Terminology: Credit Card Processing
Below we list an overview of the most commonly used terms in the Merchant Services & Payment Processing Industry. This Credit Card Processing Terminology list is constantly updated so please check back often. If you initially do not find something you are looking for or would like to suggest an edit, please contact us here for your recommendation. Credit Card Card Processing Terminology, Definitions and Meanings by SecureGlobalPay!
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Additionally, SecureGlobalPay provides setup for most customer accounts within 72 hours and will support our partners & merchants through the entire payment process with:
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- Multilingual customer services available if needed, (more than 140 languages and dialects) available 24/7
- A dedicated, in-house, relationship manager to help successfully launch and manage a new merchant’s payment processing program
- A full suite of industry-leading online sales management tools
- Gift card programs to help build customer loyalty
- Online Reporting for both gateway and back end merchant services with a dedicated customer service Web site giving business owners personalized account information 24/7
ABA Transit Routing Number
A routing transit number (RTN) is a nine digit bank code, used in the United States, which appears on the bottom of checks. It identifies the financial institution associated with the check. This code was designed to facilitate the sorting, bundling, and shipment of paper checks back to the drawer’s (check writer’s) account.
Automated Clearing House (ACH) is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct payroll and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums,mortgage loans, and other kinds of bills. Debit transfers also include new applications such as the point-of-purchase (POP) check conversion pilot program sponsored by NACHA – The Electronic Payments Association. Both the government and the commercial sectors use ACH payments. Businesses increasingly use ACH online to have customers pay, rather than via credit or debit cards.
The Federal Reserve Banks are collectively the nation’s largest automated clearing house operator. The Electronic Payments Network (EPN) is the only private-sector ACH operator in the U.S. FedACH is the Federal Reserve’s centralized application software used to process ACH transactions. EPN and the Reserve Banks rely on each other for the processing of some transactions when either party to the transaction is not their customer. These inter operator transactions are settled by the Reserve Banks.
Address Verification System (AVS)
Program used to verify the cardholders’ billing address. The address is verified by checking for validity against information provided to the issuing bank. This verification system helps reduce instances of fraud and is supported by Visa, MasterCard, Discover and American Express.
This refers to a correction made in the case of a duplicate transaction or an incident where a cardholder disputes a transaction. The acquirer initiates the adjustment to rectify the processing error. Depending on the situation, either debit or credit is applied to the merchant DDA account when an adjustment is made.
Acquirer / Acquiring Bank (AVS)
An acquiring bank (or acquirer) is the bank or financial institution that processes credit and/or debit card payments for products or services for a merchant. The term “acquirer” indicates that the bank accepts or acquires credit card transactions from the card-issuing banks within an association. The best-known (credit) card associations are Visa, MasterCard, American Express, and Diners Club.
The credit card processing entity with which an Acquirer partners in order to provide merchants with transaction clearing, settlement, billing and reporting services.
Application Program Interface (API)
A computer communication protocol that facilitates the transfer of or access to information between two separate software or computer applications.
A practice or procedure to verify the identity of an individual or organization. In respect to payment gateway account authorization, Authorize.Net employs a number of electronic practices and procedures to verify that merchants accessing the payment gateway are authorized to do so.
The response from a card issuing bank to a merchant’s transaction authorization request indicating that payment information is valid and funds are available on the customer’s credit card. Also called an Approval.
The transaction amount that is submitted to the card issuing bank for funds approval. This amount is reserved against the available balance of a customer’s credit card until the transaction is captured, a subsequent Void transaction is submitted, or the 30-day window for the authorization expires.
A credit card transaction request to authorize and capture, or settle, funds for a purchase. The payment gateway submits the request to the card issuing bank for authorization and upon approval, will automatically submit the transaction for settlement.
A code assigned to a credit card transaction by the card issuing bank once the transaction has been approved.
A credit card transaction request to only authorize, or reserve, funds for a purchase. The payment gateway submits the request to the card issuing bank for authorization, but no further action is taken.
A transaction request submitted by a merchant to verify that funds are available on a customer’s credit card for a purchase. Further action by the merchant depends on whether the transaction request type is an Authorization Capture or an Authorization Only, and whether the transaction request is authorized by the card issuing bank.
This is the total sales volume divided by the total number of sales for a given period of time. It is used to establish the merchant’s average ticket amount in order to monitor for any irregularities.
