Glossary of Merchant Account Terms

ACH (Automated Clearing House):
The system banks use to electronically transfer money between member banks, as regulated by the Federal Reserve. It simplifies the exchange and settlement of electronic payments passed between financial institutions by representing debits and credits to be deducted from an account, automatically, as they occur.

Acquirer:
A licensed affiliate of MasterCard and/or VISA, that is in the business of processing credit card transactions for its merchants.

Acquiring Bank:
A financial institution that provides credit card processing accounts for merchants. The bank receives funds from a cardholder when a credit card transaction is completed, and then deposits the payment amount, less any fees, into the merchants business checking account.

AVS (Address Verification Service):
The process of validating a cardholder's given address against the issuer's records, to determine accuracy and deter fraud. This service is provided as part of a credit card authorization for mail order/telephone order transactions. A code is returned with the authorization result that indicates the level of accuracy of the address match and helps secure the most favorable interchange rates.

Adjustment:
An adjustment is initiated by the acquirer to correct a processing error. The error could be a duplication of a transaction or the result of a cardholder dispute. The acquirer debits or credits the merchant account for the dollar amount of the adjustment.

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

Authorization:
Verification of a bankcard transaction by a bankcard-issuing bank or other institution, or by an approved independent service provider. Authorization is initiated by accessing (by voice or electronic terminal, as appropriate) Global Payments' designated authorization center. Authorization is based on the cardholder account status and available credit.

Authorization Code:
A code that a credit card issuing bank returns in an electronic message to the merchant's POS equipment that indicates approval of the transaction. The code serves as proof of authorization.

Authorization Network:
The network responsible for verifying cardholder data and available funds required for an electronic transaction.

Authorization Response:
An issuing financial institution's electronic message reply to an authorization request, which may include:


Approval -- transaction was approved


Decline -- transaction was not approved


Call Center -- response pending more information, merchant must call the toll-free authorization
phone number.

Average Ticket (Average Sale):
The average dollar amount of a merchant's typical sale. The average ticket amount is calculated by dividing the total sales volume by the total number of sales for the specified time period.

Bankcard:
A plastic card with a magnetic strip that is used by the cardholder to leverage a pre-established line of credit and is widely accepted as payment for goods and services by merchants.

Basis Point:
One one-hundredth of a percent (.0001). Discount rates are expressed as basis points.

Batch:
The accumulation of captured credit card, debit, and EBT transactions (usually one full day) in the merchant's terminal or POS awaiting settlement.

Batch Close:
The process by which a merchant gathers all of the credit card transactions that have occurred over a specified period of time, usually one full day, and submits them to the financial institution acting as the acquiring bank for settlement.

Bulk Processing:
A means of processing multiple transactions in bulk rather than one at a time. It is used as a solution for abnormal processing situations, such as a system failure, or Internet outage that prevents normal processing procedures.

Capture:
The submission of an electronic credit card transaction for financial settlement. Authorized credit card sales must be captured and settled in order for a merchant to receive funds for those sales. Also see Settlement.

Cardholder:
The person or entity whose name is embossed on a card or whose name appears on a bankcard as an authorized user.

Card Issuing Bank:
The bank that extends credit to a cardholder through bankcard accounts. The financial institution issues a credit card and bills the cardholder for purchases against the bankcard account. See also Issuing Bank.

Card-Not-Present:
A transaction where the card is not present at the time of the transaction (such as mail order or telephone order). Credit card data is manually entered into the terminal, as opposed to swiping a cards magnetic stripe through the terminal.

Chargeback:
A previous transaction that is being disputed by the cardholder or the issuing institution. A chargeback occurs when a cardholder disputes a charge or when proper bankcard acceptance and authorization procedures were not followed.

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

Code 10 Authorization:
A tool at the merchants disposal for verifying a card or cardholder's authenticity without alerting the cardholder, when suspicious behavior, card irregularities, or other such factors alert the merchant to fraud warning signs. The merchant calls the voice authorization phone number and informs the operator of a "code 10," at which point the operator asks a series of yes or no questions and instructs the merchant how to proceed.

Commercial Card:
Charge card issued to businesses as an alternative way of financing expenses such as supplies and travel, etc. (often replacing purchase orders). These cards (corporate, business, purchasing) also provide users with specific reporting advantages. MasterCard and Visa each provide issuers with the ability to issue commercial card products.

Corporate Card:
Charge card designed for business-related expenses. See Commercial Card.

Cost Plus Pricing:
Also known as Interchange Plus pricing. A standardized format of quoting credit card processing rates by fully disclosing all interchange and assessment fees, including all surcharges, and then adding margin of either basis points to the discount rates and/or cents to the per item fees.

