Glossary of Useful Terms
Automated Clearing House (ACH) –
The automated “bank” that transfers electronic funds into and out of the merchant’s bank account.
Authorization –
The permission of the issuing Bank to accept a credit card for payment.
Authorization Code –
The code sent by the issuing Bank in response to an authorization request to indicate that a credit card can be accepted as payment.
Authorization Fee –
A fee charged by Credit Card Processor for every response a merchant receives through a terminal.
Authorization Request –
A request sent to the issuing Bank by the merchant for approval to accept a card for payment.
Average Monthly Volume –
Total amount of sales for the year divided by 12 months.
Average Ticket –
Total net merchant sales divided by the number of transactions.
Address Verification Services (AVS) –
When a card is not swiped, the address must be verified to combat possible fraud. This feature is used primarily by mail or telephone order merchants but can be used by retail merchants when a card cannot be swiped. A prompt appears on the terminal asking the merchant to enter at least the Zip Code of the Cardholder so that the address can be verified. Complete AVS is a service that verifies the Cardholder’s billing address.
Charge Back –
When a Cardholder disputes a charge, the issuing Bank charges the amount of the charge back to the merchant until the dispute is settled.
Clearing –
The exchange of financial transaction information.
Closing –
The sending through the interchange of the credit card transactions accumulated by the merchant in the terminal or Host so the merchant can be paid for them.
Data Capture –
The collection, formatting, and storage of information in computer memory.
Demand Deposit Account (DDA) –
The bank checking account to which the merchant’s deposits are made or funds debited.
Discount Rate –
The fee charged by Credit Card Processor to a merchant for processing credit card transactions. Also called “Discount Fee,” “Base Rate or Fee,” “Monthly Rate or Fee,” or Just “Rate” or “Fee.”
Electronic Draft Capture (EDC) –
Sending the information about each credit card transaction to the issuing Bank electronically through the point of sale terminal.
Interchange Fees –
The fees deducted from the transaction amount by the issuing Bank to cover the cost of the process. The Acquirer pays the net amount to the Issuing Bank.
Merchant Category Code (MCC) –
Code used by MasterCard to identify what a merchant sells.
Merchant File –
A file used by the Acquirer to list pertinent information on its merchants.
Merchant Identification (MID) Number –
Each merchant is assigned a unique identification number that is used in all Processing systems to locate information concerning the merchants and their accounts.
Merchant Processing Agreement (MPA) –
A signed contract between the merchant and the credit card processor that outlines the responsibilities of the processor and the merchant in the credit card transaction process.
Merchant Qualification Standards –
The minimum standards established by MasterCard and VISA for merchant acceptance that requires the merchant to be financially responsible and of good repute.
Minimum Discount Fee –
The minimum discount fee a merchant agrees to pay each month based on his or her expected sales volume. The Credit Card Processor will charge the merchant the actual amount of fees generated or the minimum discount fee, whichever is greater.
MO/TO –
Mail Order/ Telephone Order.
Non-Qualified Rate –
The discount rate level, at which the transaction qualifies when it did not meet any of the qualifications for the other lower rates. All paper merchants will qualify at this level, as will all business cards.
Off-Line Sale –
Allows the merchant to enter a transaction if unable to process under the regular sales key. Also called a Force of Post Auth.
Off-Line Debit Card –
A debit card that does not deduct funds from the checking account immediately. Transactions are processed like a regular credit card and funds are not deducted for 24-72 hours. No Personal Identification Number (PIN) is needed to process the transaction.
Partially Qualified Rate –
The discount rate level at which the transaction qualifies when it did not meet all requirements for the best (lowest) rate but met more requirement than needed to qualify for the Standard (highest) rate.
Per-Transaction Fee –
A fee that can be charged to a merchant for each transaction that is processed.
Personal Identification Number (PIN) –
A number that must be entered by the customer before an ATM will allow access to the customer’s bank accounts. Also used at a retail establishment when a customer pays for a purchase with an ATM or on-line debit card.
Posting –
The process of recording charges and credits to the Cardholder’s account.
Processing –
The procedure by which the merchant sends the information about each credit card transaction to the issuing Bank so that the Issuing Bank can pay the merchant for the transactions.
Qualification Level –
Each transaction is assigned a Qualification Level at interchange. The level assigned depends on how well the transaction met the requirements for the merchant’s industry. For example, for a retail merchant’s transaction to be assigned the Qualified level, the card must be swiped, the terminal must be settled each day, and all other criteria for that level must be met.
Qualified Rate –
The discount rate level, at which the transaction qualifies when it met all requirements for the best (lowest) rate.
Settlement or Settling –
The sending through the interchange of the credit card transactions accumulated by the merchant in the terminal or Host so the merchant can be paid for them.
Swipe –
Running a credit card’s magnetic stripe through a reader that interprets the data encoded on it.
Terminal Based –
Software through which transactions are stored in the terminal until settlement.
Terminal Identification (TID) Number –
The unique number assigned to each point of sale terminal that tells the Credit Card Processor which merchant a transaction came from and where an authorization is to be sent.
Terminal Provider –
A company that supplies credit card hardware and software to a merchant.
Third-Party Processor –
A non-member agent contracted by a member to provide authorization, processing, and merchant services.
Transaction –
Any action between a Cardholder and a merchant or member that results in activity on the account, such as a purchase, cash advance, debit or credit adjustment, etc.