• Key Definitions

Acceptor:

A business that has qualified to process credit or debit cards as payment. 

 

Acquirer:

An acquiring bank (or acquirer) is a bank or financial institution that processes credit or debit card payments on behalf of a merchant. The term acquirer indicates that the bank accepts or acquires credit card payments from the card-issuing banks within an association

 

AVS:  
The Address Verification System (AVS) is a system used to verify the address of a person claiming to own a credit card. The system will check the billing address of the credit card provided by the user with the address on file at the credit card company.

 

Adjustment:

A debit is initiated by the acquirer to correct a processing error. The error could be a duplication of a transaction or the result of a cardholder dispute. The acquirer debits or credits the merchant DDA account for the dollar amount of the correction.


Audio Response Unit (ARU):

This is an electronic authorization and capture product where the merchant uses a touch-tone telephone to process transactions.

 

Authorization:

The process of verifying the credit card has sufficient funds (credit) available to cover the amount of the transaction. An authorization is obtained for every sale. An approval response in the form of a code sent to a merchant’s POS equipment (usually a terminal) from a card-issuing financial institution that verifies the availability of credit or funds in the cardholder account to make the purchase. Also, see Point-Of-Sale.

 

Authorization Code:

A code that a credit card issuing bank returns in an electronic message to the merchant’s POS equipment that indicates approval of the transaction. The code serves as proof of authorization.

 

Authorization Response:

An issuing financial institution’s electronic message reply to an authorization request, which may include:

Approval — transaction was approved
Decline — transaction was not approved
Call Center — response pending more information, the merchant must call the toll-free authorization phone number
Service Not Allowed - You've entered a credit card number that does not exist


Auto Close/Batch:

A terminal feature that allows an end-of-day batch closing to occur automatically at a specified time, without having to be initiated by the merchant.

 

Automated Clearing House (ACH) File:

A file with instructions for the exchange and settlement of electronic payments passed between financial institutions. It represents debits and credits to be deducted from an account automatically as they occur.

 

Average Ticket (Average Sale):

The average dollar amount of a merchant’s typical sale. The average ticket amount is calculated by dividing the total sales volume by the total number of sales for the specified time period.

 

Bankcard:

A credit card issued by a Visa or MasterCard-sponsored financial institution. (American Express, Discover, Diners Club, JCB, etc., are issued directly from their respective operations, rather than through banks.)

 

Batch:

The accumulation of captured credit card transactions in the merchant’s terminal or POS awaiting settlement.

 

Capture:

The submission of an electronic credit card transaction for financial settlement. Authorized credit card sales must be captured and settled in order for a merchant to receive funds for those sales. Also, see Settlement. 

 

Cardholder:

Any person or entity that uses a payment card account (bank card or otherwise). The person that uses a credit card to purchase goods and services.

 

Card Issuing Bank:

An EFT Network Member-Bank that runs a credit card or debit card “purchasing service” for their account holders. An example

is Chase and the Chase Visa Card that they issue.

 

Chargeback:

A credit card transaction that is billed back to the merchant after the sale has been settled. Chargebacks are initiated by the card issuer on behalf of the cardholder. Typical cardholder disputes involve product delivery failure or product/service dissatisfaction. Cardholders are urged to try to obtain satisfaction from the merchant before disputing the bill with the credit card issuer.

 

Close Batch:

The process of sending the batch for settlement.

 

Commercial Cards:

Credit or charge cards issued to businesses to cover expenses such as travel and entertainment and procurement. Includes the multiple payment card brands of purchasing cards, business cards, corporate cards and, multi-utility fleet cards. Visa and MasterCard now have special procedures for passing billing information back to the card-issuing bank so that it can be displayed on cardholder statements; this is a program for promoting the use of credit cards for business purchases by providing purchase tracking to business users. New regulations require that this billing information is passed back with the transactions, otherwise, a higher pass- through fee will be incurred.

 

Corporate Card:

Charge card designed for business-related expenses, such as travel and entertainment. Please see Commercial Card.

 

Credit (Reversal):

Nullification of an authorized transaction (sale) that has not been settled. If supported by the card issuer, a reversal will immediately “undo” an authorization and return it to the open-to-buy balance on a cardholder’s account. Some card issuers do not support reversals.

