ACQUIRER

A bank that sponsors merchants for the acceptance of credit card transactions.

ACQUIRING BANK

The bank that maintains the merchant relationship and receives all transactions from the merchant.

ADDRESS VERIFICATION SERVICE (AVS)

A service that verifies the cardholder's billing address in order to help combat fraud in "card not present" transactions (e.g. mail order, telephone order, internet, etc.).

AGENT BANK

A bank that participates in another bank's card program, usually by turning over its applicants for bankcards to the bank administering the bankcard program and by acting as a depository for merchants.

AMERICAN EXPRESS OR AMEX

An organization that issues cards and acquires Transactions (unlike Visa and MasterCard, which are bank associations).

APPROVAL

A code issued by a card-issuing bank allowing a sale to be charged against a cardholder's account. Approval means that the amount is within the cardholders remaining credit limit and that the card has not been reported lost or stolen. Approvals are requested via an AUTHORIZATION.

ASSOCIATIONS

MasterCard and Visa are the existing bankcard associations. Their purpose is to establish and administer the rules and regulations governing the credit card business. Discover and American Express are similar but not technically associations since they are single companies. 

 

AUTHORIZATION

The request to charge a cardholder. Reduces the cardholder's "Open to Buy" but does not actually charge the account. Authorization must be SETTLED in order to charge the account. If not settled within a certain time period authorizations expire or "drop off." The expiration time period is determined by the issuing bank, typically 3-7 days.

AUTHORIZATION CODE

The numerical code sent by the card issuer, given to a Sales transaction as verification that the sale has been authorized. The authorization code is always included on the merchant sales draft.

AUTH ONLY OR PRE-AUTH

A transaction in which the merchant does not intend to charge the cardholder until a later time, if at all. See PRIOR AUTHORIZATION.

AVERAGE TICKET

The average dollar amount of merchant credit transactions.

BANKCARD

Non-profit organizations that are owned by participating financial institutions.

BASIS POINT

One one-hundredth of a percent (0.01%). DISCOUNT rates are expressed as basis points.

BATCH

A collection of transactions. Usually a merchant has one batch per day or per shift.

BATCH PROCESSING

A type of data processing where related transactions are transmitted as a group for processing.

BUNDLED RATE

A discount rate that includes communications costs as well as transaction fees. Also referred to as a flat rate.

CARD ISSUING BANK

The financial institution that issues a credit card to a consumer. This is the financial institution that sends the credit card bill and is responsible for the receivables on the card.

CAPTURE

The act of creating an electronic transaction, usually for transferring money. Captured transactions are ready for settlement.

CHARGEBACK

The act of taking back funds that have been paid to a merchant for a disputed or improper credit card transaction. This procedure is initiated by the issuer after the acquirer has begun the clearing process.

CHARGE BACK PERIOD

The number of calendar days in which a MEMBER may charge sales back to the merchant, beginning with the day after the date the record is first received by the member or agent and continuing until the end of the day on which it is dispatched as a charge back item.

CHECK GUARANTEE

A service which guarantees check payment (up to the Limit defined for the account), provided that the merchant follows correct procedures in accepting the check. The service determines whether the check writer has previously written delinquent checks.

CLEARING

The process of exchanging financial details between an ACQUIRER and an ISSUER to facilitate posting of a cardholder's account and reconciliation of a customer's settlement position.

CLOSE BATCH

The process by which transactions with authorization codes are sent to the PROCESSOR for payment to the merchant.

CREDIT or RETURN

A return of funds to a cardholder's account (crediting entry) for a sale that has already been authorized and settled.

DEBIT CARD (ON-LINE)

An ATM bankcard used to purchase goods and services and to obtain cash, which debits the cardholder's personal deposit account. Requires a PIN (Personal Identification Number) for use.

DEBIT CARD (OFF-LINE)

A bankcard used to purchase goods and services and to obtain cash, which debits the cardholder's personal deposit account. Off-line debit cards do NOT require a PIN (Personal Identification Number) for use and pass through interchange just like a credit card.

DECLINE

Response to transaction request meaning that the issuing bank will not authorize the transaction.

DEPOSIT

When a merchant closes a batch and sends the transactions to the host computer for settlement. Compare to RELEASE. Batches should be closed on a daily basis to ensure the lowest discount rates.

DISCOUNT RATE

The discount rate is the rate a merchant pays their financial institution for services rendered in connection with processing of financial transactions. The discount rate is made up of several components including interchange and processing fees.

