business uses Square, calculate your effective rate and contact us if it exceeds 2.5%.

Floor Limit:  An amount that Visa and MasterCard have established for single transactions at specific types of merchant outlets and branches, above which authorization is required.

Force Transaction: A sale transaction for which a merchant received a voice authorization or authorization only. A force is done so that the previously authorized transaction can be settled and the merchant can receive funds. (also known as post auth or prior sale)

Fraudulent Transaction: A transaction unauthorized by the cardholder of a bankcard. Such transactions are categorized as lost, stolen, not received, issued on a fraudulent application, counterfeit, fraudulent processing of transactions, account takeover, or other fraudulent conditions as defined by the card company or the member company.

Fraudulent User: An individual who is not the cardholder or designee and who uses a card (or cardnumber in a mail/phone order or recurring transaction) to obtain goods or services without the cardholder’s consent.

Front-end Processor: A company/vendor that provides communication and data processing services for authorization of card payments and the transfer of data between merchants’ point of sale equipment to the back-end clearing and settlement processor.

Funding: Refers to the payment to a merchant for his submitted deposits.

Funds Transfer System: A wire transfer network, ACH, or other communication system or clearing house or association of banks in which First Data’s Clearing/Funding Bank is a member and through which a payment order by a bank may be transmitted. Includes: SWIFT, CHIPS, Fedwire, the National Association of Clearing House Associations, MasterCard and VISA. 

Gateway:  the middleman providing communication between your company’s software, website or hardware and your Processor. Some Processors ARE the gateway. Most gateway companies make software or provide e-commerce solutions (either invisibly on your website or as the shopping cart). Examples of Gateways include Authorize.Net/CyberSource, SkipJack, SlimCD, 3Delta, etc.

Ghost Authorization: An authorization that is approved but never cleared or settled, resulting in additional fees to the merchant. Visa and MasterCard claim these can adversely impact a cardholder’s open-to-buy credit availability, leading to increased declines and confusion at the point of sale. Visa calls the fee for this the Misuse of Authorization Fee while MasterCard calls it a Processing Integrity Fee.

Gift Cards:  Setting up a gift card program for your small business is a fast, effective and less expensive strategy to increase sales and branding than most other forms of advertising like coupon campaigns and discounts. Let us work with your objectives to find the best solution to starting a gift card program in your business.

Google Wallet: Google Wallet is a mobile payment system developed by Google that allows its users to store debit cards, credit cards, loyalty cards, and gift cards among other things, as well as redeeming sales promotions on their mobile phone. Google Wallet can use near field communication (NFC) to “make secure payments fast and convenient by simply tapping the phone on any PayPass-enabled terminal at checkout.”

Government Card:  A generic term for commercial purchasing cards (purchase cards) issued to federal, state, or local government agencies. It can refer to a Purchase, Travel, or Fleet card.

Gross billing:  A method of pricing where the processor’s cost of the transaction (Interchange +Assessment) and the discount rate (processor’s charge) are blended, that is, combined together into one aggregate rate.

Hard Decline:  A declined authorization attempt resulting from a lost or stolen card, pick-up card, etc. A Code 10 call should be made by the merchant to the authorization center.

Header Fee: A hidden fee, also listed as a batch header fee. It usually does not correspond to any additional value or service and is a method of adding intangible fees to the merchant’s expenses. Read our post “Time to Review: Is Your Credit Card Processing Vendor Costing too Much?”

Hidden Fees: Fees that may be charged on your payment processing statement that are not justified or do not correspond with a tangible value or service. Read our post “Time to Review: Is Your Credit Card Processing Vendor Costing too Much?”

Holdback: Also referred to as a reserve. This is a fee held back from a merchant’s credit card transactions to cover any possible charge backs, and other disputed charges that a merchant may encounter. Usually, after a time, the hold backs are returned to the merchant.

Hologram: A laser-created photograph that uses a three-dimensional image that is difficult to duplicate. Used as an anti-counterfeiting measure on many payment cards.

Host Capture System (HCS): A transaction is transmitted with an authorization request to the host computer at the front end, the information is captured at the host, then sent back to the POS device. Since the information is already stored at the host, it can be settled without the merchant performing a settlement function.