Back End Processor
When a merchant submits a batch of payments, it goes to the front-end processor, which routes it to the back-end processor. A back-end processor accepts the settlement from the front-end processor and then moves the money from the issuing bank to the acquiring bank.
This refers to a Visa or MasterCard branded credit card issued by a financial institution. Other Card brands such as Amex, Discover, JCB etc. issue their cards directly and not through banks.
Bank Card Association
A group of financial institutions or banks that have formed an association for issuing bank cards. Usually a bank card association will work together along with other payments entities to provide certain bank card offers.
Bank Identification Number
An identification number assigned by Visa to each member of a financial institutions, bank or processor.
Basis Point (BP)
Equivalent to .01 percent, or one hundredth of one percent, and is used as a measurement of fee rates. Rate changes are often expressed in basis points instead of hundredth percents, e.g., a fee rate increase of 1.95 percent to 2.0 percent is expressed as an increase of 5 basis points.
A batch is a collection of credit card transactions awaiting settlement. Settlement will result in the transfer of the ‘batched’ funds into the merchant’s bank account.
A Merchant Interface tool for uploading multiple transactions at once from a spreadsheet or proprietary business application.
Brick and Mortar
A term used in the payments industry that refers to merchants that operate in storefront or physical locations. Also referred to as “Retail”.
The electronic infrastructure that provides a high-speed, continuous connection to the Internet.
A credit card transaction request to capture funds that were previously authorized, but NOT via the payment gateway. For this type of transaction, the merchant will submit the authorization code that was previously received from the issuing bank through some other means than a payment gateway request, e.g., by telephone.
Credit card issuing entities such as Visa, MasterCard and Discover that govern and oversee the use of credit cards for payment transactions.
A Card Code is a three- or four-digit number that appears on the back of a credit card (on the front for American Express). This code may be used to validate customer information on file with the credit card association.
This is the person who has obtained a credit card from a bank or other institution and uses it for the purchase of goods and services.
The issuing bank or card issuer refers to the bank or financial institution that lends money to the cardholder. It can also be referred to as the cardholder’s financial institution.
Card Code Status
This value is returned to the merchant by the processor, and indicates whether the billing information provided by a customer matches information on file at the credit card association for the cardholder associated with the credit card number and Card Code.
Refers to transactions in which the actual credit card is not presented for payment. Instead, the credit card information is transmitted via internet, fax, mail or telephone. Because the card in not physically presented to the merchant for processing, these kinds of transactions are referred to as card-not-present transactions.
Literally means that a credit card is physically presented to a merchant by a cardholder at the time of the transaction. This term is used in the payments industry to distinguish “brick and mortar”, or retail merchants from those that operate from mail order/telephone order locations or via Web sites.
A hardware device that facilitates the reading and transmission of payment information stored in the magnetic stripe on a credit, debit or stored-value card.
A consumer to which a credit or debit card is issued by the credit card associations or by the consumer’s bank.
Cardholder Authentication Programs
The cardholder authentication programs Verified by Visa and MasterCard® SecureCode™ are security programs created by the card associations to provide identity authentication for Visa and MasterCard cardholders, and transaction protection for merchants. By registering for these programs, merchants can minimize the risk of chargebacks and returns while providing optimal security for their Visa and MasterCard customers.
A claim made by a cardholder that an unauthorized purchase or transaction was performed on their credit card.
Cash Discount Merchant Processing
A cash discount merchant account program provides the ability to accept credit card and debit card payments without paying fees. This is made possible by passing the cost associated with the acceptance back to customers who choose to pay with a credit card or debit card. Cash discount merchant services programs allow business owners to accept all major credit cards, without paying the 3-4% overhead in fees.
This is a situation where a buyer asks their credit card company to reverse a transaction that has already been approved. See our guide on how to stop chargeback’s.
Chargeback Reason Code
A code provided to the merchant by the card issuing bank that indicates the reason for the chargebacked transaction.
A risk management process that verifies the trustworthiness of an electronic check transaction against an extensive high risk or bad check database.
Credit Card Number
The account number assigned by a credit card association or card issuing bank to a cardholder. This information must be provided to a merchant by a customer in order to make a credit card payment.
Customer IP Address
Indicates the Internet Protocol (IP) address of a customer’s Web browser, or the IP address from which a transaction is submitted to the payment gateway.