ELECTRONIC DRAFT CAPTURE

A system in which each transaction is routed to the HOST COMPUTER for processing and storage. The stored transactions are used to create settlement files and transaction reports.

ELECTRONIC FUNDS TRANSFER (EFT)

The paperless act of transmitting money through a computer network. Usually does not refer to CHECK GUARANTEE.

FLOOR LIMIT

This was a preset limit established by a PROCESSOR that allowed merchants to accept credit card sales without authorization provided the merchant check to see that the card number was not listed on a Warning Bulletin for lost or stolen cards. Floor limits are now rarely used.

FORCE

A sale TRANSACTION for which a merchant received a VOICE AUTHORIZATION. A Force is done so that the PREVIOUSLY AUTHORIZED transaction can be settled and the merchant can receive funds. Also known as POST AUTHORIZATION.

GATEWAY

A system that passes data between networks having similar function, but different implementations.

HOST CAPTURE

Type of transaction capture in which transaction information is stored on the PROCESSOR's HOST COMPUTER and not on the merchant's POS system. Compared to TERMINAL CAPTURE. SETTLEMENT occurs at the HOST COMPUTER and may be automatic: no merchant initiation is required.

HOST COMPUTER

Refers to the computer at the PROCESSOR that is dialed for AUTHORIZATION and SETTLEMENT.

INDEPENDENT SALES ORGANIZATION (ISO)

Term for a company that is sponsored by an ACQUIRING BANK to solicit, sell and sometimes support merchants.

INTERCHANGE

The flow of information between issuers and acquirers, e.g. transactions, retrieval requests, charge backs.

INTERCHANGE FEE

The fee paid by the ACQUIRING BANK to the ISSUING BANK for each credit card transaction. This fee is part of the DISCOUNT rate. This fee is set by and collected by the bankcard associations.

ISSUER (CARD ISSUER)

A bank that provides credit cards to consumers.

ISSUING BANK

Same as the ISSUER. The issuer of the customer credit card.

MAGNETIC STRIPE

A stripe on the back of a bankcard that contains magnetically encoded cardholder account information. The name of the cardholder is stored on Track I and the account number and expiration date are stored on Track II. Also referred to as MAG STRIPE. See Appendix II for details.

MANUAL ENTRY

Credit card information that is entered via keypad instead of swiping the card through a card reader.

MASTERCARD

An association of banks that governs the issuing and acquiring of MasterCard credit card transactions.

MEMBER (MEMBER INSTITUTION)

A financial institution that is a member of Visa USA and/or MasterCard International. A member is licensed to issue cards to holders and/or accept merchant drafts.

MERCHANT

A retailer, or any other entity (pursuant to a Merchant Agreement), that agrees to accept credit cards, debit cards, or both, when properly presented.

MERCHANT AGREEMENT

A written agreement between a merchant and a bank containing their respective rights, duties, and warranties with respect to acceptance of the bankcard and matters related to bankcard activity.

MERCHANT BANK

Also known as the Acquiring Financial Institution since it acquires merchant business by supplying the merchant with the means to accept credit cards for payment. It is a bank that has entered into an agreement with a merchant to accept deposits generated by bankcard transactions, also called the ACQUIRER or ACQUIRING BANK.

MERCHANT CATEGORY CODE

A code assigned by an ACQUIRER to a MERCHANT to identify the merchant's principal trade, profession, or line of business. This four digit code is also know as the SIC CODE.

MERIT

Refers to the Qualification levels for a MasterCard transaction. Merit III is the highest, followed by Merit II, Merit I, and then Standard.

MESSAGE FORMAT

The specifications for the content of a data message with respect to the size, character type, sequence, and content of its data fields.

MID

Refers to Merchant Identification Number. This unique number identifies a merchant to the merchant bank or processor.

MOTO

Refers to Mail Order/Telephone Order.

MULTI-TRANS

Multiple transaction requests and responses transmitted to the processor on the same connection.

MULTI-TRANS MODE

The HOST COMPUTER transmits additional codes to allow additional transactions on an existing connection.

NET SETTLEMENT BANK

The bank that maintains the settlement account and that executes funds transfers with member clearing banks.

NON-QUALIFIED

A broad term that describes a transaction that did not interchange at the best rate because it did not satisfy all the card association requirements for the transaction. For instance, the transaction was entered manually or it was not settled in a timely manner.

OFF-LINE

Operating mode in which the terminal is not connected to the processor. Often used when a merchant is batch processing transactions.

