Scroll down to review the most commonly used merchant processing terms and definitions.

A B C D E F G HI J K L M N O P QR S T U V W X Y Z

ABA (American Bankers Association):

The national trade association of commercial banks.

ABA Routing Number:

Also referred to as Transit Routing Number. Directs electronic ACH deposits to theproper bank institution.

Account Number:

A unique sequence of numbers assigned to a cardholder account that identifies theissuer and type of financial transaction card.

ACH (automatic check handling):

A form of electronic payment. Funds or payments can be transferred electronicallyin two ways: by wire transfer or through an automated clearinghouse. Wire transferis an online, real-time payment system designed to handle large-dollar, time-criticalpayments, mostly between large banks. ACH, in contrast, is designed to be an "electroniccheck." It is typically used to process high volumes of relatively small-dollarpayments for settlement within one or two business days. ACH transactions are settledin a manner similar to the way checks are settled: The clearinghouse takes all ACHfiles received daily from its member banks, sorts them by the originating bank (thebank where the check was cashed or deposited) and the paying bank (the bank againstwhich the check was drawn), totals the accounts, and credits or debits appropriateaccounts accordingly.

Acknowledgement:

The transmission of a short packet from the receiving device to the sending deviceindicates that the data has been received error-free.

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 transactionsfrom the merchant.

Acquiring Bank or Acquirer:

A financial institution that provides accounts for merchants. It is also calleda merchant bank, or acquirer. The acquiring bank processes the merchant's transactionsand credits payment to the merchant account. Your merchant account at the acquiringbank receives funds from a cardholder when a transaction is complete. Acquirersare so named because they acquire a merchant's sales tickets and credit the ordervalue to the merchant's account.

Address Verification System:

Address Verification Service is a system available to merchants who key transactionswhich matches the street number and zip code of the cardholder with the informationgiven to the merchant. This allows the merchant to verify that the person requestingthe goods or services is the person who owns the cards.

ADSL (asymmetric digital subscriber line):

A communications protocol for connecting computers and other electronic devicesto a network, such as the Internet. ADSL offers more bandwidth than current telephonemodem connections. ADSL can operate over most existing telephone lines but is currentlyavailable in only a few areas and generally costs more.

Approval:

A code issued by a card issuing bank allowing a sale to be charged against a cardholder'saccount. Approval means that the amount is within the cardholder's remaining creditlimit and the card has not been reported lost or stolen. Approvals are requestedvia an AUTHORIZATION.

Approval/Authorization:

All participants in the chain from the retailer to the cardholder have said thatthey are ready, willing, and able to complete this Sale, Refund or PreAuth. Notethat money does not actually flow out of (or back into) the cardholder's accountupon Approval/Authorization. Rather, the transaction is queued for completion duringthe next batch closure.

AMERICAN EXPRESS (Amex):

An organization that issues cards and acquires transactions, unlike VISA and MASTERCARD,which are bank associations.

AMEX:

Abbreviation for American Express. An organization that issues travel and entertainmentcards and acquires transactions.

Arbitration:

The procedure used to determine the responsibility for a chargeback-related disputebetween two members.

ASP (active server page):

An HTML page that includes one or more scripts, or small embedded programs, thatare processed on a Microsoft Web server (Internet Information Server) before thepage is sent to the user. Typically, the script in the Web page (at the server level)uses input from a user's request to access data from a database and then buildsor customizes the page before sending it to the requester.

ATM:

ATM is an acronym for Automated Teller Machine.

Authentication:

Identification of individuals and businesses through the use of digital certificates.

Auth Only:

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

Authorization:

The request to charge a cardholder. Reduces the cardholders "Open to Buy" but doesnot actually charge the account. Authorization must be FORCED in order to chargethe account. If not used within a certain time period, the authorization will expire.Time period determined by issuing bank.

Authorization Center:

A department that electronically communicates with a merchants request for an authorizationon credit card transactions to the cardholders bank and transmits the authorizationvia voice authorization or electronic point of sale equipment.

Authorization Code:

The numerical or alphanumerical code sent by the card issuer, given to a sales transactionas verification that the sale has been authorized. The authorization code is alwaysincluded on the merchant sales draft.

Automated Clearing House:

A method of transferring funds between banks via the Federal Reserve System usedby most, but not all, financial institutions.

Average ticket:

The average size of a merchant's bankcard transaction. Generally used in pricingdecisions and calculations.

AVS (address verification system):

In 1996, VISA/MasterCard headquarters introduced a new regulation requiring allbusinesses that manually key in the majority of their credit card transactions tohave a special fraud prevention feature on their credit card processing equipment.This feature is referred to as an address verification system (it checks to seethat the billing address given by the customer matches the credit card). If youopt not to use AVS, VISA and MasterCard will not support your transactions and willcharge you an additional 1.25% on those sales.

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Bandwidth:

The amount of electronic data that can be transferred through an electronic connectionin a given time. For modems connected by telephone to the Internet, the modem's"speed" represents the maximum possible bandwidth of the connection, such 56.6 Kps(kilobits per second). Competent Web site operators strive to keep the size of Webpage files low to conserve bandwidth and speed downloading.