DBA stands for “doing business as” and is a legal term used in the United States and Canada, meaning that the trade name, or fictitious business name, under which the business or operation is conducted and presented to the world is not the legal name of the legal person (or persons) who actually own it and are responsible for it.
DCC stands for dynamic currency conversion and is a financial service in which a cardholder can have the cost of a transaction converted to their local currency when making a payment in a foreign currency.
The merchants demand deposit account is the bank account that the acquirer/processor credits or debits for deposits, fees, and adjustments.
This is a payment card which draws funds directly from the cardholder’s bank account at the time of a purchase.
Transactions that are not approved by the card issuing bank are marked as declined. No further action may be taken for declined transactions.
Deposit Correction Notice
Refers to the adjustments (debits or credits) made for an out-of-balance condition due to various problems in the transmittal. The correction is made by the merchant’s acquirer at the time of capture prior to being sent out for interchange.
An electronic file containing unique information that is used to verify the trustworthiness of an organization or individual. Digital Certificates are issued by a Certificate Authority, and are used with the Secure Sockets Layer (SSL) protocol.
Digital Fingerprint or Transaction Fingerprint
Digital fingerprints are used to authenticate that electronic communications were sent and received via the Internet without being intercepted or modified during transmission.
The percent of each credit card or eCheck.Net® transaction and batch settlement processed that is billed to the merchant by the payment gateway. The transaction types for which the discount fee is charged are: charges, refunds, voids and declines.
ECA stands for Electronic Check Acceptance, a service from Telecheck, a widely used check guarantee program available through your merchant account provider.
E-Commerce, or Electronic Commerce, refers to the buying and selling of products of services online via the Internet or using other electronic means.
Electronic funds transfer (EFT) is the system behind many financial transactions that do not involve physical exchange of cash or checks. If you’ve ever received a direct deposit of a paycheck or tax refund, you’ve used EFT. This method is popular with government agencies because sending an EFT payment costs a fraction of what it costs to print and mail a check.
The date on which the validity of a credit card expires. Transactions will only be approved for credit cards that are not yet expired.
Front End Processor
The front-end processor handles the capture, authorization and settlement with the acquiring banks; has connectivity to all the card companies; and routes transactions to the appropriate network for authorization.
This is a fee that the acquiring bank pays to the issuing bank during a transaction (that uses the MasterCard or Visa network).
Interchange is the transfer rate exchanged between merchant acquirers and card issuers each time a Visa or MasterCard transaction is processed.
Internet Protocol (IP)
A method of transmitting information and communications between computer systems and networks via the Internet.
Internet Service Provider (ISP)
An organization or business that provides Internet services and resource management to businesses and consumers.
ISO – Independent Sales Organization
An ISO refers to an independent sales organization that has an agreement to sell the services of a Bank and is allowed to mark up the Fees and sign up merchants.
This is the bank or financial institution that extends credit to a cardholder through the issuance of a branded payment card for use in the payment of goods and services.
Level II processing allows for capture of a customer code and tax amount in addition to the standard payment information. With a Level II merchant account, you will be able to manage your Interchange pricing qualification and lower your cost of processing MasterCard and Visa transactions.
Level III processing allows your business to process business-to-business and business-to-government sales.
The black stripe on a credit or debit card that stores the cardholder’s account or payment information.
Mail Order/Telephone Order (MOTO)
A business, or merchant, that sells merchandise or services to consumers via mail or telephone initiated orders. MOTO merchants may operate from call or fulfillment centers, but could also be represented by home businesses or merchants with no retail locations.
The submission of payment information for a transaction by keying the customer’s payment information into a hardware terminal or Virtual Terminal.
A security program created by MasterCard® to provide identity authentication for cardholders and transaction protection for merchants. By registering for MasterCard® SecureCode™, merchants can minimize transaction risks while providing additional security for their MasterCard customers.
MasterCard® Site Data Protection (SDP) Program
A program created by MasterCard® stating its technology and sensitive data security requirements for merchants and merchant service providers. Compliance is required of its member institutions.
The person or business entity that sells goods or services to a customer.
An account opened by a business that wishes to accept credit card payments. It is opened through a bank or a credit processing company.
Merchant Account Provider
A financial institution, or bank, that provides a financial account to a merchant for the purpose of collecting proceeds from a consumer bank account or credit card payment transactions.