Interchange: A fee that is set by the credit card associations and paid to their member banks. Interchange is charged to credit card processors, who pass it along to merchants as part of the discount fee. It makes up the largest portion of credit card processing fees.  MasterCard and Visa establish interchange fee rates. Also refers to the Cost Plus, or Cost Plus Interchange, pricing structure. Read Time to Review: Is Your Credit Card Processing Vendor Costing too Much?

Interchange Compliance: We have seen this as a hidden fee used by unscrupulous companies to scare or overcharge merchants. See Hidden Fees.

Interchange Plus:  A method of pricing rates where the Discount Rate (processor’s charge) is isolated from Interchange. Because the costs are transparent, it is more honest as it discloses where the fees are really going. However, it may confuse merchants who are not used to seeing “assessment” and “interchange.”

International Service Assessment Fee: The ISA is separate from interchange, and from Visa’s standard assessment fee, which is currently 0.11%. For example, an ISA fee of 0.40% will be added to a transaction where a customer pays using her Visa-branded credit card that is issued by a bank based outside of the United States.

International Acquirer Fee: Combined with the International Service Assessment Fee (0.4%) which totals 0.85% on transactions paid for by a Visa card issued outside of the U.S.A. Introduced October 2009.

International Processing Fee: Currently 0.40% + 0¢ — is assessed on Discover transactions at US merchants, where the card issuing country is outside of the US. Introduced October 2009.

International Service Fee: Currently 0.55% + 0¢ — is assessed on Discover transactions, including Cash Advance, conducted at a merchant location in a country other than the country that the card was issued in. Introduced October 2009.

ISO or Independent Sales Organization: A company or individual contracted with a Processor to acquire new Merchants. Many ISOs provide customer support, technical support and installation support to its customers on behalf of the Processor. However, ISOs who sell off merchant accounts or who are prepaid an advanced commission have little incentive to continue customer service and support.

Issuing Bank: A bank or financial institution that is a licensed member of a credit card network. It provides cardholders with a line of credit for purchases or cash advances, and is responsible for reimbursing an acquirer for purchases made by the cardholder. The issuing bank then bills the cardholder.

Large Ticket:  Visa and MasterCard have incentives for high price credit card transactions by offering special interchange rates. Large ticket transactions may be defined as those greater than $100,000, and may even exceed several million dollars. Large Ticket rates are lower rate than regular transactions but may only qualify if the business has been approved for such transaction volume in advance.

Level 1 Data:  Transactions which qualify as Level 1 and show on statement as L1 or Corporate Card L1 are business card transactions which did not qualify at the lowest rate due to missing or invalid information prompts when the sale was transacted. Prompts which were invalid or missing may include AVS (address verification), Sales Tax, P.O. number, or other fields left blank on a terminal or POS system.

Level 2 Data:  Additional information that may be submitted with the minimum required information for a payment transaction. Examples include shipping and tax information.

Level 3 Data: Extensive information that may be submitted with the minimum required information and level 2 data for a payment transaction. Examples include product codes and other merchant-specific order information. Transactions which get approved as Level 3 are often a much lower rate and typically involve Business, Purchasing, Fleet, Government, Corporate and Commercial credit cards. Some Level 3 Large Ticket rates may benefit from flat rate transactions where no percentage is charged, only a transaction fee like $35.00, which is much cheaper than normal rates when transactions may be for $10,000 or more.

Loyalty Card:  Any electronic card which is used only at a single Merchant’s business for the purpose of earning discounts, free products and services, or rewards based on frequent buying. These usually have the Merchant’s name and logo, and is provided by a 3rd party company (not the processor, but must be compatible with the Processor) to track purchases and manage customer information. This is an effective incentive to award your most loyal, frequent customers by giving back. These specialty or custom cards can be used on certain credit card terminals which also take regular bank cards and/or gift cards. Examples include TenderCard and Global eTelecom.

Magnetic Stripe:  The black stripe on a credit, debit or stored-value card that stores the cardholder’s account or payment information.

