Industry TermsLearn the definitions for many bank card industry terms.
A unique sequence of numbers assigned to a cardholder account that identifies the issuer and type of financial transaction card.
Acquirers process credit and debit payments for merchants, making it possible for them to accept payment from card issuers that are within associations like Visa, MasterCard, Discover, and American Express. Acquirers can be banks or other financial institutions. The contract acquirers and merchants enter into give the merchant a line of credit in the form of a merchant account. This relationship is often facilitated by an independent sales organization (ISO), member service provider (MSP), or payment processor. The acquirer’s fees are a markup that gets added to association interchange fees.... More
A process defined in operations regulations whereby a transaction is approved by or on behalf of an issuer; commonly understood to be receiving of a sales validation by the merchant, by telephone, or authorization terminal.
A code that notifies you that you have obtained the authorization for a specific Visa card transaction. Note: You should print this on the sales draft.
A nationwide electronic funds transfer network which enables participating financial institutions to distribute electronic credit and debit entries to bank accounts and to settle such entries.
An unattended, magnetic stripe-reading terminal that dispenses cash; accepts deposits and loan payments; enables a bank customer to order transfers among accounts and make account inquiries.
In 1996, Visa/MasterCard headquarters introduced a new regulation requiring all businesses who manually key in the majority of their credit card transactions to have a special fraud prevention feature on their credit card processing equipment. This feature is referred to as an address verification system (it checks to see that the billing address given by the customer matches the credit card). If you opt not to use AVS, VISA and MasterCard will not support your transactions and will charge you an additional 1.25% on those sales.
Also known as “Discount Rate.” This is a percentage of each sale that the bank charges as per Visa and Master Card Rate requirements. All banks are required to have at least 3 rate structures. Face to face retail (usually the lowest rate e.g.. 1.49%). Phone, Mail and Internet rates (usually higher e.g.. 2.24%). And a rate for imprinted or phone authorized rates (highest rate e.g.. 2.62%). It is very important to correctly classify the way you will accept credit cards so that you can achieve the best rate structure.
A collection of credit card transactions saved for submitting at one time, usually each day. Merchants who do not have real-time verification systems must submit their transactions manually through a POS terminal. Batch fees are charged to encourage a merchant to submit his or her transactions at one time, rather than throughout the day.
The code that a lodging or car rental merchant gives to a cardholder. The cancellation code confirms that the cardholder did, indeed, cancel a reservation.
The submission of a credit card transaction for processing and settlement. POS terminals and real-time processing software capture transactions to submit to merchant account providers or credit card processors.
The customer to whom a card has been issued or the individual authorized to use the card.
A transaction that is posted to a cardholder’s MasterCard card account in which the cardholder receives cash at an ATM, or cash or travelers checks at a branch of a member financial institution or at a qualified and approved agent of a member financial institution.
A customer who does not receive his goods or services, or says he did not place an order, can ask his issuing bank to charge back the merchant. The Issuing Bank sends the charge back request to the merchant bank, which forwards it to the merchant asking to validate the charge. Information such as the amount, an invoice or folio, customer signature, or shipping documents, and the shipping address (used in AVS during the authorization) are needed to defend against a charge back.
The process of exchanging financial transaction details between an acquirer and an issuer to facilitate posting of a cardholder’s account and reconciliation of a customer’s settlement position.
A credit card issued jointly by a member bank and a merchant, bearing the “brand” of both.
This is a voice authorization code that you might initiate when you suspect a card is stolen or fake, or when a customer is acting suspiciously.
A Web server that contains the software necessary for processing customer orders via the Web, including shopping cart programs, dynamic inventory databases, and online payment systems. Commerce servers are usually also secure servers.
A bankcard issued to companies for use by company employees. The liability for abuse of the card typically rests with the company and not with the employee.
A plastic card bearing an account number assigned to a cardholder with a credit limit that can be used to purchase goods and services and to obtain cash disbursements on credit, for which a cardholder is subsequently billed by an issuer for repayment of the credit extended at once or on an installment basis.
Merchant services providers that handle the details of processing credit card transactions between merchants, issuing banks, and merchant account providers. Web site operators usually must first establish their own merchant account before contracting for credit card processing services.
A financial instrument used by consumers in place of cash. Unlike a credit card, debit card purchases are deducted automatically from the cardholder’s account, like a check. Visa and Master Card now offer debit cards through banks and other financial institutions.
A plastic card used to initiate a debit transaction. In general, these transactions are used primarily to purchase goods and services and to obtain cash, for which the cardholder’s asset account is debited by the issuer.
A consumer account set up to allow Ecommerce transactions through a particular credit card processing system. Before the consumer can make a purchase, he or she must first establish an account with the credit card processor, who provides an ID and password. These can then be used to make purchases at any Web site that supports that transaction system.
See “Bank Rate.”
A system in which the transaction data from an Internet transaction is tagged with this indicator and sent on to Visa or Master Card. It is a requirement (October 1st, 2000) for all merchants with a majority of sales via the Internet to use an approved and ECI compliant payment gateway. Hand keying of credit card numbers in to standard credit card terminals would not capture and pass on the ECI, therefore this method is not compliant.
A system in which the transaction data is captured at the merchant location for processing and storage.