 

Direct Deposit Account ( DDA):

The merchant's account into which processors deposit funds and from which the merchant may withdraw at any time.

 

Debit Card:

Payment cards whose funds are withdrawn directly from the cardholder’s checking account at the time of sale (online debit on a Debit Network) or after batch settlement (off-line debit on a Credit Card Network).

 

Deposit Correction Notice (DCN):

Adjustments (debits or credits) made for an out-of-balance condition due to various problems in the transmittal. The correction is made by the merchant’s acquirer at the time of capture prior to being sent out for Interchange.

 

Dial Terminal:

AKA, the little black box that is typically found in restaurants and retailers. It should never be used in a B2B environment.

 

Edit Rejects:

The rejection of a sales draft by Visa or MasterCard before a transaction processes through Interchange, but after it has been paid by the acquirer.

 

Electronic Cash Register (ECR):

A device used for cash sales, which can also be integrated to accept credit cards.

 

Electronic Data Capture (EDC):

Process of electronically authorizing, capturing and settling a credit card transaction.


EMV: 

Europay, MasterCard, and Visa 

 

Fleet Cards:

Private label credit cards designed mainly for repairs, maintenance, and fueling of business vehicles.

 

Footer:

Text printed at the bottom of a sales draft. A merchant can customize the footer (i.e., Have a Nice Day, No Refunds, Thank You for Shopping With Us, etc.).

 

Independent Sales Organization (ISO):​

An ISO is an Independent Sales Organization that resells merchant processing - the retailer in the typical distribution chain. ISO are required to disclose who they are an ISO for at the bottom of their website. 

., is a registered ISO/MSP in association with Fifth Third Bank, Cincinnati, OH


Interchange:​

The fee charged to the merchant and passed back to the issuing bank. The fees go up and down based on Industry, Card Type, Processing Network, How Entered, and Data Passed.         

 

Issuer:​

The bank or other financial institution that extends credit to a cardholder through bank card accounts. The financial institution issues a credit card and bills the cardholder for purchases against the bankcard account. Also referred to as the cardholder’s financial institution. Simply put, the Issuer is a bank or other institution that issues a credit card or debit card to a cardholder.


Merchant Sponsoring Bank (MSP):

A Chartered Bank or Savings and Loan; that has obtained membership in Visa or MasterCard in order to allow a processor access to the Visa and MasterCard networks (in order to process these types of transactions). Since only a Bank may join Visa or MasterCard, many processors make deals with a Sponsoring Bank in order to gain access to the Visa and MasterCard networks. Because these Sponsoring agreements are usually like a partnership, the line between the Sponsoring Banks and their processors is not always clear; sometimes the partnership is referred to by the name of the bank, while other times they are referred to by the name of the processor.

 

Magnetic Strip:

A strip of magnetic tape affixed to the back of credit cards containing identifying data, such as account number and cardholder name.

 

Manual Close:

A batch close that must be initiated by the merchant on a daily basis, as opposed to an auto-close at a preset time.

 

Merchant:

A business that accepts credit cards.

 

MID (Merchant Identification Number):

This number is generated by a processor/acquirer and is specific to each individual merchant location. This number is used to identify the merchant during the processing of daily transactions, rejects, adjustments, chargebacks, end-of-month processing fees, etc.

 

Shopping Cart Software:

These applications typically provide a means of capturing a client’s credit card information, but they rely on the Software Module of the Secure Gateway Provider, in conjunction with the Secure Payment Gateway, in order to conduct secure credit card transactions online. 

 

T & E Cards:

Credit or charge card used by businesses for travel and entertainment expenses. Examples of these cards are American Express, Diners Club, Carte Blanche, and JCB. Also, see Corporate Cards.


TEARSHEET: 

A document given to a gateway that provides the merchant account information, bank account information, processor information, etc. to aid in the set up of communication between the gateway and the merchant account provider.

 

Terminal Identification Number(TID):

A unique number assigned to each POS terminal, Virtual Terminal or Gateway

 

VAR (Value Added Reseller):

Third-party vendor that enhances or modifies existing hardware or software, adding value to the services provided by the processor or acquirer


VAR Sheet: 

A document given to a gateway that provides the merchant account information, bank account information, processor information, etc. to aid in the set up of communication between the gateway and the merchant account provider.