Merchant Account & Credit Card Processing Glossary
Easy to understand definitions of merchant account terms.
This page is currently under development, so definitions are still being added often.
A
Acquiring Bank
The aqcuiring bank is the bank that processes the actual credit card transactions. Acquiring banks usually do not provide direct service to the merchant. Instead, they rely on a network of approved independent service providers to sell and manage their merchant accounts. Acquiring banks collect a set fee for processing and play a minimal role in the overall cost of the transaction fee.
Address Verification Service (AVS)
AVS is a tool for merchants to reduce the risk and cost of keyed transactions when the credit or debit card is not present. The merchant collects the billing address of the card holder and it is verified when the transaction is submitted. This is most often used in mail order, telephone order and e-commerce transactions, and can also be used through a virtual terminal in face-to-face transactions.
Average Ticket Size (AVT)
Often referred to as just “Average Ticket,” this the average size of a sale including any and all items included in the sale. This is often a difficult number for merchants to calculate because they simply do not track it. However, the card service companies do not need an exact number and a estimation will suffice. Card companies need this number to properly determine transaction limits and identify the occurrence of potential fraud.
B
Basis Points
Basis points are the numbers to the right of the decimal point. For example, %0.34 could also be referred to as 34 basis points.
Batch Processing
A batch is the sum total of all transactions that occurred in a set time frame, usually one day. Typically, at the end of the day a merchant will settle her batch, or “batch out.” The batch will be sent to the bank for processing and the batch total will be the amount deposited into the merchant’s checking account. It allows for numerous transactions to be grouped together for one deposit.
C
Card Present
“Card Present” means that the physical credit card is present at the merchants location during the actual transaction. Typically, this is calculated automatically by swiping the credit card through a card reader like a credit card terminal or USB slider, but can also be done with a card imprinter where in a carbon copy of the card is captured on a sales ticket.
Chargeback
When a customer disputes a charge the credit card company will automatically charge the transaction back to the merchant, and this is called a “chargeback.” The amount of the charge will be debited from the merchants account and the merchant will incur a chargeback fee (usually $25). Merchants can contest a chargeback by submitting proof in the form of signed receipts or invoices proving that the customer approved of the transaction.
Credit Card Terminal
A credit card terminal (aka: EDC Terminal) is an electronic device that enables merchants to accept credit cards at the point of sale. Terminals are available in both wired and mobile wireless options. Additionally, a pin-pad can be connected in order to accept pin based debit card transactions.
CVV2
Card Verification Codes (also known as “Card Verification Value Codes”) are three to four digit codes that are printed on the front, back, or signature line of card as an added security feature designed to prevent fraud. Below are some of the different code currently in use:
- MasterCard, Visa, Diners Club, Discover, and JCB credit and debit cards have a three diget code called the CVC2 (card validation code), CVV2 (card verification value), CVV, and CID (card identification number). The numbers are printed at the end of the signature panel on the right hand side and are not embossed.
- American Express prints a four digit code on the front side of the card just about the account number and is referred to as the CID code (Unique Card Code). It is also not embossed.
Discount Rate
The discount rate is simply the percentage fee that the merchant pays for charging a credit card. For instance, if the discount rate is 1.72% the merchant will pay a $1.72 fee for charging a $100 transaction. The discount rate is usually charged along with a “transaction fee” of a few cents (i.e. $0.25 per transaction). The merchant fee is usually promoted as a combination of the discount rate and transaction fee (i.e. 1.72% + $0.25 per transaction).
EDC Terminal
See: Credit Card Terminal
Gateway
See: Payment Gateway
Holdback
A Holdback is a portion for money held by the credit card company from transactions processed through the merchants account. Card companies do this if a new business has little (or poor) credit history, or if the company engages in higher risk transactions. Holdbacks tend to be 5%-10% of the charge and held a minimum of 180 days. The funds are used to cover costs of excessive chargebacks or fraudulent activity by the merchant. If the funds are not needed by the end of the holdback period, they are released to the merchant.
Imprinter
(Coming Soon)
Interchange
(Coming Soon)
Magnetic Stripe
(Coming Soon)
Merchant Account Provider
(Coming Soon)
Merchant Account
(Coming Soon)
Merchant Identification Number (MID)
(Coming Soon)
Mid-Qualified Rate
(Coming Soon)
Monthly Volume (MV):
(Coming Soon)
Non-Qualified Rate
(Coming Soon)
Payment Gateway
Also simply referred to as just a “gateway,” this is a program that allows businesses to charge credit card through their websites or virtual terminal. Several companies such as Authorize.net and PayJunction.com specialize in developing payment gateways that can be easily merged with just about any merchant account and any need. Technical savvy is not always needed to implement a gateway, however the more complex the need the more difficult it can be.
Payment Gateway Provider
(Coming Soon)
Payment Processor
(Coming Soon)
PCI Compliance
(Coming Soon)
Pin Pad
(Coming Soon)
Point of Sale (POS) Terminal
(Coming Soon)
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