Bank Card:

A plastic card that is widely accepted by merchants as a result of a standard setof rules for the authorization of its use, clearing, and settlement of transactions,used to credit an account for processing a sales transaction. The most common bankcard is a credit card. Transactions are usually not profitable for amounts of lessthan $5 (U.S.); micropayment schemes are designed for much smaller increments ofpayment.

Bank Identification Number:

The digits of a credit card that identify the ISSUING BANK. Sometimes the firstsix digits. Often referred to as a BIN.

Bank Routing Number:

the first nine digits that appear across the bottom of a personal check, they identifythe financial institution

Bank Service Fee:

EVO statement fee.

Basis Point:

One one-hundredth of a percent. DISCOUNT rates are expressed as basis points.

Batch:

A collection of credit card transactions saved for submitting at one time, usuallyeach day. Merchants who do not have real-time verification systems must submit theirtransactions manually through a POS terminal. Batch fees are charged to encouragea merchant to submit his or her transactions at one time, rather than throughoutthe day.

Batch#:

Also known as SID or Submission ID. When FDRN receives a batch closure/settlementmessage from iBill, rather than use iBill's suggested BatchID number, FDRN insteadidentifies the batch request for its own uses by assigning it its own FDRN BatchNumber. When speaking with FDRN representatives, you'll find they more quickly knowwhat you're talking about when you begin the conversation by mentioning the FDRNBatch Number.

Batch Close:

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

Batch fee:

a fee incurred for settling each batch from the terminal.

Batch Processing:

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

Browser:

A software program used for locating, requesting, and displaying Web pages. Examplesinclude Netscape Navigator, Microsoft Internet Explorer, and Opera.

Bundled Rate:

A discount rate which includes communication costs as well as transaction fees.Also referred to as a flat rate.

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Cancellation Fee:

A fee incurred if a merchant cancels prior to the completion of the 3-year contractterm.

Capture:

The submission of a credit card transaction for processing and settlement. POS terminalsand real-time processing software capture transactions to submit to merchant accountproviders or credit card processors.

Card Issue:

Financial institution (or its agent), which issues the financial transaction cardto the cardholder. The card issuer remains unchanged throughout a transaction.

Cardholder:

A person or company who has an active credit card account with which transactionscan be processed.

Card Validation Code:

A unique encrypted 3-digit value that is encoded in the magnetic stripe and printedon the back of a MasterCard. It is used as an additional means of Cardholder validationduring the authorization or referral process.

Card Verification Value 2:

A unique encrypted 3-digit value that is encoded in the magnetic stripe and printedon the back of a Visa Card. It is used as an additional means of Cardholder verificationduring the authorization or referral process.

CAS:

Customer Access System; NDC's Front End.

Cascading Style Sheets (CSS):

A method used to attach styles such as specific fonts, colors, and spacing to HTMLdocuments. Because they "cascade," some elements take precedence over others.

Cash advance:

The amount advanced by a bank teller or ATM to the bankcard holder against the cardholder’sline of credit.

CDPD:

Cellular Digital Packet Data; Wireless Technology allows data files to be brokeninto a number of "Packets" and sent along idle channels of existing cellular voicenetworks.

Certification:

A process during which a terminal or software provider meets certain standards requiredby the certifier.

CFR (cost and freight):

Indicates that a quoted price includes the cost of the goods and transportationcharges but not of insurance.

Chain:

A series of merchant locations that are managed/owned by the same entity.

Channel:

A path along which a POS communication signal is transmitted.

Chargeback:

A fee charged by a merchant services provider against a merchant account for transactionsthat are successfully challenged by a credit card holder. After a charge is disputedand adjudicated in the cardholder's favor, the transaction total and chargebackfee are deducted from the merchant account. CIF (cost, insurance, and freight):A term indicating that a quoted price includes the cost of the goods, insurance,and transportation charges.

Chargeback Reason Code:

A two-digit code identifying the specific reason for a chargeback.

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. Theservice determines whether the check writer has previously written delinquent checks.

Check Services:

Authorization of a check.

CLASS A Certified:

Certification of a product WITH Help Desk support.

CLASS B Certified:

Certification of a product WITHOUT Help Desk support.

Clearing:

The process of exchanging financial details between an AQUIRER and an ISSUER tofacilitate posting of a cardholder's account and reconciliation of a customer'ssettlement position.

Client:

A computer that requests and receives data over a network, including the Internet.The most common types of client on the Internet are computers running browsers ore-mail programs.

Close Batch:

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

Commerce Server:

A Web server that contains the software necessary for processing customer ordersvia the Web, including shopping cart programs, dynamic inventory databases, andonline payment systems. Commerce servers are usually also secure servers.

Cookies:

Small files that are automatically downloaded from a Web server to the computerof someone browsing a Web site. Information stored in cookies can then be accessedany time that computer returns to the site. Cookies allow Web sites to "personalize"their appearance by identifying visitors, storing passwords, tracking preferences,and other possibilities.

Corporate Card:

a bankcard issued to companies for use by company employees.

Crawler:

A software application that automatically finds and retrieves information from theWeb. Also called a "spider" or "robot."

Credit:

Commonly referred to as a "Refund," this is a transaction that transfers money fromthe merchant to the cardholder's account.

Credit Card:

A bankcard establishing the privilege of the person to whom it is issued to presentit as payment to a merchant; the card bearer must reimburse the credit card companythe amount of the sale. Credit card transactions are usually not profitable foramounts of less than $5 (U.S.); micropayment schemes are designed for much smallerincrements of payment.

