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Glossary of Merchant Services Terminology
 
ABA (American Banker'S Association) Routing Number This 9-digit ABA-assigned number identifies individual banks. This number is used to facilitate the electronic routing of funds (ACH transfer) from one bank account to another.
Access Number This is the telephone number dialed by the modem that lets a computer communicate with an online service or Internet Service Provider (ISP). 
ACH (Automated Clearing House) A processing organization networked with others to exchange (clear and settle) electronic debit/credit transactions (no physical checks). 
Acquiring Bank This is the status of a Visa®/MasterCard®® member bank that establishes and maintains the merchant relationship and processes all merchant transactions. BancorpSouth Bank is an acquiring bank. Contrast with "Issuing Bank." 
AVS (Address Verification Service) AVS is a tool for merchants to reduce the risk associated with non-face-to-face transactions, such as mail order or telephone order. A merchant using AVS (must have equipment that is AVS-compatible). 
Agent  An individual that receives compensation or residuals for selling credit card services to merchants.  See MSR.
Amex American Express®
Approval Code issued by the card-issuing bank that allows a sale to be place against the cardholder’s account.  This means that the amount of the sale is within the cardholder’s credit limit and the card has not been reported lost or stolen.  An approval code freezes cardholder funds for 10 to 21 days, depending on the card-issuing bank, and guarantees funds to the merchant for 30 days provided the merchant has followed all Visa® and MasterCard® regulations regarding the sale.  An approval may be obtained electronically (terminal) or by phone (voice), and it is also known as an “authorization.” 
Articles Of Incorporation This legal document identifies the terms under which a corporation was created and identifies the principals. 
Auth/Batch Fee This is the amount of money charged to the merchant each time an authorization is issued for a transaction, and each time they "close" a batch of transactions. 
Autho Log Bank file of all authorizations obtained for a specific merchant number, showing card number, dollar amount, and how (electronically or voice) and where (network or FDR for voice) they were obtained. 
Authorization The process whereby a transaction is approved by an issuing bank, authorized agent, or Visa®/MasterCard® on behalf of that issuer, before the transaction is completed by the merchant via telephone or terminal. 
Auths & Captures The amount charged by the processor to handle the transaction.
Average Ticket Size (Avt) The average Visa®/MasterCard® dollar amount of each transaction the merchant anticipates processing. 
AVS Fee Charge for accessing the Address Verification System database. See "Address Verification Service." 

 

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Bank Identification Number (Bin) Visa®/MasterCard® assigns unique, identifying numbers to each member acquiring or issuing bank. These numbers identify parts of both credit card and merchant account numbers. 
Basis Point One one-hundredth of a percent.  Merchant discount rates are billed in basis points. 
Batch Header Fee  Charged by the processor for Batching Processing out the machine totals at the end of a day.
Batch Processing This occurs when a merchant transmits the "batch" of daily sales stored in the terminal for processing. An "open" Batch is one that is not yet "closed." To "close" a batch is to transmit the information from the merchant's location (terminal or software) to our processor. 
Bundled Rate Discount rate that includes communications costs instead of being billed separately as transaction fees, it may also be referred to as a “flat rate.” 
Business Financials The three forms that are known collectively as "business financials" areMerchants: Profit and Loss Statement, Balance Statement, and Statement of Cash Flow. 
Business Type Business type is determined by the way in which a business processes transactions:

• Retail - Merchants selling tangible goods in a face-to-face environment who normally use conventional terminals and swipe transactions. • Service - Merchants selling services like plumbing or auto repair in a face-to-face environment, who normally use conventional terminals and may key or swipe trans-actions.
• Restaurant - Merchants selling prepared foods in a face-to-face environment, who normally use conventional terminals and swipe their transactions.
• Hotel - Merchants selling lodging and hospitality services in a face-to-face environment, who normally use conventional terminals and key or swipe their transactions.
• MOTO - Merchants selling tangible goods or services in a non-face-to-face mail order, Internet or telephone order environment, who normally use software or conventional terminals and always key their transactions.
• Internet - An Internet Merchant is one who processes transactions via the Internet. Processing transactions via the Internet means that the cardholder types their credit card information online and the transaction is processed seconds later. 