A paperless transfer of funds initiated from a terminal, computer, telephone instrument, or magnetic tape.
The process of printing identifying data on a bankcard in the form of raised characters.
The purchase of debts owed, or “accounts receivable,” in exchange for immediate payment at a discount. In Ecommerce, the term is often applied to ISOs that offer to process credit card transactions through their own merchant account rather than through an account established by the merchant, in exchange for a percentage of the transaction or other fee. Factoring of credit card debt is illegal.
High Risk Merchant
A bankcard processing account designed especially for high risk merchants. These accounts usually come with higher fees and rates in order to compensate for the credit risk.
A physical impression you make from a customer’s card which appears on the draft. This proves that the card was present when the sale was made. Note: An imprint can be created electronically if you use a magnetic-stripe-reading terminal that includes the correct point-of-sale (POS) entry code.
A device to produce an image of the embossed characters of the bankcard on all copies of sales drafts and credit slips.
The fee that the Card Association charges the merchant to get the funds into his bank (merchant bank) and to get the billing information to the cardholder’s bank (issuing bank). Interchange fees are based on following credit card regulations and capturing appropriate data including card swipe, address, and electronic signature as needed. These fees are also based on the timeliness of the settlement of transactions.
A person or entity that conducts the majority of transactions online, usually through but not limited to e-commerce storefronts.
A merchant account designed specifically for e-commerce and online-only businesses, which are usually considered high risk. These accounts are often accompanied by payment technology that synchronizes with the merchant's website in order to facilitate online payment processing.
ISO (Independent Service Organization)
The entity that enters into a contractual agreement with a major credit card brand like Visa, Discover, or MasterCard to issue that brand's branded credit cards.
The magnetically encoded stripe on the back of a debit or credit card. This stripe contains sensitive, necessary information about the cardholder's account. The physical and magnetic characteristics of the magnetic stripe are specified in ISO Standards 7810, 7811, and 7813.
A device that reads information recorded on the magnetic stripe of a card. Also known as a card reader.
A transaction initiated by mail or telephone to be debited or credited to a bankcard account.
An institution that participates in the programs offered by Master Card International Incorporated.
A bank that has entered into an agreement with a merchant to accept deposits generated by bankcard transactions; also called the acquirer or acquiring bank.
Whenever a customer disputes a transaction on their debit or credit card, the payment reversal is known as a chargeback. It is a demand made by the credit card issuer for the merchant to make compensation for the loss resulting from a disputed or fraudulent transaction.
A unique code assigned to a business by a payment processor to identify the merchant on each transaction.
The code that transmits a customer’s order to and from a merchant’s bank’s transaction-authorizing agent usually a MAP (merchant account provider). See also payment gateway provider.
A company that provides code and/or software for an Ecommerce site to enable it to transfer information from its shopping cart to the acquiring bank, and on through the rest of the credit card transaction. See also payment gateway.
A four-to-twelve character secret code that allows an issuer to positively authenticate the cardholder for the purpose of approving an ATM or terminal transaction occurring at a point-of-interaction device.
A small device that allows you to slide the credit card through to make a charge. This is what most retail stores have. It is fast, easy and accurate to make a charge on a customer’s credit card within seconds. It is also known as a terminal machine.
Designed to help companies maintain control of purchases while reducing the administrative cost associated with authorizing, tracking, paying, and reconciling those purchases.
Having your customer’s credit card information validated and processed for you automatically. The credit card will be charged and the money will be deposited into your bank account all automatically. This is perfect for an internet-based business.
A hardcopy document representing a transaction that took place at the point of sale, with a description that usually includes: date, merchant name/location, primary account number, amount and reference number.
Regular, usually monthly, charges for maintaining a merchant account. Recurring fees include the discount rate, transaction fees, statement fee, and monthly minimum.
An account established by a merchant to store funds designated for a particular purpose.
A retrieval request is what happens when a cardholder cannot remember a credit card transaction, or the bank wants order information for some reason. The card issuer initiates a retrieval request, in which the merchant has 10 days to respond with the order information or the retrieval request will turn into a charge back. There is usually a retrieval request fee issued against the merchant also in these cases.
A system for encrypting data sent over the Internet, including Ecommerce transactions and passwords. With SSL, client and server computers exchange public keys, allowing them to encode and decode their communication.
The process by which merchant and cardholder banks exchange financial data and value resulting from sales transactions, cash disbursements and merchandise credits.
Fees charged for establishing a merchant account, including application fees, software licensing fees, and equipment purchases.
A plastic card containing a computer chip that can store electronic “money.” Unlike a credit card, a smart card can only spend out the dollar amount its owner has already put into the card account. It’s similar in function to a prepaid calling card but is available for all purchases.
A type of electronic bank debit card that has a specific dollar amount programmed into it. A gift card is an example of such a card.
Swipe Discount Rate
Processing of transactions by parties acting under contract to issuers or acquirers.
Action between a cardholder and a merchant or a cardholder and a member that results in activity on the cardholder account.
The date a cardholder effects a card purchase of goods, services, or other things of value, or effects a cash disbursement.
Action between a cardholder and a merchant or a cardholder and a member that results in activity on the cardholder account. Fee