Credit Card Processors (or third-party processors):

Merchant services providers that handle the details of processing credit card transactionsbetween merchants, issuing banks, and merchant account providers. Web site operatorsusually must first establish their own merchant account before contracting for creditcard processing services.

Credit Limit:

The maximum amount the cardholder may owe an issuer on the card.

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Data Encryption:

The scrambling of information sent over the Internet. Data encryption ensures thatonly the intended recipient has the ability to read and understand the information.

Database:

A file or file system containing organized information and, most commonly, a filingand retrieval system for storing information. Most database software also includestools for data analysis. Examples of database software include Oracle, Sybase, andMicrosoft Access.

DCS (destination control statement):

A document that accompanies nearly all commercial shipments that declares the shipment'scontents are licensed for export to a particular destination. The anti-diversionclause in the DCS precludes the diversion of the shipment to any other destination.

Debit:

A charge to the customers bankcard account.

Debit Card:

A financial instrument used by consumers in place of cash. Unlike a credit card,debit card purchases are deducted automatically from the cardholder's account, likea check. Visa and MasterCard now offer debit cards through banks and other financialinstitutions. Requires a PIN (Personal Identification Number) for use.

Decline:

Either the processing network or the cardholder's bank has refused to complete aSale, Refund or PreAuth. The cardholder's account balance was not changed. iBillpasses back to the retailer any reason it receives for a Decline having been issued.Unfortunately, reasons stated by banks and processing networks tend to be vague.This is often due to there being a problem between the cardholder and his bank,and bank policies rightly leave us out of such private conversations.

Deposit:

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

dHTML (dynamic HTML ):

An extension of HTML that gives greater control over the layout of page elementsand the ability to have Web pages that change and interact with the user withouthaving to communicate with the server. The three components of DHTML pages are HTML,Java script, and cascading style sheets.

Digital Certificate:

Online identification that authenticates a consumer, merchant and financial institution.Digital certificates are used during SET transactions.

Digital Wallet:

A consumer account set up to allow e-commerce transactions through a particularcredit card processing system. Before the consumer can make a purchase, he or shemust first establish an account with the credit card processor, who provides anID and password. These can then be used to make purchases at any Web site that supportsthat transaction system. CyberCash's "Digital Coin" system is an example of a digitalwallet system.

Discount Rate:

An amount charged to a merchant for the daily processing of credit card transactions.A fee that applies to all retail card present & magnetic stripe read items thatare authorized and batched out on a daily basis.

Discount Rate:

A percentage fee paid to the merchant account provider or ISO for handling an electronictransaction. Most Web merchants pay between two and 10 percent of their revenuefrom online credit card or electronic check orders.

Doing Business As:

(DBA) refers to the specific name and location of the merchant establishment wherecredit card purchases were made.

Domain:

A designation for particular location on the Internet. A domain, for example "Merchantstorez.com,"contains files that make up the content of Web pages under that address. Merchantstorez.com/intro.htmand MerchantWorkz.com/report3.htm are different Web pages located within the samedomain. Domain names are associated with IP addresses.

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E-Check:

The electronic equivalent of a paper check.

E-commerce:

The processing of economic transactions, such as buying and selling, through electroniccommunication. E-commerce often refers to transactions occurring on the Internet,such as credit card purchases at Web sites. See also Internet commerce.

EDC (electronic data capture):

The use of a POS terminal for validating and submitting credit card transactionsto a merchant account provider or other credit card processor. In online creditcard processing, software takes the place of the POS terminal.

EDI (electronic data interchange):

EDI is a global computer network, separate from the Internet, used to handle financialtransactions between banks and other institutions.

EFT (Electronic Funds Transfer):

A method of transferring money from one bank account to another using a varietyof electronic methods such as bank wire transfer, federal wire transfer, internationalwire transfer.

EIRF (Electronic Interchange Reimbursement Fee):

A VISA classification level that is charged to the merchant when a credit card isnot present, swipe not read, card number is manually key entered.

Electronic Banking:

A form of banking where funds are transferred via an exchange of electronic signalsbetween financial institutions instead of exchanging cash or checks.

Electronic Commerce (E Commerce):

Conducting business electronically instead of using paper.

Electronic Draft Capture:

A system in which each transaction is routed to the host computer for processingand storage. The stored transactions are used to create settlement files and transactionsreports. 

Electronic Financial Services:

(EFS) financial services that are provided electronically via personal computers,ATM machines, etc.

Electronic Funds Transfer:

The paperless act of transmitting money through a computer network. Usually doesnot refer to CHECK GUARANTEE

Electronic Wallet:

Software that enables a cardholder to conduct online transactions, manage paymentreceipts and store digital certificates.

EMC (export management company):

A firm that provides exporting services to other firms. The export management firmwill either take title to act as an intermediary merchant or provide export managementservices in exchange for fees or a commission.

Embossing:

The raised characters that are printed on all credit cards. Embossing provides thecardholders information and allows the card to be imprinted.

Encryption:

The process of encoding a PIN pad with the processor's configuration and key injectionfor the purpose of accepting debit cards. Most common formats are DUKPT (DerivedUnique Key Per Transaction) and Masterkey (MasterCard's debit key encryption format).“The Debit Process” - The transformation of data for the purpose ofprivacy into an unreadable format until reformatted with a decryption key.