Call Center Terminal message received when communications network is “down” or card-issuing bank wants additional information to complete the sale. It is also used by card issuing banks to spot check sales. 
Capture Processing terminology for electronic deposit of credit card transactions. Unlike a transaction that is authorized only, a captured transaction resides in the terminal memory under “terminal capture” and in the host computer memory under “host capture” until settlement. It may also be referred to as “EDC.” 
Card Limit Credit limit established for a credit card by the card-issuing bank that may or may not be exceeded (except with its permission).  A “decline” message usually results when a transaction will put the cardholder over his or her credit limit. 
Card Reader Device on a point-of-sale terminal that electronically reads the information contained in the magnetic stripe on a credit card. 
Center Processing slang for voice authorization center. 
Chargeback Processing bank is forced to reverse a merchant sale because the card- issuing bank (cardholder) disputes the sale.  The merchant has the opportunity to appeal and prove the sale is valid.
Communication Cost Cost incurred each time a terminal dials out to a computer network. communication network
Check Card A Visa® or MasterCard® that is used to pay for goods directly out of an individuals checking account.  Same as a Debit Card.
Contingent Liability This is the term used by underwriters and sales people to identify a situation that is created when merchants process transactions in advance of the date cardholders can expect to receive the goods or services they purchased. Travel agencies pose a contingent liability risk. Similarly, all MOTO merchants pose contingent liability risks to the bank. We limit this liability to a maximum of 90 days. 
Conventional Rate  A rate that is comprised of both a percentage and dollar amount such as 1.93% + $0.28.
Credit Money debited from a merchant’s account and paid back to cardholder.  A credit may be issued outside of the original batch. 
Credit Report A credit report is ordered for every signing principal on the application, and is used by under-writers to make approval decisions.
CVV Value Computer value picked up from a card’s magnetic stripe that identifies the transaction as mag-stripe read. 
CVV2 CVV2 is a three-digit security code that is printed on the back of most credit cards. The CVV2 program is designed to reduce fraud in the card-not-present environment by validating that a genuine Visa®/MasterCard® credit card is being used during a transaction. 
DDA Demand Deposit Account (bank account). 
Debit Card A type of account (e.g., Visa® Debit Card or MasterCard® Debit Card) where the amount of any transaction is debited directly from a cardholder’s checking account immediately instead of the standard 30-day billing period. This may also be a regional debit card issued by a local bank (e.g., Pulse, Mpact, or Shazam), allowing a cardholder to access to his checking account funds electronically.  This may require a personal identification number (PIN). 
Debit Networks The host of companies that honor card transactions and at the same time debit the card-holder's checking account for the amount of the purchase. They are smaller, more numerous, and more likely to be only regionally accepted than their credit-based counterparts. 
Decline Response to transaction authorization attempt that means card-issuing bank will not accept the charge and the merchant must accept another form of payment. 
Direct Marketing The method by which a merchant solicits business to a population that did not ask to be solicited (i.e. "junk mail"). It is often mistakenly confused with terms like, "mail order" and "telephone order." A merchant that sends catalogs or brochures to a mailing list of past customers is not a direct marketer, but a merchant who sends catalogs or brochures to everyone in a geographic area is a direct marketer. 
Discount Rate Percentage of each sale that the merchant pays to the processing bank to turn Visa® and MasterCard® funds into cash.  It may be billed on gross or net sales, depending on the processing bank.
Doing Business As (DBA) The DBA is the name the public sees, whether on a physical storefront or on the web. If the merchant has another business, then we would need a separate application for both. 
Draft Processing slang for sales draft.  A sales draft can be a receipt produced by an electronic printer or a manually imprinted, multi-part sales receipt. 
DTC Depository Transfer Check—DDA checks printed with business account name and number in the “Pay to the order of” portion of the check and no signature required above the signature line. Money may only be deposited to the account that matches the information printed on the DTC. 
Dues And Assessments The amount charged by the ISO to handle the transaction.
E-Commerce This is a generic term denoting business done over the web and/or processed electronically. 
EDC Electronic Draft Capture—Electronic authorization and deposit of credit card transactions without submission of paper drafts to the bank for payment. This may also be referred to as “capture.” 
