Glossary

ABA Routing Number

The American Banking Association (ABA) routing number is a unique, bank-identifying number that directs electronic ACH deposits to the proper bank. This number consists of 9 digits and precedes the account number printed at the bottom of a check

 

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.). Used only in the United States

American Express®

An organization that issues cards and acquires transactions, unlike Visa® and MasterCard®, which are bank associations

Approval

Any transaction that is approved by the cardholder or check writer's bank. Approvals are requested via an authorization. An approval is the opposite of a declined transaction

Authorization

An authorization is a request to charge a cardholder. It reduces the cardholder's open-to-buy but does not actually capture the funds. The authorization must be settled in order to charge the account. If it is not used within a certain time period, it will drop off. The issuing bank determines the time period for drop off. Authorizations can only be used for credit card transactions

Authorization Code (AUTHCODE)

Approved sale and authorization transactions always receive a numeric or alphanumeric authorization code that references the transaction for processing purposes

Automated Clearing House (ACH)

The Automated Clearing House network is a nationwide, wholesale electronic payment and collection system. It is a method of transferring funds between banks via the Federal Reserve System.

Average Ticket

The average dollar amount of merchant credit transactions.

Basis Point

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

Batch

A collection of transactions submitted for settlement. 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

Batch Settlement

A procedure that causes all funds from captured transactions to be routed to the merchant's acquiring bank for deposit. Payment gateways automatically submit all captured transactions for settlement on a daily basis. Some retail swipe terminals can also be programmed to perform automatic daily batch settlements

Capture

The process of capturing funds from an authorization.

Card-not-present

A situation where the cardholder (and the card) is not physically present at the time of purchase. Typical card-not-present transactions take place in businesses focused on mail order/telephone order, business-to-business, and Internet-based transactions

Card-present

A situation where the cardholder (and the card) is physically present at the time of purchase. Card-present transactions account for the majority of credit card transactions in the world and are accounted for by traditional retailers (e.g. gas station or restaurant) and all other situations where the cardholder is present at the time of purchase

Card Verification Value Code (CVV)

The Card Verification Value Code is used to help authenticate transactions in card-not-present transactions (e.g. MO/TO and Internet). For Visa and MasterCard, the code will be the last three digits printed on the signature strip on the back of the credit card. For American Express, the code will be the four-digit number on the front of the card above the account number. (Visa refers to this code as CVV2, MasterCard refers to it as CVC2, and American Express refers to it as CID)

Chargeback

The act of taking back funds that have been paid to a merchant for a disputed or improper credit card transaction. Merchants are generally assessed a fee for each chargeback. An excessive amount of chargebacks may result in the loss of the merchant account

Debit Card

An ATM bankcard used to purchase goods and services and to obtain cash. A debit card debits the cardholder's personal deposit account and requires a Personal Identification Number (PIN) for use. Debit cards branded with a bankcard logo (e.g. Visa) can be accepted without a PIN

Decline

A transaction in which the issuing bank will not authorize the transaction

Demand Deposit Account (DDA)

A standard checking or savings account into which electronic funds can be transferred

Discount Rate

Amount charged to a merchant for processing a transaction. It is usually a percentage of the transaction amount. The rate is typically based on business type, monthly transaction volume, and average ticket

Discover®

An organization that issues cards and acquires transactions, unlike Visa and MasterCard, which are bank associations

Electronic Funds Transfer (EFT)

The paperless act of transmitting money through a computer network.

Internet Merchant Account

This special type of account is required for merchants who wish to sell goods and services over the Internet and accept credit cards as payment. This type of account is different than a traditional merchant account and is considered card-not-present

Issuer

A bank that provides credit cards to consumers

Keyed Transaction

A transaction that involves keying in the credit card account number using a computer or terminal. Keyed transactions are used in card-not-present environments such as MO/TO and Internet-based businesses

MasterCard®

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

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 Account

A commercial account that enables a business to accept credit cards, debit cards, and other forms of electronic payment

Merchant Agreement

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

Merchant Identification Number

A unique number that is assigned by the acquiring bank to identify a merchant

MO/TO

Mail Order/Telephone Order credit card transactions

Non-Qualified

A broad term that describes a transaction that did not interchange at the best rate because it was entered manually, was not settled in a timely manner, or the data set required for the best interchange was not provided. Transactions involving international, government, corporate, and business credit cards are generally non-qualified transactions

Open-to-buy

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

Payment Gateway

A system that allows the processing of payment transactions over the Internet. Payment gateways encrypt sensitive information to ensure that information passes securely between the parties involved, i.e. customer, merchant, and processor

Processor

A large data center that processes credit card transactions and settles funds to merchants. A processor connects to the merchant on behalf of an acquirer via a gateway or POS system to process payments electronically. Processors edit and format messages and switch to bankcard networks. They provide files for clearing and settlement and other value-added services.

Qualification

A level at which a transaction interchanges. Level of qualification is dependent on how credit card number,  how quickly a transaction is settled, the type of industry, specific information, etc.

Recurring Transaction

A transaction in which a cardholder has given a merchant permission to periodically charge the cardholder's account

Reserve

Reserves, or holdbacks, are established to help alleviate risk associated with higher-volume and higher-risk merchants. The reserve may be funded with a cash deposit or a percentage of sales

Retrieval Request

A request initiated by a cardholder or issuing bank for documentation concerning a transaction. A retrieval request can lead to a chargeback

Secure Sockets Layer (SSL)

An encryption system that allows merchants to process transactions securely over the Internet. All Applied Merchant payment gateways use SSL technology to ensure data safety

SIC Code

Refers to Standard Industry Classification. These codes are four digit numbers used to identify business type

Surcharges

Any additional charges to a merchant's standard processing fees. They are a result of non-qualified transactions of different communications methods

Swiped Transaction

A transaction that involves credit card information being transferred directly as a result of swiping or sliding the credit card through a card reader. Swiped cards are used in retail and other card-present situations. The information magnetically encoded in the magnetic stripe includes secret data that helps validate the card

Transaction Fee

A per transaction charge incurred by merchants. 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 Authorization

An authorization that is obtained through a phone call. If the transaction is approved, the merchant is provided with an authorization code (AUTHCODE), which is used to settle the transaction through a swipe terminal or payment gateway at a later time

Void

The reversal of an approved transaction, one that has been authorized but not settled. Settled transactions require processing of a credit in order to be reversed. A void does not remove any hold on the customer's open-to-buy.