Glossary

Key Terms

Acquirer, Approval, Batch, Chargeback, Interchange Fees, Discount Rate, Transactions

Full Glossary

Index:

Term Definition
ABA Number American Bankers Association or Transit Routing Number -- a 9 digit number identifying a financial institution in which a merchant account is located for electronic deposits.
Account Number A 16 digit number assigned to a cardholder’s account that identifies the Issuer and type of financial transaction card
Acquirer Any company that is authorized and licensed by Visa/MC to accept credit or debit card transactions from merchants and submits those transactions into interchange directly or indirectly and settles on merchants behalf.
Acquirer Responsibilities Provide authorization decisions to those merchants accepting credit/debit cards as a form of payment. Accept card transaction data from merchants, transmit said data to the Associations (Visa/MC) via interchange, Settle merchant’s transactions.
Address Verification Service (AVS) An Association service which allows a merchant to verify the cardholder’s billing address before completing a mail/telephone transaction (MOTO). This service is not a guarantee for the validity of the transaction.
Agent Bank A small financial institution that is contracted to become an Issuer or Acquirer of another member. A bank, by agreement usually turns over its applicants for bankcard processing to the Issuer/Acquirer and acts as a depository for merchants.
Amex American Express is labeled as a Travel & Entertainment credit card. A 15 digit account number starting with the prefix “37” or “34”, transactions are directed to Amex for the funding & settlement process.
Annual Renewal Fee An amount charged to a merchant each year to continue processing Visa and MasterCard transactions.
Approval An authorization response notifying the merchant via a terminal that a sale may be processed because the cardholder has a status of “open-to-buy” (funds/credit available) on their account.
Arbitration The Associations policies or procedures in determining which member (Issuer or Acquirer) must accept financial responsibility after all chargeback cycles have been completed.
Assessments Fees paid to Visa and MasterCard to support marketing & operating activities.
Association Visa/MC license members to issue cards with the Associations brands (issuer) and to sign merchants to accept cards (acquirer) with those brands
Authorization The process by which an Issuer or Stand in Processor (STIP is a service that provides authorization response on behalf of an Issuer) will either grant or deny permission to the merchant to complete a transaction.  Authorization is based on the cardholder’s account status and available funds or credit.
Authorization Code Alpha-Numeric number, that is designated by the issuer or STIP that is given to a sale transaction as verification that the sale has been authorized.
Automated Clearing House (ACH) A regional organization used by member banks to electronically transfer funds directly from sending bank through the Federal Reserve to the merchants bank, usually between 28 to 48 hours.
ACH Delay Days Allows a Bank/Acquirer to delay release of funds to merchants.
ACH Rejects Represents a merchant’s deposit or fee that could not be posted to the merchants DDA (Direct Deposit Account)
Auto Close Batch is closed at the terminal level at a specified time each day.
Bankcard A credit card or check card (debit) issued by members of one or both Associations (Visa/MC)
Base I System A VisaNet network that authorization will go through for approval
Base II System An electronic batch system used for the exchange of Visa interchange transaction data and for settlement of the value of those transactions between acquirers and issuers.
Base Identification Number A set of numbers assigned by the bankcard Association to its members. On a cardholder’s account # the BIN appears as the first 6 digits. Visa’s BIN begins with a “4” and MasterCard’s ICA (Inter-bank Card Association) begins with “5”. It is a number used to identify the acquiring bank to the processor. Visa uses a 6 digit system, while MasterCard uses a 4 digit system.
Batch Media received from different locations and merchants and treated as a group.  Usually a day’s worth of a merchant’s Transactions (sales and returns) to be processed by the card Processor.
Batch Amount Net dollar value of items within a Batch.
Batch Header Ticket A leading document for a batch, containing all control and identifying information.
Batch Number A number that identifies the transaction type (paper or electronic) and the processing series to which this item belongs. Used for purposes of retrieval and investigation.
Batch Processing A type of data processing and communication transmission where related transactions are grouped together and transmitted.