Credit (Reversal):
Nullification of an authorized transaction (sale) that has not been settled. If supported by the card issuer, a reversal will immediately "undo" an authorization and return it to the open to- buy balance on a cardholder's account. Some card issuers do not support reversals.

Daily Discount:
The amount a merchant is paid for each batch less the discount rate and per item fee per transaction within that batch.

DDA Account (Demand Deposit Account):
A business checking account designated by the merchant through which bankcard transactions (excluding American Express and Discover transactions), adjustments, batch settlement, and charge backs are processed by Global Payments.

Debit Card:
A plastic card resembling a credit card that is used by consumers in place of cash. The cardholder's checking account is debited by the card-issuing institution either at the time of purchase, or after batch settlement.

Deposit Correction Notice (DCN):
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.

Discount Rate:
A percentage-based fee that is paid to the acquiring bank or ISO for the time and expense involved in the handling of transactions.

DSL (Digital Subscriber Loop):
A method for moving data over regular phone lines. A DSL circuit is much faster than a regular phone connection, and the wires coming into the subscriber's premises are the same (copper) wires used for regular phone service. A DSL circuit must be configured to connect two specific locations, similar to a leased line.

Edit Rejects:
The rejection of a sales draft by Visa or MasterCard before a transaction processes through interchange, but after it has been paid by the acquirer.

EBT (Electronic Benefits Transfer):
The payment of social security benefits, such as welfare or food stamps, through a point-of-sale system. The recipient is given a card and PIN allowing access to the benefits through an electronic network.

Electronic Cash Register (ECR):
A system for automatically checking out goods from retail food stores, consisting of a device that scans packages and reads symbols imprinted on the label, and a computer that converts the symbol information to tell a cash register the price of the item; the computer can also keep records of sales and inventories.

Electronic Data Capture (EDC):
Process of electronically authorizing, capturing and settling a credit card transaction.

EFT (Electronic Funds Transfer):
A method of transferring money from one bank account to another, using any of a wide variety of electronic methods currently available.

Fleet cards:
Private label credit cards designed mainly for repairs, maintenance and fueling of business vehicles.

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

Independent Sales Organization (ISO):
A firm or organization that processes credit card transactions in exchange for a portion of the transaction fees.

Interchange:
The domestic and international systems operated by Visa and MasterCard for the electronic exchange of financial and non-financial data associated with sale and credit data between merchant acquirers and card issuers.

Interchange Fee:
A fee paid by an acquirer to an issuer for transactions entered into interchange. The interchange fee is a percentage applied, according to Visa/MasterCard regulations, to the dollar value of each transaction. There are multiple categories of interchange, and Visa and MasterCard each have their own criteria for their own categories. A transaction must meet the specified criteria for a category in order for that category's rate to be applied. Each transaction is evaluated individually, so various interchange rates may apply within one batch of merchant transactions.

Interchange Plus:
Also known as Cost Plus pricing. A standardized format of quoting credit card processing rates by fully disclosing all interchange and assessment fees, including all surcharges, and then adding margin of either basis points to the discount rates and/or cents to the per item fees.

Internet Protocol:
Internet Protocol (IP) is the protocol by which data is sent from one computer to another on the Internet. Each computer on the Internet has at least one address that uniquely identifies it from all other computers on the Internet. IP is a connectionless protocol, which means that there is no established connection between the end points that are communicating.

Internet Service Provider:
A business that provides access to the Internet. Access may be provided by dial-up telephone line or a high-speed DSL circuit.

Issuing Bank (Issuer):
The bank that extends credit to a cardholder through bankcard accounts. The financial institution issues a credit card and bills the cardholder for purchases against the bankcard account. See also Card Issuing Bank.

Magnetic Stripe:
A stripe on the back of a card that is magnetically encoded with cardholder account information.

Mail Order/Telephone Order (MOTO):
Credit card transactions initiated via mail, E-mail, or telephone. Also known as card-not-present transactions.

Merchant:
A person or entity entering into merchant agreement as well as all personnel, agents and representatives of the merchant.

Merchant Identification Number (MID):
A six to 16-digit number assigned to each merchant and used to identify the merchant during processing of daily transactions, rejects, adjustments, charge backs, end-of-month processing fees, etc.

Merchant Services Provider:
A bank, ISO, or any other firm that provides the various services required for the processing of a merchant's credit card sales.

Monthly Minimum:
The minimum amount that will be charged to a merchant by a merchant services provider in any given month. If the merchant account activity does not generate the monthly minimum the account holder is automatically charged the difference.

Negative Deposit:
What occurs when the dollar amount of a credit draft submitted for deposit to the deposit account exceeds the dollar amount of the sales drafts submitted for deposit.