Merchant Identification Number
The number that a Processor or acquirer generates for each merchant location and uses it to identify the merchant during the processing of daily transactions.
Merchant Processing Statement
This report provides monthly summary information about your sales, charges against your sales, and both transaction and monthly fees.
Merchant Service Provider (MSP)
A company or sales organization that provides transaction processing solutions to its merchant clients.
Monthly Volume Cap
This means merchants are only permitted to handle a specific number of credit card transactions per month. Once the cap is reached, a merchant can no longer take credit cards as payments during that month.
Refers to Mail Order/Telephone Order, which are credit card transactions that take place via e-mail, fax, mail or telephone. These kinds of transactions where the customer’s card is not physically presented for payments are referred to as “card-not-present” transactions.
This is an electronic payment processing service which allows an online business to price goods in over 60 different currencies. Overseas customers then have the leisure of choosing to see items priced using their own country’s currency.
Generally Corporate Cards or International Cards or credit card transactions with missing information such address, customer code or order number.
Online Credit Card Processing Statement
A statement service that will reduce paper consumption. This report provides monthly summary information about sales, charges against sales, and both transaction and monthly fees.
Paper Credit Card Processing Statement
This report provides monthly summary information about sales, charges against your sales, and both transaction and monthly fees.
Payment Card Industry (PCI) Data Security Standard (DSS)
These are strict requirements set forth by the PCI council detailing measures that payment processing organizations must take to help prevent credit card fraud, hacking and other various security vulnerabilities and threats.
A system of technologies and processes that allow merchants to electronically submit payment transactions to the payment processing networks (i.e., the Credit Card Interchange and the ACH Network). Payment gateways also provide merchants with transaction management, reporting, and billing services.
A set of comprehensive requirements for enhancing payment account data security. It was developed by an oversight board known as the PCI Security Standards Council whose founders include all of the major credit card associations to help facilitate the broad adoption of consistent data security measures on a global basis.
Personal Identification Number (PIN)
A unique number that is issued to an individual or organization by a financial organization or related service—or other type of service provider—for the purpose of authenticating user identity and granting secure access to accounts or information.
The flat fee charged to a merchant by the payment gateway for each transaction and batch settlement processed. The transaction types for which the per-transaction fee is charged are: charges, refunds, voids and declines.
Point of Sale (POS)
A term used in the payments industry that refers to the physical location where a payment transaction takes place. POS is also used to describe credit card payment acceptance systems that are designed for the place of sale, such as card swipe terminals.
Point of Sale (POS) Device
A piece of electronic equipment that is used by a merchant to submit credit card payment information to the processing network. Like terminals, these devices are connected to the credit card processing network via dial-up telephone connection or Broadband. POS devices also include Personal Digital Assistants (PDAs), Smartphones, and wireless electronic devices capable of transmitting credit card payment information via wireless Broadband connection.
Point of Sale (POS) Solutions Provider
A POS device, system or software manufacturer or distributor that provides POS products or services to Card Present (retail and mobile) merchants.
Prior Authorization Capture
A credit card transaction request to capture funds for a separate, previously authorized authorization-only transaction. With this type of transaction, the merchant will submit an authorization code that was received from the issuing bank at the time of the original authorization-only transaction.
An entity in the credit card processing network that handles the posting of transactions for authorization, clearing and settlement to consumer credit card accounts at the card associations, and the settlement of funds to merchant bank accounts. Processors may also provide merchants with billing and reporting services.
QSR – Quick Service Restaurant
An efficient, quick-payment solution dramatically improves the speed and profitability of low-ticket, swipe-and-go transactions by allowing merchants to offer a variety of payment options to help satisfy customer needs, attract new customers and increase market share.
This is a process where a customer’s credit card is authorized and charged at the time of purchase.
Recurring Billing Transaction
The submission of a transaction on a recurring or periodic basis, typically for an ongoing billing or subscription-based payment activities
In some instances where risk is an issue, a merchant may be required to deposit funds in a reserve account held at the processors sponsoring bank. This process of mitigating risk is used by most ACH processors.
The business of selling merchandise or services to consumers. Authorize.Net uses this term to refer to merchants that operate in a storefront or physical location and accept Card Present payments—meaning that payment is physically presented to the merchant, and credit cards are “swiped” into a card reading device.