Call Tag Methodology information to arrange a pickup of defective equipment from the merchant’s location.
Capture Type The method or system that was used to send in items for processing the Electronic Cut.
Card Activation A security process developed to prevent loss fraudulent use of a new or reissued bankcard. The card cannot be used until the cardholder calls a toll free # and verifies his/her identity.
Cardholder The person whose name appears on the card issued from the issuing bank to be used as a credit or debit card.
Card Verification Value A unique check value encoded on the magnetic stripe of a card for purposes of validating card information during the authorization process.
Chargeback The process by which an Issuer may return a disputed Transaction to the Acquirer through Interchange.
Chargeback Reason Code A numerical code identifying the specific reason(s) for a Chargeback.
Check Card A bankcard that enables the user to purchase goods and services and obtain cash against his or her account. The check card is also called a “Debit Card”.
Chip Card A card with a microprocessor embedded in it.
Co Brand Card A partnership between an Issuer and another entity that is not in the bankcard business in a credit card program. The card bears the name of both entities.
Code 10 Authorization A voice authorization request generated when a merchant is suspicious of a card or card holder.
Corporate Card A bankcard designed specifically to meet the travel, entertainment and other payment needs of mid to large size corporations.
Credit Card A plastic card with a credit limit used to purchase goods & services and to obtain cash for which the cardholder is subsequently billed by the issuer for repayment of the credit extended.
Credit Limit The maximum balance the issuer has approved for the cardholder to carry.
Data Capture Generally, this is a processing term for the collection, formatting and storage of data in computer memory according to predefined fields.  This occurs when a terminal reads the magnetic stripe from the plastic card or from manual entries and then stores the information for later output.
DDA Number Demand Deposit Account – Bank account identification # of a merchant where their funds are deposited.
Debit Card A card issued by a financial institution that deducts from the cardholder’s personal DDA or savings account for the purchase of goods and services and to obtain cash.
Dial-Up Terminal A terminal that uses a standard phone jack (RJ11), like the ones found in an individual’s home, to communicate, authorize and process transactions.
Discount Rate The fee charged to the merchant by the Acquirer for the processing services that enable the merchant to except various forms of electronic/card based payments.
EBT Electronic Benefits Transfer is the provision of government benefits (food stamps/welfare) to a recipient through the use of a magnetic strip card or other card type capable of accessing POS terminals.
EDC Electronic Draft Capture – this is a paperless transaction.
Electronic Data Capture A point of sale terminal that reads the information encoded in the magnetic stripe of bank and T&E cards. These terminals electronically authorize and capture transaction data.
Electronic Warning Bulletin An electronic file that advises merchants not to honor transactions on certain accounts. Issuers submit compromised (lost/stolen) account numbers to Visa/MC for them to be incorporated into this file.
Entitlements The term used for allowing a merchant’s terminal access to a network and the types of cards the merchant will be able to accept.
Gateway A communication link between a network and the Internet
Host Based Capture Instead of the POS terminal capturing and storing transaction data it is done by a computer or a mainframe (Host)
ICA Interbank Card Association (MasterCard) begins w the number “5”. Is a 4 digit number assigned by MC that identifies the member bank in the transaction processing.
Interchange The exchange of information between the Acquirer and Issuer in accordance with Visa/MasterCard regulations.
Interchange Fees For purchases the fee is charged to the Acquirer and paid to the Issuer. For Cash Advances the fee is charged to the Issuer and paid to the Acquirer. These fees are regulated by the Associations (Visa/MasterCard).
Interchange Rejects Sales, returns and cash advances that have failed the initial interchange edits.
ISO Independent Sales Organization (also called a Member Service Provider).  An outside company other than a MC/Visa member that is contracted by Members to conduct merchant processing or cardholder services.
Issuer Association member that initiates & maintains cardholder relationships.
JCB Japanese Credit Bureau is a Non-Bankcard prevalent on the West Coast.
Lease Line Phone lines used by merchants to connect directly to their Processor.  A terminal type that relays data over a dedicated circuit and an Acquirer.