Manual Entry:  The submission of payment information for a transaction by keying the customer’s payment information into a hardware terminal or Virtual Terminal. For example, any transaction that is not submitted by allowing an organization or business to “swipe”, or read, payment information from a magnetic stripe on a credit, debit or stored-value card; or transactions that take place by physically keying in payment information using a keypad. Additionally, for online merchants a manual transaction might be considered any transaction that is not entered at their e-commerce Web site by a customer.

MasterCard® SecureCode™: A security program created by MasterCard® to provide identity authentication for cardholders and transaction protection for merchants. By registering for MasterCard® SecureCode™, merchants can minimize transaction risks while providing additional security for their MasterCard customers.

MasterCard® Site Data Protection (SDP) Program: A program created by MasterCard® stating its technology and sensitive data security requirements for merchants and merchant service providers. Compliance is required of its member institutions.

Merchant Account:  The business arrangement between a merchant and a credit card processor that allows the merchant to accept payment cards from customers.

Merchant Account Provider/Merchant Services Provider/Merchant Acquirer:  The entity that provides merchants with the products and services needed to process payment cards. The provider also acts as an intermediary between the merchants and the issuing banks and credit card networks throughout the process and is responsible for depositing the transaction proceeds into the merchant’s designated bank account.

Merchant Identification Number (MID):  An identification number assigned to each member merchant of an acquiring organization, such as a financial institution, Independent Sales Organization (ISO), Merchant Service Provider (MSP) or processor.

Merchant Processing Agreement (MPA):  A contract between a merchant and their merchant account provider that outlines the responsibilities and warranties of all parties involved in credit card processing.

Merchant Service Provider (MSP): A company or sales organization that provides transaction processing solutions to its merchant clients.

Mobile Credit Card Processing:  Processing payment card transactions from a mobile device or smartphone. An example is ProcessNow® from TransFirst®, which relies on a free downloadable app to turn a smartphone or tablet into a terminal on the go.

Monthly Minimum:  The amount that a processor charges a merchant if their discount rate, transaction fees and other account fees do not collectively equal a pre-determined amount that’s stated in the MPA.

Monthly Processing Limit:  The amount of money that a merchant service provider will allow a merchant to process each month, as outlined in their MPA.

Monthly Processing Volume:  Gross monthly payment card sales (in dollars) that a merchant processes. This figure is specified in the merchant application for card processing along with the average ticket size. Both are used to help determine processing fees.

MOTO:  Abbreviation for mail order/telephone order.

NACHA: NACHA develops operating rules and business practices for the Automated Clearing House (ACH) Network and for electronic payments in the areas of Internet commerce, electronic bill and invoice presentment and payment (EBPP, EIPP), e-checks, financial electronic data interchange (EDI), international payments and electronic benefits services (EBS). Additional Information: http://www.nacha.org/

NEC (N.E.C.): Abbreviation for “Not Elsewhere Classified”

Network:  An entire system of communication hardware and software used to transfer electronic information during the authorization and settlement process.

No Signature Required (NSR):  Visa, MasterCard, American Express & Discover now offer this program to speed up the transaction process for fast paced businesses. Benefits & restrictions include:

• Transactions must be on U.S. issued cards of $25 or less from eligible MCCs (Merchant Category Codes)
• Card must be magnetic swiped or contactless in face-to-face environment (or unattended environment if $15 or less)
• Transaction receipt does not need to be given to customer unless requested.
• Non Qualified Rate (see Tiered Pricing below).

Non Face-to-Face Transaction: Any transaction in which the card is not presented, such as a phone, mail or Internet purchase. See Card-Not-Present.

No-Show: A charge to a cardholder account by a lodging merchant if the person either fails to arrive or fails to cancel the guaranteed reservation.

Offline Debit: Debit transaction that occurs when a Visa/MasterCard check card is authorized through the credit card system and the amount is debited from the cardholder’s checking (DDA) account.

Offline Transaction: A transaction that is authorized through a voice authorization and later keyed into a POS terminal prior to settlement.

OK Number: A validation number from the host computer confirming a successful batch deposit.