Electronic Ticket Capture (ETC) An ETC system reaches out and "grabs" sales ticket information electronically. Buyer information is contained on the magnetic strip on the back of the credit card. The merchant "swipes" the card through a terminal, and the buyer information is "read" by the computer system and merged with the sales information. It then processes the ticket just as if the merchant was making a manual deposit at a bank. This action is normally done in "batches" of tickets, such as at the end of the day. 
Face-To-Face A face-to-face transaction is one at which the cardholder was present. This is usually evidenced by the action of swiping a card through a terminal but may also be evidenced with a signed, imprinted draft. (See "Imprinter.") 
Fed Bank A Federal Reserve bank capable of receiving ACH deposits directly.  Some smaller banks that are not part of the Federal Reserve system receive ACH deposits via a Fed bank, sometimes delaying merchant deposits an additional day. 
Federal Tax Id Number This 9-digit number is assigned by the IRS for tracking business taxes. We absolutely require a Federal Tax ID number from all applicants. Some smaller merchants that are sole-proprietors may use their personal Social Security Number in place of a Federal Tax ID number. 
Flat Rate Discount rate that includes communications costs instead of being billed separately as transaction fees, and it may also be referred to as a “bundled rate.” 
Floor Limit Preset limit established by a processing bank that allowed the merchant to accept a Visa® and MasterCard® sale without authorization, provided the merchant checked the Warning Bulletin (eliminated 4-2-94) for lost or stolen cards.  
Force Processing terminology for a previously authorized transaction that is entered into terminal/host memory for capture/deposit.  Voice authorized transactions are entered for payment via this transaction, which may also be known as a post-authorization. 
Full Business Name A merchant may only apply for credit card processing under a business name that corresponds to the tax ID number written on the application. 
Gateway Just as a customer must walk through a door or gate to enter a business establishment, so must customers enter electronic "gateways" before they can do business electronically. 
Hypertext Transfer Protocol, Secure Connection (Https) This allows for secure communication between computers. One must have the proper pass-word (s) to get into a secure site. 
Host This is the computer on which a web site is physically located, normally the Internet Service Provider (ISP). 
Host Capture Draft capture where each transaction approved and captured at the network host computer and a duplicate file (shadow file) is kept in the terminal, so the merchant has a record of the batch.  Settlement occurs at the host computer only, and is “automatic,” requiring no additional function at the terminal level.  Several batches may remain stored in the terminal memory at all times. 
Hypercom This company manufactures conventional processing terminals. Models include the T77 and T7P terminal/printer combinations and the S8 PinPad. 
Imprinter The now old-fashioned manual, slide-type device used to produce an image of the raised (embossed) characters on a credit card, to a transaction slip. All merchants should have a manual imprinter for cases that demand a physical imprint. 
Integrated Point Of Sale (IPOS) This acronym refers to conventional terminals that are "smarter" and more sophisticated in that they may be set-up to communicate with like terminals owned by the same merchant -even if they are located at different locations and with different merchant numbers. 
Interchange Rate The amount charged by Visa® or MasterCard® to handle the transaction.
Internet Merchant See Business Type 
ISO  Independent Sales Office.  See Registered ISO.
Issuing Bank An Issuing Bank is any Visa®/MasterCard® member bank that enters into contractual relation-ships with cardholders for the issuance of cards. 
Keyed A transaction is "keyed" when the information from a credit card is manually typed into a terminal or computer (utilizing credit card processing software like YourPay.com). A transaction is keyed because either the card is not present at the time the transaction is entered or the equipment being used to process the transaction can't read the card. 
Mag Stripe Magnetic strip located on the back of credit cards that contains cardholder information, such as the account number, expiration date,(track II) and name of cardholder (track I). 
Mail Order/Telephone Order (Moto) See "Business Type." 
Match Member Alert To Control High Risk—File maintained by MasterCard® that lists merchants whose processing accounts have been terminated by a processing bank for cause (e.g., fraud, high percentage of chargebacks, failure to pay processing fees, etc.). 
MCC (Merchant Category Code) Merchant Category Code—Four-digit codes established by Visa® and MasterCard® that are transmitted by network to describe the merchant’s type of business. This may also be known as SIC (Standard Industry Code). 