Non-Qualified Transaction Fees (Non-Qual):
Transactions that are downgraded from a qualified rate for failure to meet the set Visa/MasterCard criteria of a qualified transaction. For example, a retail merchant (non-MOTO) that processes a card-not-present transaction (or manually enters card data rather than swiping the magnetic stripe through the terminal) will pay a downgraded, or non-qualified interchange rate.

PABP (Payment Application Best Practices):
Visas set of requirements that a developer's point-of-sale payment application must meet to achieve PABP validation by an independent, Visa-qualified auditor, for the purpose of maintaining PCI DSS compliance.

PCI DSS (Payment Card Industry Data Security Standards):
A security standard, implemented by the PCI Security Standards Council for all card brands, to protect customer account data. It includes requirements for security management, policies, procedures, network architecture, software design and other protective measures to help facilitate the broad adoption of consistent data security measures.

PIN (Personal Identification Number):
The confidential individual number or code used by a cardholder to authenticate card ownership for ATM or POS terminal transactions.

PIN or Online Debit:
A check/debit card transaction processed through the PIN debit networks and incurring the published PIN debit network fee charges as set forth by the debit networks. A PIN number must be entered, and therefore, the cardholder's signature is not required.

Point-of-Sale (POS):
A location where credit card transactions are performed with the cardholder present, such as a retail store. The card is read magnetically, and the cardholder's signature is obtained as proof of the transaction. This is the most secure form of credit card commerce. Also refers to the equipment used to process transactions.

Portal:
A Website or service that offers a broad array of resources and services. Web portals offer resources and tools for resellers, developers, and merchants, including real-time processing reports, batch and deposit details, live chat with support reps, newsletters, and much more.

POS Terminal:
Equipment used to capture, transmit and store transactions at the point-of-sale.

Pre-Auth:
The process of authorizing and reserving the funds for a transaction prior to completing a sale. Pre-auth ensures that the card is valid, that the cardholder has sufficient funds to cover the purchase amount, and reserves the funds for completion.

Private Label Card:
Credit, debit or stored-value card that can be used only within a specific merchant's store. Also referred to as a proprietary card.

Processor:
A company that provides transaction authorization, clearing, or settlement services for merchants and members.

Purchasing Card:
Charge card used by businesses to cover purchasing expenses. See also Commercial Card.

Real-Time Processing:
The immediate verification and processing of a credit card transaction following a purchase made by the customer. With real-time processing and real-time Web reporting, transaction information is available immediately after a transaction occurs.

Re-presentment:
A follow up transaction originated by the acquiring bank in order to recover funds that were previously charged back to the merchant, by the cardholder and/or card issuer, as being unauthorized or fraudulent. Re-presentment of previously charged back transactions can occur if a merchant provides documentation to support the transaction.

Reserve Account:
A merchant account which contains funds (average 20 percent of anticipated processing volume), generated by a merchants credit card transactions, that are held in reserve by the acquiring bank to cover possible future disputed charges, fees and other expenses. After a predetermined time, the reserve is released and deposited into the merchant's checking account, usually with no interest accumulated.

Sales Draft:
A paper or electronic record of a sale, rental or service transaction which the merchant presents to Global Payments for processing through the interchange system or otherwise, so that the cardholder's card account can be debited and the deposit account may be credited.

Settlement:
The process of completing all necessary funds transfers so that a merchant involved in a credit card transaction is paid for the goods or services purchased by a cardholder.

Signature or Offline Debit:
A check/debit card transaction processed through the PIN debit networks and incurring the published PIN debit network fee charges as set forth by the debit networks. A PIN number must be entered, and therefore, the cardholders signature is not required.

Smart Card:
A plastic card resembling traditional credit or debit cards that contains a computer chip that stores more cardholder information than the magnetic stripe on regular cards.

Small Ticket:
An interchange category specific to restaurant and quick serve transactions under $15, as well as certain retail and emerging markets as set forth by the card associations.

Split Sale:
Preparation of two or more sales drafts for a single transaction on one card account in order to avoid authorization procedures. Card association regulations prohibit split sales.

Stand-In Authorization:
In the event of an authorization network outage, Mercury "stands-in" by authorizing and backing every transaction. With stand-in, the merchant can continue processing transactions within the pre-determined floor limit during the outage, with no financial risk.

Terminal:
Equipment used to capture, transmit, and store credit card transactions.

Terminal Identification Number (TID):
The unique number assigned to each POS terminal.

Ticket Size:
The actual monetary value of the goods or services purchased in a single credit card transaction.

Transaction Fee:
The pre-determined and customary charge that is incurred for each individual credit card transaction a merchant processes, and collected by the merchant account provider or the ISO.

Trouble Ticket:
A formal request for help from technical/customer support representatives that is used for non-emergency related problems or questions. Once a trouble ticket is submitted a representative addresses the problem in the order it was received and maintains communication with the person who submitted it until it is resolved.