Online Debit:  An on-line debit card deducts funds from the bank account immediately, as soon as the card is used. There is no delay for processing the transaction. On-line debit cards can either have the MasterCard, Visa, or Discover logo, or they can have only the user’s logo, like an ATM card.

Online Transaction: A transaction that is authorized electronically from the front-end network.

Originator: A financial institution that initiates a wire transfer or automated clearing house (ACH) payment.

Overlimit: This refers to a cardholder’s account that has surpassed its credit limit with a transaction. (Their outstanding balance is beyond their credit limit.)

Over-Limit Fee: A fee charged by the processor when a merchant exceeds their pre-determined processing volume.

Partial Download: This process is when the credit card terminal dials into our bank to be partially reprogrammed, normally for updated information generally this term is used whenever verifone equipment is programmed.

Payment cards: A collective term for credit, debit, prepaid and EBT cards.

Payment Gateway: Software on a third-party provider’s server that handles the transmissions between a merchant and their processor required to complete an electronic transaction. TransFirst offers an electronic payment gateway called Transaction Express®.

PCI Compliance: Major Issuing Banks created PCI (Payment Card Industry) compliance standards to protect personal information and ensure security when transactions are processed. Due to the acute rise in data breaches, hackers and identity theft prevalent, all processors now charge breach insurance or PCI Compliance fees to insure against such a breach, which could result in hundreds of thousands of dollars in damages and fines. Banks, Processors, Gateways and Merchants ALL must follow PCI standards in order to accept credit cards. Failure to comply could result in fines or revoking your ability to accept credit cards, although it is not governed by Law which can be especially challenging to businesses and institutions which process credit cards using a computer where cardholder information is stored or card numbers are transmitted online. However, if a Gateway completes the online transaction, the Gateway usually assumes the responsibility for PCI compliance. (more info on PCI compliance)

PCI DSS: Stands for Payment Card Industry Data Security Standards, a set of requirements established by the credit card networks to protect cardholder information and reduce data theft. The standards apply to merchants, merchant account providers, issuing banks and the networks. Meeting these requirements is known as being PCI compliant.

PCI non-validation fee: A fee charged to merchants who do not return a PCI Compliance Validation Certificate, which can be obtained by completing and passing on an annual basis a Self-Assessment Questionnaire (SAQ) and/or Quarterly Network Scan (for merchants that electronically store cardholder information or whose application systems are connected to the Internet) according to the applicable business level as defined by PCI Security Standards Council.

PIN: The Personal Identification Number is the digital code that PIN-based debit cardholders enter at the terminal when making a purchase.

PIN Pad: Hardware a PIN debit cardholder uses to enter their PIN at the POS. Also called a keypad.

POS: Abbreviation for point of sale, this is the place where a customer makes payment. While POS once referred specifically to credit card terminals at the cash register, technology has expanded its application to include mobile, wireless and virtual terminals.

POS Terminal: The electronic equipment used to capture, transmit and receive the information necessary for electronic payment card transactions.

Pricing Structure:  In many cases business owners choose a merchant services provider with “the lowest rate” which is how we typically choose the best home loan, car loan, credit card and many other products that involve a “rate.” However, in the case of credit card processing, the “rate” charged can be deceptive due to different pricing structures. Let’s take a look at the three most common pricing structures:

1. Flat Rate= The most popular service provider offering a flat rate is Square, a simplified, but typically more expensive, choice for many new businesses. The benefit of using Square is the flat rate of 2.75% per swipe and 3.5% + 0.15 for every manually-entered transaction, $99 for the Square Stand and $29 for the Square Reader. If your business uses Square, calculate your effective rate and contact us if it exceeds 2.5%.
2. Tiered Pricing= (see Tiered Pricing below) Tiered pricing is the typical bait and switch scenario in the credit card processing industry. A business owner will usually be “sold” on the low “Qualified Rate” which can be as low as 1.5%. Unfortunately very few transactions meet the qualifications of the qualified rate and at the end of the month when the business owner averages all transactions that were charged a qualified rate, a mid-qualified rate and a non-qualified rate they can find that the effective rate is higher than 4%! Much higher than the average 2.5% paid by most of our valued clients. If you are on a Tiered Pricing structure, contact us for a free evaluation of your merchant services charges.
3. Cost Plus / Interchange= We recommend the Interchange Plus, or Cost Plus, or Interchange as the preferred pricing structure. Interchange refers to the processing rates charged by the card brand i.e. Visa, MasterCard, Discover. The benefits of this pricing structure is the transparency and cost-effectiveness of paying a fixed margin plus the rates charged directly by the credit card brands.

