Glossary of Terms Associated with
Credit Card Processing

AVS: Address Verification System; a credit card processing security measure provided with credit card equipment that checks the billing address and zip code of a credit card that is going through credit card authorization

Acquiring Bank: the financial institution that assumes the credit card processing risk for merchant services accounts

Authorize.net: a specific Internet software system that allows for Real Time Online Credit Card Processing

Authorized Cardholder: the person who signs for a particular credit card; credit card authorization should be given to only this party

Average Transaction Amount: the monthly credit card processing volume divided by the number of credit card transactions

Capture: the process by which the information in a credit card authorization is sent by the credit card processing system to the authorized cardholder’s bank to obtain money for goods and services delivered

Card Association: a specific credit card company, i.e. Visa, MasterCard, American Express, and Discover

Chargeback: a credit card transaction that is challenged by a cardholder or merchant bank and sent back through interchange to the bank of account (cardholder or merchant) for resolution

Chargeback Ratios: a comparison between the number of credit card authorizations and the number of chargebacks that one merchant services account acquires

Consumer: the customer who will be purchasing goods or services from you, the merchant-in this case using a credit card

Credit: an amount issued by the merchant to the cardholder if goods and services are not satisfactory

Credit Card Authorization: approval by, or on behalf of, the credit card issuer to validate a credit card transaction for a merchant or another affiliate bank

Credit Card Sales Draft: a hardcopy of the contract between the merchant and the authorized cardholder when a credit card transaction has taken place

Credit Rating: an assessment of a cardholder’s credit history as scored by one of the major credit scoring agents; rated as A, B, or C

Deposit Transaction: the process by which funds are delivered to a merchant services account when a credit card authorization has taken place and goods and services have been delivered

Domain Name: a name that identifies an IP Address, which is a unique address assigned to an individual or company that designates their coordinates on the World Wide Web. ex. www.yahoo.com

Electronic Deposit: the way in which the credit card association sends money to the merchant account when a credit card authorization has taken place and goods and services have been delivered

Electronic Draft Capture: a series of lines in the magnetic strip of a credit card that contain information necessary for credit card authorization and make the credit card processing system more secure

Encrypted Transaction: the way in which a merchant sends a customer’s credit card information to the credit card processing company using Real Time Online Credit Card Processing software

Expected Monthly Volume: the amount of money a merchant plans to process in credit card transactions in one month

Fees:

   Application Fee: a charge to the merchant who is applying for the ability to begin credit card processing

   Chargeback Fee: a charge to the merchant services account when a chargeback has occurred

   Discount Rate: the fee a credit card processing company or merchant bank charges the merchant account for giving the merchant deposit credit and handling the merchant’s credit card sales draft or electronic sales transactions

   Monthly Minimum: the amount charged to the merchant account if credit card processing fees (discount rate and transaction fees) do not reach an amount previously agreed upon by the merchant and the credit card processor

   Monthly Statement Fee: a charge to the merchant for the hard copies of his Visa/MasterCard, American Express, and Discover credit card processing transactions for the month in order to reconcile your bank statements

   Transaction Fee: a fixed amount charged to the merchant services account for each credit card processed

   Verbal Authorization Fee: a charge to the merchant account when the merchant account has had to call in to the credit card processor and receive credit card authorization over the phone

IP Address: a unique address assigned to an individual or company that designates their coordinates on the World Wide Web

Internet Software: the product that sets up a system for a merchant account to do credit card processing online

Issuing Bank: the party that supports/provides for the actual credit card; i.e. a Visa given by Bank of America or a MasterCard given by Chase; American Express and Discover do not have separate issuing banks

Manual Imprinter: a piece of credit card processing equipment in which the merchant physically rather than electronically imprints information off a consumer’s credit card; also known as knucklebuster

Merchant Services Account: the relationship set up between a business and a credit card processing company when the business would like to begin accepting credit cards for goods and services

Merchant Agreement: the initial correspondence and contract between the merchant and the credit card processing company; when this agreement is approved, a merchant services account is set up

Merchant Bank: the bank that has entered into an agreement with a merchant to accept deposits generated by credit card transactions-enables merchant to accept credit cards

Merchant Commerce Application: an online form that is designed to get the customer’s credit card information and billing/shipping address when ordering goods and services

Method of Transaction Processing:

   Swiped Credit Card: the credit card is present and the merchant physically runs the consumer’s credit card through the credit card terminal

   Keyed Credit Card: the credit card is not present and the merchant punches in the information from the credit card into the credit card terminal

   Real Time Online Credit Card Processing: use of a computer software system that facilitates credit card processing over the Internet

Merchant ID: a series or group of numbers that numerically identifies each merchant account to the credit card processing company or merchant bank for accounting and billing purposes

POS Credit Card Terminal: a device placed in a merchant location that is connected to the bank’s system via telephone lines and is designed to authorize, record, and forward data by electronic means for credit card sales

Reference Number:the identification of a specific credit card transaction; can be found on the credit card sales draft

Reserve Account: set up by the credit card processing company to protect themselves in case of losses due to chargebacks or if the merchant defaults on their merchant account

Settle Batch: the act by which the merchant sends all of the credit card processing transactions for a particular day to the credit card processor

Terminal ID: a series or group of numbers that numerically identifies a specific piece of credit card processing equipment, such as a credit card terminal or credit card printer, to the credit card processor

Transaction (credit card processing): the act of taking a credit card for goods or services performed

Underwriting: to assume financial risk for a merchant’s credit card processing by a bank that is a member of the card association