ESN:

The unique serial number assigned to a RAM Modem terminal by the manufacturer.

Euro:

The common currency shared by most of the members of the European Union (Britain,Greece, and Denmark are not participating). Introduced in January 1999, the eurowill eventually replace national currencies such as the German mark, French franc,and Italian lira.

Expiration Date:

The date embossed on a bankcard.

Export License:

Permission granted to ship a product to a foreign recipient. In the United States,export licenses are either general licenses or IVLs (individual validated licenses).

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Facsimile Draft:

a paper record that is provided to an acquirer as a substitute for an actual salesdraft.

Factoring:

The purchase of debts owed, or "accounts receivable," in exchange for immediatepayment at a discount. In e-commerce, the term is often applied to ISOs that offerto process credit card transactions through their own merchant account rather thanthrough an account established by the merchant, in exchange for a percentage ofthe transaction or other fee. Factoring of credit card debt is illegal.

FDIC (Federal Deposit Insurance Corporation):

The federal program that protects consumers by providing insurance for bank depositsin the event that a bank becomes insolvent. All funds from PPI merchant accounts,including credit, debit (ATM) and EFT transactions are FDIC insured throughout theentire transaction process from authorization and settlement through ACH depositinto the merchant's bank account.

Financial Institution:

Any organization that provides an avenue to move, invests, lend or provide financialservices. This would include federal & state savings banks, savings and loanassociations, credit unions and commercial banks.

Financial Transaction:

A transaction from the acquirer to the card issuer containing all the necessarydata elements for authorization, posting and reconciliation.

Floor Limit:

The dollar amount an acquirer sets in accordance with Visa/MasterCard guidelines.The merchant must obtain an authorization for all transactions above the floor limit.

Force Transaction/ Offline Transaction:

The entry of a transaction after a referral message is displayed on the POS terminalor network interruption of service that allows the merchant to enter a transactionand the approval code as a forced entry with an authorization code.

Freight Forwarder:

A firm that handles export shipments for other firms.

Front End:

The user interface that appears on a Web page and allows a visitor to the site tointeract with dynamic features, including databases, shopping cart programs, andonline purchase processing software.

FTP (file transfer protocol):

A set of standard codes for transferring files over the Internet. FTP is usuallyused for retrieving large files or files that cannot be displayed through a browser.Windows FTP and Fetch are examples of FTP software.

Fulfillment:

The acquirer provides the issuing bank with an original sales draft or a legiblecopy.

Funding:

The payment a merchant receives for his settled and captured deposits.

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General License:

A declaration by the U.S. Bureau of Export Administration that permits the openexport of certain nonstrategic goods and services to designated countries. Exportersof these goods need not acquire an IVL (individual validated license).

Genie:

Paymentech's Front End.

Gateway:

An application that accepts transactions from online merchant storefronts and routesthem to a financial institution's processing system.

GIF (graphic interchange file):

A file type that contains a graphic, photo, or other image. GIFs are commonly foundon the Web, along with another graphic file format, the JPEG. GIFs tend to takeless memory and bandwidth than JPEGs, and can contain animation. JPEGs offer greaterimage clarity, especially for photo images.

Good Faith:

An attempt to resolve a dispute regarding a violation of Visa/MasterCard rules andregulations via written correspondence/documentation.

Gross Deposit:

Submitting the total dollar amount of bankcard credit and sales drafts for payment.

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Hard Copy:

The original document of an application, credit slip, sales draft/slip.

Headquarters:

The main office of a business.

Holdback:

A portion of the revenue from a merchant's credit card transactions, held in reserveby the merchant account provider to cover possible disputed charges, chargebackfees, and other expenses. After a predetermined time, holdbacks are turned overto the merchant. Note: Merchant account providers almost never pay interest on holdbacks.

Hologram:

A laser photograph of an image to create a three dimensional image. Primarily usedwithin the bankcard industry as an anti fraud/counterfeit deterrent.

Home page:

The page where a user enters a web site.

Host Capture:

Type of transaction capture in which transaction information is stored in the processor'shost computer and not at the merchant's POS system. Compare to Terminal Capture.Settlement occurs at the host computer and is automatic: no merchant initiationis required.

Hot Card:

A bankcard that has been used excessively. Usually indicating that the card haseither been stolen or counterfeit.

HTML (hypertext markup language):

A set of codes that determine how a Web page will appear, including graphics, links,and text characteristics. Other code sets that build on HTML include dHTML, VRML,and XML.

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ICS (Internet commerce services):

The services an Internet commerce provider offers to enable clients to handle manyfacets of their business on the Internet.

Imprint:

Can be electronic (by swiping a card thru a card reader) or manual (by obtaininga physical imprint using an imprinter). One of the two is always required on a creditcard transaction to prove that the card was present.

Imprinter:

A piece of equipment used by merchants to imprint embossed information off of abankcard onto a sales draft.

Independent Sales Agent (ISA):

An independent contractor used to broker accounts for merchant processing and orservicing.