Member Bank Bank that is a member of the Visa® and MasterCard® associations. 
Merchant TMS customer that is engaged in some sort of consumer transaction activity (e.g., restaurant, beauty salon, car rental, etc.) that uses TMS’s products and services. 
Micr Encoding Special encoding of the account and routing number at the bottom of a check. 
MID Merchant Identification Number—Unique number identifying a merchant. 
Mid Qual Rate Usually refers to a card that is keyed in manually but could reflect the higher cost to process some business or rewards cards.
Monthly Volume (MV) The maximum monthly dollar volume a merchant is approved to process in Visa®, Master-Card, and Discover® transactions. The MV is important for underwriter consideration of the file and also helps to determine what type of documentation will be required with the file. (AMEX, or any other card processing volume is never included in the calculated monthly volume.) 
MOTO A merchant account that lumps card transactions into 2 categories   usually Mids & Nons when the transaction is submitted by telephone or the Internet.
MSR Merchant Sales Representative.  An individual that sells services through a ISO.  Sometimes called an agent or independent agent.
NACHA National Automated Clearing House Association—Banking association (part of the Federal Reserve system) that governs the ACH system. 
Negative File Computer file of lost or stolen credit cards. Terminal will respond with “pic up” or “PU” asking merchant to return the credit card to their processing bank for reward ($50). 
Node Telecommunications line (phone number) that a terminal dials to access a communications network. 
Non Qual Rate  Usually refers to a hand entered card that does not match the current information in the AVS database.
Pennies Slang for the cost of a transaction that is listed as currency.  The other portion of the cost is listed in percentage.
Personal Identification Number (PIN) For identification purposes, PIN numbers are assigned by banks to cardholders. In this way, ATM transactions and debit card transactions may take place without a cardholder's signature. 
Pinpads Pinpads are small boxes with a 10-key pad on them. Connected to a processing terminal, they are used by cardholders to enter PIN numbers and debit card transactions. 
Point Of Sale (POS) The physical location where a sale is completed. Usually used as "POS terminal" to refer to the credit card terminal (equipment). 
Post Authorization Processing terminology for a previously authorized transaction that is entered into terminal/host memory for capture/deposit.  Voice authorized transactions are entered for payment via this transaction, which may also be known as a “force.” 
Processor Large computer center that processes data from Visa® and MasterCard® sales and settles funds to merchants.  A processor may be owned and operated by a single bank, or may be run by an association of banks. 
Purchase Cards Purchase Cards are credit cards for use by employees of government agencies or corporations. What makes Purchase Cards different from ordinary credit cards is that they may only be used at certain types of merchant locations. 
Qual(ified) Rate Discount rates are tiered. Following is a breakdown of these tiers and examples of corresponding situations. A Qualified Discount Rate is the rate a merchant is charged when all conditions are optimum - that is, when a retail transaction is card-swiped and the merchant batches-out electronically at the end of the day. (Keyed/Internet merchants can still archive Qualified rates by obtaining an AVS response plus order number, plus batching out.) A Mid-Qualified Discount Rate is charged when a retail merchant keys a transaction or does not batch-out at the end of the day. A Non-Qualified Discount Rate is charged when a merchant keys a transaction and does not batch-out at the end of the day. 
Reference Number A number assigned to each transaction in a batch under host capture system.
Refund Policy This is straightforward: how will the merchant - and to what extent will the merchant - guarantee products or services sold to a cardholder? We require a refund policy of each applicant, as a liberal refund/return policy may go a long ways towards reducing the number of charge-backs that a merchant receives.
Registered ISO  An officially recognized member of Visa® and MasterCard® that is allowed to sell the services of credit cards to the merchant community.
Rejects Processing slang for transactions rejected by a processing bank. Transactions may be rejected when the merchant ID is not active at the processing bank but is active at the network, or the network information does not match the bank information.  These transactions must be reentered for the merchant to receive funding. 
Retail See "Business Type." 
Retrieval Request Written request to merchant from card issuing bank/cardholder for a copy of a particular sales draft – proof of sale. 
Routing Number Unique, nine-digit bank identifying number, preceding the account number at the bottom of the check that directs electronic ACH deposits to a particular bank.  It is also known as the ABA routing number. 