ON-LINE

Operating mode in which the terminal is connected to the processor via dial, lease line, etc. in order to provide real time responses to transaction requests.

OPEN TO BUY

The amount of credit available at a given time on a card holder's account.

ORIGINAL DRAFT

The actual bank copy of the forms used in the transaction. Also referred to as the "hard copy."

PC POS APPLICATION

A computer program that integrates two or more of the following functions: cash register, inventory, accounting, and credit card authorization and settlement.

PIN

Personal Identification Number used by a cardholder to authenticate card ownership for ATM or Debit card transactions. The cardholder enters his/her PIN into a PIN Pad. Customer entry of his/her PIN is required to complete an ATM/Debit card transaction.

POINT-OF-SALE

The place and time that the transaction occurs. This term also refers to the devices or software used to process transactions.

POST-AUTH

Completion of a pre-authorized transaction.

PRE-AUTH

The process of authorizing and reserving the funds for the transaction – insuring the card is valid; the cardholder has sufficient open-to-buy funds to cover the purchase amount and reserving the funds for completion (POST-AUTH).

PRESTIGIOUS PROPERTIES

A $500, $1000 or $1500 floor limit at designated hotels/resorts. Floor limit is returned as part of authorization response.

PRIOR AUTHORIZED SALE

A transaction for which AUTHORIZATION was obtained at an earlier time, e.g. a merchant had to call for authorization, merchant authorized card before services rendered (hotel reservation, auto rental, etc.).

PRIVATE LABEL CARD

A card that can be used only in a specific merchant's store.

PROCESSOR

A transaction processor; a large computer center that processes data from credit card transactions and settles funds to merchants.

PSIRF

The highest QUALIFICATION which a Visa transaction can obtain. Card must be swiped and transaction deposited within 24 hours.

QUALIFICATION

A level at which a transaction interchanges. The level of qualification is dependent on how well a transaction meets interchange criteria. For example how the credit card number is entered, swiped or manual, and how quickly the transaction is settled.

RECEIPT

A hard copy description of the transaction that occurred at the point-of-sale. Minimum information contained on a receipt is: date, merchant name and location, account number, type of account used (e.g. Visa, MasterCard, AMEX, etc.), amount, reference number, and action code.

RETURN or CREDIT

A transaction that is the opposite of a sale, the return amount is credited back to the cardholder.

RECURRING TRANSACTION

A transaction, for which permission has been granted by a cardholder to a merchant, that is periodically charged to the cardholder's account.

RELEASE

When a merchant instructs their terminal to close a BATCH. Applies only to Host Capture. Cardholders are not charged (and merchant accounts credited) until a batch is released. Compare to DEPOSIT.

SALE

A transaction that authorizes and captures the transaction amount as a single step.

SETTLEMENT

The process by which TRANSACTIONS with AUTH CODES are submitted to the Processor for transfer of funds.

STANDARD

The lowest QUALIFICATION level at which a Visa or MasterCard transaction may INTERCHANGE. Caused when a TRANSACTION is deposited several days after the original AUTHORIZATION.

SUSPENSE

A state in which a batch of transactions is not released to interchange because of a problem noticed by the HOST COMPUTER. Requires human intervention to fix the problem and settle the batch.

SWIPED CARD

Credit card information that is read into a card reader directly as a result of swiping (or sliding) the credit card through a card reader. The information magnetically encoded in the magnetic stripe is transmitted. This information includes secret data that helps validate the card. Compare to MANUAL ENTRY.

TERMINAL CAPTURE

Type of software in which transaction information is stored in the software, not at the HOST COMPUTER. Merchants using Terminal capture must initiate SETTLEMENTS at the end of each day or shift. Compare to HOST CAPTURE.

THIRD PARTY PROCESSOR

A non MEMBER agent which provides authorization, settlement and merchant services to a merchant.

TICKET ONLY OR POST-AUTH

A sale transaction for which you have received a voice authorization.

TRANSACTION

Action between a cardholder and a merchant that results in activity on a cardholder account.

TRANSACTION FEE

A "per transaction" charge incurred by merchants who are on scale pricing. This is in addition to the percentage DISCOUNT fees.

VISA

An association of banks that governs the issuing and acquiring of Visa credit card transactions.

VOICE AUTH

A transaction authorization that is provided by an operator, usually when an issuer sends a "Please Call" message to the merchant instead of an authorization number.

VOID

The reversal of a current transaction that has been authorized but not settled. Settled transactions require processing of a CREDIT in order to be reversed.