Interchange:

A standard format for sharing or transferring data electronically between partiesthat do not share a common application. Usually a format that is platform-independentis agreed upon as a standard. Examples of common interchange formats include EDI(electronic data interchange), ASCII (American Standard Code for Information Interchange),and GIF (graphics interchange format). Interchange is the operating system of Visa/MasterCardfor authorization, settlement, capture and passing through of interchange and otherfees in addition to monetary and non -monetary information regarding bankcard transaction/processes.

Interchange Fee:

Servicing fees paid by acquirers to issuers for transaction costs. Visa/MasterCardestablishes and periodically reviews interchange rates.

Internet Commerce:

A broad term covering all commercial transactional activities on the Internet. Internetcommerce can range from vendors selling software from a Web storefront (Web site)to large corporate procurement systems using an Internet-based VPN (virtual privatenetwork) to deal with trading partners. Internet commerce is not synonymous withe-commerce, which covers all electronic commercial activities.

Intranet:

An application that allows individuals within an organization to exchange information.

IP Address (Internet protocol address):

A designation for a particular location on the Internet, such as "140.23.719.6."IP addresses are associated with domain names.

ISO (Independent Sales Office):

A firm or organization that offers to process online credit card transactions, usuallyin exchange for transaction fees or a percentage of sales. Merchants must generallyestablish a merchant account before contracting for ISO services, although someISOs claim not to require separate merchant accounts. See also factoring.

ISO 9000:

A set of standards for electrical and electronic products, formulated by the InternationalStandards Organization. Product quality standards in most nations must either meetor exceed ISO 9000 standards.

ISP (Internet service provider):

A firm that provides access to the Internet, including Web browsing and e-mail.ISPs often offer connections that can be accessed by dialing a telephone numberthrough your computer's modem.

Issuer/Issuing Bank:

A licensed member of Visa/MasterCard that holds the contractual agreements withother financial institutions and issues bankcards.

Issuing bank:

The bank that maintains the consumer's credit card account and must pay out to themerchant's account in a credit card purchase. The issuing bank then bills the customerfor the debt.

IVL (individual validated license):

Written declaration by the U.S. Department of Commerce granting permission to exportspecified products to a specified foreign recipient. See also general license.:(J): Java: A programming language frequently used on Web sites. Some Java programs,or "applets" are downloaded from the Web server to the visitor's own computer, whichthen runs them. This distinguishes Java programs from other Web programming languages,such as PERL, that reside and run on the Web server (only the results are downloadedto the visitor's computer).

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Japanese Credit Bureau (JCB):

Issuers of the JCB bankcard.

JPEG (or JPG ):

A file format used for storing graphic images, usually photographs. JPEG files arelarger than GIFs of the same image but offer better color control and clarity. Seealso GIF.

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Kiting:

A scam in which a merchant submits a sales draft from his or her personal account(s)to get cash advances from their business.

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Local Area Network- (LAN):

A data communication network confined to a limited geographic area with moderateto high data information. The area consists of single or cluster buildings. It isowned solely by its user and does not use common carrier circuits although it mayhave gateways or bridges to other public or private networks

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Magnetic Information Character Recognition (MICR):

Imprinted bank numbers at the bottom of the check.

Magnetic Stripe:

A stripe on the back of a bankcard that contains magnetically encoded cardholderaccount information. The name of the cardholder is stored on Track I and the accountnumber and expiration date are stored on Track II. 

Mail Order/Telephone Order (MO/TO):

The direct marketing catalog industry. Potentially risky business types.

MAN:

(Metropolitan Area Network) A network covering a larger area than a Local Area Network(LAN).

Manual Entry:

Credit card information that is entered via terminal keypad or keyboard insteadof swiping the card through a card reader.

MAP (merchant account provider):

A bank or other institution that hosts merchant accounts and processes online creditcard transactions. The term is also often used broadly to include any credit cardprocessing service, including ISOs.

MASTERCARD:

An association of banks that governs the issuing and acquiring of MasterCard creditcard transactions and Maestro debit transactions.

Member:

A financial institution that is a member of VISA USA and or MasterCard International.A member licensed to issue cards to cardholders and to accept merchant sales receipts.

Merchant Account:

A bank account established by a merchant to receive the proceeds of credit cardpurchases. By establishing a merchant account, the merchant bank agrees to pay themerchant for valid credit card purchases in exchange for the right to collect onthe debt owed by the consumer.

Merchant Account Types:

There are two basic types of merchant accounts. A Retail account is merchant accountthat is approved for use in a physical store where the cardholder and the card arepresent. Typically the merchant swipes the card through a card reader to get yourcard numbers so this account is sometimes referred to as a "swipe" account or "cardholderpresent" account.

Retail accounts are the least risky type of account and therefore the merchant accountprovider charges the merchant must less than the riskier "card not present" typeof accounts.

A "card not present" account is also called a Mail Order - Telephone Order (MOTO)account. This is the account used by mail order companies, anyone accepting phoneorders or any other system where the merchant can't physically see the card and/orthe cardholder. Currently this is the type of account used for Internet Businessesaccepting credit cards online.

Because there is increased risk for charge backs and fraud with MOTO accounts, merchantaccount providers always charge the merchant higher rates and fees for this typeof account.

Merchant Acquirer:

A member that has entered into agreement with a merchant to accept deposits viabankcard transactions.

Merchant Agreement:

The written contract between the merchant and the acquirer regarding their rights,rates, and responsibilities.