Processor: An entity in the credit card processing network that handles the posting of transactions for authorization, clearing and settlement to consumer credit card accounts at the card associations, and the settlement of funds to merchant bank accounts. Processors may also provide merchants with billing and reporting services.

Proprietary Equipment: This type of equipment was specifically manufactured for a particular processor – it operates off of different software and can’t be loaded until a conversion has been done.

Real-Time Processing: The ability to approve or decline a payment card transaction in seconds while the customer waits.

Reason Code: A two-digit code identifying the reason a chargeback was initiated.

Re-authorization (re-auth, add auth): To request an additional amount to be authorized on an existing transaction. Used in the lodging industry when the original authorization is not sufficient to cover the charges.

Recurring billing: A transaction charged to a cardholder by a merchant or service provider on a designated periodic basis (weekly, monthly, annually) in payment for products or services. Two examples of recurring billing are club memberships and subscriptions.

Refund: A refund occurs when the merchant rebates all, or a portion, of an original transaction amount to the cardholder. Refunds are made to the same card that was used for the original transaction. Similar to a Credit.

Representment: An attempt to reverse a chargeback initiated by a merchant or acquirer to the issuing bank that presented the chargeback, backed by supporting documentation.

Retrieval: The first step in the chargeback process. In a disputed transaction, the issuing bank requests a copy of the physical sales ticket of the transaction in question from the merchant.

Reversal: When an acquirer successfully represents a chargeback to the issuer, the chargeback is reversed and the funds are returned to the merchant.

ROM (Read-Only Memory): Memory and information that cannot be changed.

RS232: The standard port on POS device used to support a wireless transmission via VSAT, Frame, VPN or Motient. May also be used with various peripheral devices i.e. Check Reader or Personal Computer. 

Sales Transaction Fee: The amount the financial institution charges a merchant for each sales transaction.

Settlement: The process in which a merchant transmits batches of transactions to the acquirer. In interchange, it is the process by which acquirers and issuers exchange financial data resulting from sales transactions, cash advances, merchandise credits, etc.

Settlement Statement: A document issued to the merchant, indicating the sales and credit activity, billing information, discount fee and chargebacks (if any) occurring during a particular time frame (one week, one month).

Shopping Cart Software: Shopping cart software allows the cardholder to select items from an online store and place them in a virtual shopping basket or shopping cart. The shopping cart remembers which items are selected while the cardholder views other items within the virtual storefront, keeps a running total, and may calculate taxes and shipping. The items in the shopping cart are eventually ordered if the cardholder chooses.

Smart Card, or Smart Chip Card, or Chip Card: A payment card with a built-in microprocessor (chip) that stores information. Smart cards can be used for stored-value cards, credit cards, loyalty programs and security access. Does Your Business Need EMV (Smart Chip) Terminals?

Soft Decline: A declined authorization attempt that does not necessarily mean the card is bad (i.e., call referral, issuer unavailable or cardholder over limit). These transactions may be resubmitted a day or two later in an attempt to obtain a valid authorization.

Split Dial: The capability of a card terminal to dial different telephone numbers to obtain an authorization or settlement of different card types.

SSL:  Secure Socket Layer, a system for encrypting payment card data sent over the Internet.

Standard Industrial Code (SIC): A universal four-digit code that designates a merchant’s industry type. Similar to an MCC code.

Stored Value Card: A stored value card is used by a merchant to issue spending credit to their customers. The merchant’s customers are given a magnetic stripe card in exchange for money received, merchandise returned or other considerations. The card represents a dollar value that the merchant’s customer can either use or give to another individual. There is no security associated with the card itself. The actual record of the balance on the card is maintained on a stored value card database.