Sale Processing slang for a credit card sale—money debited from a cardholder’s account and paid to a merchant. 
Sales Rep A sales entity that acts as a service and sales representative to market TMS’s products and services to merchants. Also known as an "agent"
Settlement Process of transmitting authorized transactions for capture by a host computer in a terminal capture system. It requires a particular procedure on the part of the merchant, so transactions are merely stored in terminal memory until settlement occurs.  Upon settlement, terminal memory is cleared and unique nine-digit “OK” number appears on the terminal screen (terminal only) or is printed on a settlement report (terminal with printer).
Shopping Cart As used on the internet, a shopping cart is analogous to choosing items in a grocery store and placing them in a shopping cart for eventual purchase. Chosen items are grouped into a single purchase (Shopping Cart) so that only one electronic purchase need be completed. 
Standard Industry Code/Merchant Category Code (SIC/MCC Code) The SIC code is a four-digit, numeric identifier of merchant business types. There are thou-sands of these codes, all of them defined by Visa® International in the Visa® USA Merchant Data Manual. 
Statement Fee  Charge for compiling, printing, and mailing out the merchant’s credit card statement monthly.
Swipe This is the action of physically sliding a credit card through a terminal or magnetic stripe reader that "reads" the magnetic strip on the back of all credit and debit cards. The alternate method of getting this information into the terminal is by manually keying it in. The value of swiping cannot be overstated in that it documents the physical presence of the card at the point-of-sale. By definition, all swiped transactions are face-to-face transactions. 
T & E Cards Travel and entertainment cards—American Express® and Carte Blanche cards. 
T & E Merchants Travel and entertainment merchants—car rental agencies, lodging merchants, and restaurants. 
T&E See "Travel and Entertainment." 
Terminal Identification Number (TID) A Terminal Identification Number is used to identify a specific serial-numbered piece of equipment. 
Terminal Memory Memory capacity for an EDC terminal – number of transactions it will hold before batch is full and must be settled. 
Terminal-Based Capture Type of EDC where each transaction is approved and resides in the terminal memory only until settlement (transmission to host computer)–see “settlement.” 
Test Mode Special function that allows the terminal to emulate live operations. Transactions authorized and settled in this mode are completely bogus and the merchant will receive no refunds. 
TMF  Terminated Merchant File.  A merchant is placed on this file maintained by Visa® and MasterCard® for not adhering to their policies and regulations.  Once a merchant is on this file, it is next to impossible to be removed from the list.  It bans a merchant from ever being able to process credit cards.
Trade Reference A trade reference is a business that extends credit or otherwise has a business relationship with the applicant. Put bluntly, we need to know that the applicant pays bills on time and does indeed purchase goods or services from an outside source. A trade reference is re-quested of all applicants. 
Transaction Billing Unbundled rate—Merchant discount rate is billed as a percentage plus a fee for each transaction, which usually includes the communications charges. 
Travel And Entertainment (T&E) Properly used, this phrase refers to American Express® (Amex) and Diners Club® cards where a cardholder normally pays off the card each month. This is to differentiate these programs from pure credit cards. Discover® is commonly lumped-in with the other T&E card types, al-though it is not technically a T&E card type.
Verifone This company manufactures conventional processing terminals. Model names include: Tranz 380, Tranz 330, Tranz 460, the P250 Printer and the PinPad 1000. 
Visa®net Terminal capture communications network owned by Visa®
Void Transaction that deletes a previous sale.  This transaction can only be completed within the same batch as the original sale, and the authorization or approval code is not deleted so the cardholder’s funds are still frozen.  Another transaction may be forced or post-authorized using the same authorization code, or the merchant may contact the center or card-issuing bank to request that the funds be released. 
Volume Processing slang for a merchant’s annual Visa® and MasterCard® processing volume. 
Wats Fee  Refers to a charge to dial a toll free number.  It is not applicable to today’s technology and is used frequently to add profit to a merchant account with low conventional fees.
Wire Transfer Fastest way to transfer funds through the Federal Reserve system (usually same day).  There is almost always a fee attached to this service, from the transferring or receiving bank or sometimes from both.  This is not to be confused with the ACH transfer. 

 

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