Merchant Bank:

A bank that holds a merchant account. After a consumer buys a product using a creditcard, the merchant bank places funds into a merchant account in exchange for theright to collect on the debt owed by a consumer. See also merchant account provider.

Merchant Category Code (MCC):

Merchant classification code that identifies the merchant by business type and orprocessing type, authorization and settlement.

Merchant Number:

A number that identifies each merchant to the processing company.

Merchant Services Provider:

A bank, ISO, or other firm that provides services for processing financial transactions,usually credit card sales. Many MSPs provide merchant accounts, while others requiretheir clients to establish merchant accounts on their own. Some MSPs claim thatthey do not require merchant accounts; this may indicate factoring, which is illegalin many areas. See also holdback.

M.I.C.R. (Magnetic Ink Character Recognition)

Characters (i.e. account information) printed on a check with ink containing particlesof a magnetic material.

Micropayment:

Very small charges, perhaps even less than a penny, processed through e-commercesystems. Until this time, e-commerce has been largely limited to purchases of $10(U.S.) or more. With micropayments, however, e-commerce merchants can sell productsfor far lower prices, such as charging small fees for downloading documents or chargingper click for online advertising. Micropayment systems are still largely experimentaland not widely available.

M.I.D.:

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

Mid -Qualified:

A broad term that describes a transaction that did not interchange at the best ratebecause it was entered manually or was not settled in a timely manner.

MID/TID:

MID - Merchant ID number and TID - Terminal ID numbers. For example, a grocery storetypically has a single MID but has a distinct TID for each cash register terminal.By sorting all of that MID's traffic by TID, management can see which register contributedwhich set of transactions. Most Web retailers have just one terminal, so all trafficis associated with a single MID/TID. However, You may have more than one accountassociated with the same MID/TID. In that event, you'll find that batches oftencontain transactions from more than one account.

Minimum Discount Fee:

A fee that is assessed a merchant that does not process at least $25 per month.

MODEM:

Stands for MOdulatorDEModulator. An electronic telecommunications hardware deviceused by the terminal or PC POS to dial up the PROCESSOR.

MO/TO (Mail order, telephone order):

This is the account used by mail order companies, anyone accepting phone ordersor any other system where the merchant can't physically see the card and/or thecardholder. Currently this is the type of account is used for Internet Businessesaccepting credit cards online. Because there is increased risk for charge backsand fraud with MOTO accounts, merchant account providers always charge the merchanthigher rates and fees for this type of account. A classification of merchant accountwith a specific set of rules that are more restrictive than retail merchants. Enablesa merchant to accept credit card payment without a cardholder's signature. The merchantand the cardholder do not need to be in the same physical location. MOTO accountsare also known as Card Not Present or CNP accounts.

MO/TO discount rate (mail order / telephone order discount rate ):

The discount rate charged by the merchant account provider for credit card transactionin which the actual credit card was not available to the merchant. MOTO discountrates are generally higher than swipe discount rates to account for the increasedchance of fraud or nonpayment.

Monthly Minimum:

The minimum amount in fees and percentages charged by a merchant services providerin a given month. If account activity does not generate the monthly minimum, theaccount holder must make up the difference.

MSP (Merchant Services Provider):

A firm that is directly certified by an acquiring bank to provide credit card accounts.

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Net Payment:

Payment to the merchant for sales drafts less credits minus the specified discountfee.

Net Revenue:

Discount income less interchange expenses.

Net Settlement:

The settlement through an actual transfer of funds.

Non-Bankcard:

A non-bank company that deals directly with the cardholder i.e.: American Express,Diners, Discover, Carte Blanche and JCB.

Non Face-to-Face Transactions:

Any transaction where the card is not present at the time of the sale.

Non-Qualified Rate:

A fee that applies to all retail, mo/to, internet items without an AVS match, AVSRequest, delayed or incomplete transactions/batches/batch settlements for foreigncards, business cards and or corporate cards.

Notification:

A message where the sender notifies the receiver of an activity taken, requiringno approval or response.

No show:

A charge processed by a hotel or motel when a cardholder fails to arrive at a certaintime or fails to cancel a guaranteed reservation with a certain timeframe. The wording"no show" must be written on the signature line of the sales draft.

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Online Storefront:

A commerce-enabled Web site available on a public network, such as the Internet,that offers goods and services for sale. An online storefront is the equivalentof a store or place of business that a customer would visit to purchase goods andservices.

Open to Buy:

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

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Packet:

A bundle of data organized in a specific way for transmission. The three principalelements of a packet include the header, the text, and trailer (error detectionand correction bits).

PIN:

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

PIP:

Refers to Plural Interface Processing. Split dial capability that allows terminalto process American Express directly thru the AMEX network, thereby eliminatingAMEX authorization fees.

Point of Sale(POS):

The place and time at which a transaction occurs. This term also refers to the devicesor software used to capture transactions.

Post Authorization:

A sale transaction for which you received a VOICE AUTHORIZATION at an earlier time.

POS Terminal:

A piece of equipment used at a merchant location that is connected to the bank andor their authorization service provider via phone lines to authorize, record andforward information electronically. If the credit card is available, the merchantcan swipe the card through the terminal. See also swipe discount rate and MOTO discountrate.

Posting:

The process of recording debits and credits to individual cardholder account balances.