Magnetic Stripe Stripe located on the back of credit/debit cards that contains multiple tracks of information regarding the account that can be read by a magnetic stripe reader in a POS device.
Media A term used to define sales draft, legible reproduction or fax.
Member A financial institution that is a member of Visa or MasterCard.
Merchant Category Code Classification codes used in authorization clearing & settlement systems to identify the type of business a merchant operates.
MOTO Mail/Telephone Order -- MOTO is used to describe a transaction type or category code.
Net Settlement The currency amount representing the difference between a merchants sales for a day, acquirer fees and misc adjustments, may be a debit or credit.
Net Settlement The currency amount representing the difference between a merchants sales for a day, acquirer fees and misc adjustments, may be a debit or credit.
Non-Bankcard Any credit card entitlement other than Visa/MasterCard.
Offline Debit Transactions that do not require the cardholder to enter a PIN (Personal Identification Number), but does require the cardholder’s signature. The transaction is processed like a credit card with the withdrawal of funds from the cardholder’s account within a day or two. These transactions are often referred to as “check card” or “debit card”.
Online Debit A debit transaction that requires the cardholder to enter a PIN. The transaction must be approved online by requesting authorization from the issuing financial institution. If the transaction is approved funds are withdrawn, held from the cardholder’s account at the time of the transaction. The funds for the transaction are guaranteed to the merchant.
Pass-Through Transactions that are processed through an Acquirer/Processor for statement purposes but are not funded by the Acquirer/Processor (e.g., Amex transactions).
Pick-Up An authorization response given to a merchant from the Issuer requesting the cardholder’s card to be confiscated.
Pinpad A device attached to or integrated with a POS terminal used for the entry and encryption of the cardholder’s PIN for Online Debit.
Posting The process of recording debits and credits to a merchant’s or cardholder’s account.
Pre-Arbitration Is an attempt between the issuers and acquirers to resolve chargeback’s prior to filing for arbitration.
Presentment Is the Acquirer’s act of sending a transaction to the issuer through Interchange.
Private Label Card A proprietary card that is issued and accepted only at a particular business.
Processor An organization that is connected to Visa/MC and provides authorization and/or clearing and settlement services on behalf of the Member.
Recurring Transaction A transaction where the cardholder has given written permission to periodically charge the cardholders account for goods & services.
Representment A subsequent demand of payment made after a Chargeback has been resolved.
Routing Number American Bankers Association (ABA) assigned a 9 digit number that identifies the bank at which the merchants DDA reside.
Reverse PIP A method where by the equipment directly dials American Express for the authorization and settlement of Amex transactions.
Settlement The transfer of funds from the issuing bank to the acquiring bank to the merchant.
Smart Card A card that contains a micro processing chip, it can perform many different functions. Also known as “Stored Value Card”.
Split Dial A process that allows the terminal to dial directly to different Processors for Authorization.
Statement The summary of account information received, processed and funded to the merchant.
Stored Value Card See “Smart Card” definition above.
Substitute Draft A replacement for a sales slip that is allowed by both Visa/MasterCard for non-fraud retrieval requests.
Surcharge A fee charged to merchants by the Acquirer for the recovery of increased Interchange charges due to transactions clearing differently than planned. (Also known as a “Billback”).
Switch An electronic mechanism that routes transaction data from POS terminal to the authorizing data processor for approval by the Issuer.
Terminal Based Capture POS terminal captures and stores Transaction data until it is ready to be Batched and sent for processing.
Terminal ID (TID) An identification number assigned to a terminal.
Third Party Processor Processing of transactions by parties acting under contract to the card Issuers or Acquirers. A non-member agent contracted by a member to provide, authorization processing and merchant services.
Transactions The exchange of goods or services between a merchant and a cardholder that provides a financial obligation arising from the use of a credit/debit card.
Voice Authorization (VRU) If a credit card cannot be swiped successfully a merchant will call to manually have an authorization obtained from the issuing bank.