Summary Adjustment: A correction to a deposit, made by the acquirer, when there is an error in the submitted deposit.

Synchronous: Communication method that transmits continuously with no stops and start bytes between information bytes.

Terminated Merchant File: Also called MATCH, this database is maintained by all third-party processors, banks and other financial institutions. It lists the names of merchants whose privileges to process credit cards and other electronic transactions have been terminated by an acquirer for violation of a merchant processing agreement.

Terminated Merchant List (TMF): Also called Match List. When you apply for a merchant account, the processor will check to see if you are on the Terminated Merchant File (TMF). If you’re on it, this means that another processor has terminated a merchant account with you, and sends up a red flag to processors and banks that you’re a credit risk.

Getting on the TMF list is the equivalent of getting blacklisted. Here are some reasons a Merchant may be put on the Match List:

• Credit card fraud — If your fraud detection controls aren’t strong enough you could end up with too many chargebacks.
• Friendly fraud — This is when a consumer disputes a legitimate charge such as from an adult website.
• Factoring — Factoring is when a merchant deposits transactions for sales generated by another business.
• Excessive chargebacks — When chargeback rate is >1% of total sales, calculated monthly and cumulatively.
• Fraud — Types of fraud include not delivering products or misrepresenting products or services.
• Violating the merchant agreement.
• Owing money to a Processor.

TID, Terminal ID: A unique identification number assigned to a specific point of sale (POS) device by the Acquirer.

Tiered Pricing: Processing price structure in which individual credit card types are grouped or ‘lumped together’ into Tiers at contrived rates. Tiers may be labeled Qualified, Mid-Qualified, Non-Qualified or Debit/Check Card. Fixed rate would be single Tier billing. This billing is nearly always a disadvantage to merchants because Tier rates are usually higher than the individual card types they comprise. Interchange Plus pricing is the only truly honest, fair, transparent pricing because all card types are revealed at their true bank cost on the statement.

1 Tier (Flat Rate/Fixed Rate) — Worst possible scenario for merchants. All cards receive the Non Qualified rates. These may be 3% – 5% or more on all card types, even when debit interchange may only by 0.95%.
2 Tier — Includes Qualified & Non Qualifed rates only. Qualified may include Debit cards or Debit & plain basic credit cards. Non qualified will include all remaining card types (30-45 card types). This is the second worst pricing structure.
3 Tier — Includes Qualified (Debit), Mid Qualified (Rewards/Travel cards) and Non Qualified Card types (all remaining cards including business, foreign, and standard).
4 Tier — The most ideal of Tiered pricing, this includes all in the 3 Tier categories above but adds a Debit (Check Card) rate. Only Interchange Plus is a better price structure.

Transaction: Any event that causes a change in an organization’s financial position or net worth, resulting from normal activity. Advance of funds, purchase of goods at a retailer or when a borrower activates a revolving line of credit. Activities affecting a deposit account carried out at the request of the account owner. One example of a transaction is the process that takes place when a cardholder makes a purchase with a credit card.

Transaction Date: The actual date on which a transaction occurs. Used in recording and tracking transactions.

Transaction Fees: Service costs charged to a merchant on a per-transaction basis.

Virtual Shopping Cart: A program that is integrated into a website and makes it possible for shoppers to keep a running tally of products and services they plan to purchase. At checkout, the shopping cart connects to a secure payment page where they can complete their purchase with a payment card.

Virtual Terminal: See also POS. A credit card terminal run from the computer screen, iPhone or other smartphone or handheld device which runs in a window via web browser or other software application, rather than using dedicated hardware like a physcial credit card terminal. Examples include Transaction Central, SkipJack and Authorize.Net.

Voice Authorization: A low-tech processing solution typically used by low-volume merchants that requires them to phone an authorization center to process a transaction and receive authorization.

Void: A void transaction describes a credit card transaction that has been deleted before settlement (close of batch). The transaction amount has only been authorized to the card holder’s account, therefore the cardholder should see that no funds were removed and card holder’s balance will clear the authorization amount within 24-48 hours. This is much faster than issuing a Credit, which may take 48-72 hours or more for funds to be reversed back to the cardholder’s account.