Point of Sale (POS):

The merchant location where the customer makes a purchase.

PreAuth:

An event where no money flows but the cardholder's account is asked whether a pendingSale is likely to be successful. The authorization/approval of a PreAuth usuallyindicates that a follow-up Sale will also be Approved, but do keep in mind thatthe favorable condition of the cardholder's account may change before you can issuea Sale.

Presentment:

The process the acquirer uses to send transaction information to the issuer forreimbursement.

Private Label:

Proprietary cards only accepted at that merchants retail location.

Prior Authorization:

An authorization that has been obtained previously, either through operator or throughcredit card equipment.

Processor:

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

Protocol:

A specific set of rules for organizing the transmission of data in a network.

Public Key Encryption:

A method of encrypting electronic data. Developed to account for weaknesses in symmetricencryption, public key encryption does not require the transmission of decodingkeys themselves.

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Qualification:

A level at which a transaction interchanges. Level of qualification (qualified,mid-qual, e.t.c.) is dependent on how credit card number is entered, how quicklya transaction is settled, the type of industry, specific information, etc.

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Real-Time Authorization:

Authorizes a credit card in real-time, as a customer makes their purchase.

Real-time Processing:

The verification and processing of credit card transactions immediately followinga purchase. Real-time verification on the Web usually takes less than five minutes.Real-time verification is especially important for Web sites that sell productsand services that consumers expect immediately, such as memberships to the siteor software downloads.

Reason Code:

A code used to provide additional information to a member regarding chargebacks,presentments, or retrieval requests.

Receipt:

A hard copy of an invoice or sales draft that took place at the point of sale thatincludes a date, merchant name and or location, account number, dollar amount, referencecode and the type of account.

Reconciliation:

An exchange of messages between two institutions (acquirer, card issuer, or theiragents) to reach agreement on their financial totals.

Recurring Fees:

Regular, usually monthly, charges for maintaining a merchant account. Recurringfees include the discount rate, transaction fees, statement fee, and monthly minimum.

Recurring Transaction:

A transaction that is charged to the cardholder on regular scheduled intervals forgoods and or services provided.

Reference Number:

A code given to a transaction by Host based processors.

Replacement Authorization:

An authorization used when a previous authorization was approved and a subsequentauthorization is required because the amount of the transaction is now differentfrom the originally approved amount.

Representment:

A financial transaction originated by a merchant to recover funds charged back bya card issuer.

Request:

A message where the sender informs the receiver that a transaction is in progressand a response is required to complete the activity.

Reserve Account (or Holdback):

A portion of the revenue from a merchant's credit card transactions, held in reserveby the merchant account provider to cover possible disputed charges, chargebackfees, and other expenses. After a predetermined time, holdbacks are turned overto the merchant. Note: Merchant account providers almost never pay interest on holdbacks.

Retreival Request:

A request to a merchant for documentation concerning a transaction, usually a cardholderdispute or suspicious sale/return. A Retrieval Request can lead to a CHARGEBACK.

Reversal:

A transaction from the acquirer to the card issuer informing the card issuer thatthe previously initiated transaction cannot be processed as instructed, i.e., isundeliverable, unprocessed or cancelled by the receiver.

Reverse PIP:

The terminal is set up to dial direct to AMEX for authorization and settlement.

Robot:

A software application that automatically finds and retrieves information from theWeb. Also called a "spider" or "crawler."

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Sales Draft:

An actual paper documentation of a transaction.

Secure Server:

A Web server or other computer connected to the Internet that is capable of establishingencrypted communication with clients, generally using SSL or SET.

Security:

an internal department within the Credit/Risk Department that monitors the performanceof the entire portfolio/merchant client base by monitoring suspect accounts andor transactions for possible fraudulent activity.

SET (secure electronic transaction):

A system for encrypting e-commerce transactions, such as online credit card purchases.Developed by Visa, MasterCard, Microsoft, and several major banks, SET combines1,024-bit encryption with digital certificates to ensure security. SET is stillin development.

Settlement:

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

Setup Fees:

Fees charged for establishing a merchant account, including application fees, softwarelicensing fees, and equipment purchases.

Shopping Cart Program:

A software package that runs as part of a Web site to collect and record purchasingdecisions by a visitor. Shopping cart programs are stored on Web servers.

S.I.C. Code:

Refers to Standard Industry Classification. These codes are four digits used toidentify the business type.

Smart Card:

A plastic card containing a computer chip that can store electronic "money." Unlikea credit card, a smart card can only spend out the dollar amount its owner has alreadyput into the card account. It's similar in function to a prepaid calling card butis available for all purchases.

Spam:

Unsolicited e-mail. There are two common usages: 1) mass e-mailings by commercialsites to recipients who have not requested any contact, and 2) e-mail sent to intentionallyannoy or harass the recipient, including crashing his or her computer by overloadingits e-mail capacity.

Spider:

A software application that automatically finds and retrieves information from theWeb. Also called a "robot" or "crawler."

Split Dial:

The terminal dials direct to AMEX for authorization and settles at the VISA/MASTERCARDHost.

SSL (secure socket layer):

A system for encrypting data sent over the Internet, including e-commerce transactionsand passwords. With SSL, client and server computers exchange public keys, allowingthem to encode and decode their communication.