When a customer receives their credit card statement, they sometimes contact their bank to request additional information on particular transactions. This request for additional information is what is referred to as a retrieval request.
Return or Returned Item
An eCheck.Net® transaction that could not be completely processed for reasons such as NSF, invalid account number, account closed or other rejection reason(s) provided by the customer’s bank. A chargeback is a type of return.
A reversed chargeback or refund transaction. This occurs when the merchant produces sufficient proof that disputes a chargeback or the customer rescinds the chargeback.
Secure Payment Gateway
This refers to a system that passes credit card data, authorization requests, and authorization responses over the internet using encryption technology.
Settlement occurs when the credit cardholders’ funds are transferred between the card issuing bank and merchant acquiring bank. Put simply, money is exchanged from the customer to the merchant, to complete a purchase transaction.
The transaction amount sent to the credit card processor or the ACH Network for settlement. This is the amount that will be posted as a charge or refund against the specified method of payment, and for credit card transactions, may be less than or equal to the amount originally authorized for the transaction.
This is a virtual cart where customers can add or delete items they wish to purchase. It is a software solution that runs on a merchant web site or online store.
SSL (Secure Socket Layer)
SSL is a secure web protocol used for encrypting data between the web browser and web server so that a third-party cannot intercept the credit card information.
A payment card, similar to a debit card, attached to a limited monetary value, held either in an account by a card issuer, or in an electronic chip embedded within the card. Gift credit cards are a type of stored-value card.
A piece of electronic hardware, or a device, that is used by a merchant to submit credit card payment information to the processing network. Terminals are connected to the credit card processing network via dial-up telephone connection or Broadband.
Terminal Identification Number (TID)
An identification number assigned to each POS device by a merchant’s processor. This number provides the processor with information about the device’s configuration and capabilities.
A software application typically used in eCommerce solutions to connect a website shopping cart, or POS software application, to the Processing Bank. Authorize.net is a popular manufacturer of such solutions. Most gateway applications provide virtual terminal access to their systems as well, allowing the merchant to key or enter a transaction, if necessary.
An organization or business not directly associated or involved with transaction processing, or necessary for the exchange of a transaction between the point-of-sale and the Processing Bank.
The exchange of information, goods or services in which all participating parties benefit. Specifically, the exchange of a consumer’s payment or payment information for merchandise or services provided by an organization or business.
A transaction downgrade typically happens because the type of card your customer is using has a higher processing cost or because a transaction was processed incorrectly. It typically results in a merchant being charged a rate increase.
Transaction ID (Trans ID)
A unique identification value assigned to each transaction processed through the payment gateway. This ID may be used to search for or sort transactions.
The type of credit card transaction taking place. For charge transactions, a consumer is allowing a merchant to collect payment for merchandise or services rendered. However, in the case of a refund transaction, a merchant is returning funds to the consumer for a previous charge transaction.
The process of evaluating a service applicant’s financial history and credit trustworthiness to determine whether to grant a service account. In some cases, underwriting may also determine an applicant’s financial obligations, such as services pricing.
Value Added Reseller
This is a third-party vendor that enhances or modifies existing hardware or software, adding value to the services provided by the processor or acquirer.
Verified by Visa
A security program created by Visa to provide identity authentication for cardholders and transaction protection for merchants. By registering for Verified by Visa, merchants can minimize the risk of chargebacks and returns while providing additional security for their Visa customers.
Virtual Point-of-Sale (VPOS) Terminal
A secure, easy-to-use Authorize.Net solution that allows retail, or “brick and mortar” merchants, to manually submit transactions using a computer with Windows Internet Explorer, and a MagTek USB HID card reader.
This is an application that allows merchants to manually key in customers’ credit card information. The information is then securely transmitted and authorized by the payment gateway.
Visa Cardholder Information Security Program (CISP)
A program created by Visa stating its technology and sensitive data security requirements for merchants and merchant service providers. Compliance is required of its member institutions.
Transactions of this type are used to cancel original charge transactions that have not yet been submitted for batch settlement. For this type of transaction, the merchant must submit the transaction ID of the original charge transaction against which the Void is being submitted. No further action may be taken for Void transactions. To cancel a transaction that has already settled, a refund must be submitted.
Wireless Data Service
A wireless service that allows merchants to transmit transaction information via their cell phone or other enabled wireless device.