Starter Kit:

Supplies that are shipped to new merchants including sales drafts/slips, creditslips, batch header tickets, Visa/MasterCard decals, imprinter plates, terminaloverlays and instruction guides.

Stored Value Card:

A pre-paid card that stores a monetary value from which the purchase amount is deductedafter each transaction.

Suspect Transaction:

A transaction that occurs one day prior to or directly after an account number islisted in the Warning Bulletin or pick up list.

Swiped Card:

Credit card information that is read directly into the terminal as a result of swipingor sliding the credit card thru a card reader. The information magnetically encodedin the magnetic stripe is transmitted. This information includes secret data thathelps validate the card.

Swipe Discount Rate:

The discount rate charged by a merchant account provider for transactions in whicha credit card is swiped on the POS Equipment. It is also available for inspectionby the merchant. Swipe discount rates are generally lower than MOTO discount ratesbecause the merchant can match signatures and perform other checks for fraud ormisuse.

Switch:

An electronic service that routes transaction information from the point of saleterminal to the authorization center for approval.

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T-1 (also T-2, T-3):

Commercial connections to the Internet. T-1 connections offer approximately 25 timesthe bandwidth of 56.6 Kps telephone modems.

Tag:

A code within a data structure that gives instructions for formatting or other actions.HTML documents are set up using HTML tags, which serve various functions, such ascontrolling the styling of text and placement of graphic elements and providinglinks to interactive programs and scripts.

T & E Card:

Travel and entertainment card issued by a private, non-bank company that deals directlywith the cardholder and the merchant and typically requires full payment on a monthlybasis.

Terminal:

An end-use device (usually with display monitor and keyboard) with little or nosoftware of its own that relies on a mainframe or another computer (such as a PCserver) for its "intelligence." A variation of this kind of terminal is being revivedin the idea of the thin client or network computer. The term is sometimes used tomean any personal computer or user workstation that is hooked up to a network.

T & E Merchant:

An airline, lodging, restaurant or card rental company whose main function is toprovide travel/entertainment related services.

Terminal Based:

A system that captures credit card transactions and holds them until settlement.

Terminal Capture:

Type of software in which transaction information is stored in software, not atthe host computer. Merchants using terminal capture must initiate SETTLEMENT atthe end of each day or shift. Compare to HOST SETTLE.

Terminated Merchant File (TMF):

A file listing the names of merchants and their principals whose bankcard relationshiphas been terminated by the acquirer.

Thin Client:

A simple client program (not required to know how to interpret and display objectsmuch more complex than menus and plain text ) or hardware device that relies onmost of the function of the system being in the server.

Third Party Processor:

A non-member agent, employed by an acquiring bank, which provides authorization,settlement, and merchant services to a merchant.

Ticket Size:

The monetary value of an order placed by credit card.

Transaction:

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

Transaction Date:

The actual date on which a transaction occurs.

Transaction Fee:

A per transaction charge incurred by merchants. This is in addition to the percentageDISCOUNT fees.

Transaction Fees:

Service fees charged to the merchant on a per transaction basis.

Truncation:

An anti theft mechanism in which the complete credit card number and expirationdate does not appear on the sales receipt. The last four digits of the credit cardnumber will appear on the sales receipt.

Turnkey Application:

Software that requires little or no modification when inserted into a Web site.In e-commerce, many MAPs (merchant account providers) and ISOs offer turnkey applicationsfor processing credit card orders online.

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URL (uniform resource locator):

An address for a file (or page) located on the Internet, usually the Web. Example:www.ibill.com.

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Valid Date:

The date embossed by the card issuer on the credit card.

VAR Value Added Reseller:

Third party software vendors.

Voice Auth:

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

Voice Response Unit (VRU):

An automated authorization support system for touch-tone phones.

VPN (virtual private network):

A private network of computers that's at least partially connected by public phonelines. A good example would be a private office LAN that allows users to log inremotely over the Internet (an open, public system). VPNs use encryption and secureprotocols like PPTP to ensure that data transmissions are not intercepted by unauthorizedparties.

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Web Host:

The computer which has your active website on it. To host a website, a host computermust have proper server software, connection capacity for the traffic that comesto the website and a unique and static internet protocol (IP) address. An IP addresslooks like 4 sets of numbers separated by periods, i.e. "201.11.123.1" A uniformresource locator, or URL, is a unique name that has been assigned to a static IPof a specific host computer making it easier to find a website.

Web Server:

A computer dedicated to storing the various files that make up Web pages and theprotocols needed for communicating with other computers via the Internet.

World Wide Web (or simply Web):

The entire collection of files written in HTML and similar mark-up languages availableon the Internet. Clients on the Internet use their browsers to request these filesfrom Web servers and then display them as Web pages. The Web is only a portion ofthe Internet; other parts include e-mail communication and FTP.

Wireless:

Describing radio-based systems that allow transmission of telephone and/or datasignals through the air without a physical connection.

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XML (extensible markup language):

A metalanguage containing a set of rules for constructing other markup languages.With XML, people can make up their own tags, which expands the amount and kindsof information that can be provided about the data held in documents. It enablesdesigners to create their own customized tags to provide functionality not availablewith HTML. For example, XML supports links that point to multiple documents, asopposed to HTML links, which can reference just one destination each.

Zero Floor Limit:

Requires that all cardholder transactions be authorized

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