Acquiring Processor - The
processor provides credit card processing, billing, reporting
and settlement and operational services to acquiring and
issuing banks. Many financial institutions don't do their
own bankcard processing because it's more cost-effective
to let someone like First Data invest in the equipment
and people and do it for them.
Address Verification Service (AVS) - Since 1996 MasterCard
/ Visa has made available a fraud prevention measure available
for taking credit card orders over the phone, mail, fax,
or on the internet. The credit card processing company
checks the billing address the customer tells you with
the billing address on file with the bank that issued
the card. If the addresses match, then the card is approved
at your basic discount rate. If the addresses don't match,
then typically the card will still be approved but a code
in your reporting will tell you that AVS was not a match.
You should know what this rate is whether you are "keying"
an order into a terminal, accepting an order over the
phone, or receiving an order over the internet. Important:
If your credit card terminal, PC based software, or Internet
based software is NOT prompting your customers to give
you their "billing address" then you may be paying what
you think is a good rate but in fact all of your transactions
are much higher because AVS is not even attempted.
Authorization - The act of ensuring that the cardholder
has adequate funds available against their line of credit.
A positive authorization (when an authorization code is
generated) results in those funds being set aside. The
cardholder's available credit limit is reduced by the
authorized amount. You are typically charged an authorization
fee (transaction fee) even if you void the transaction
before you batch out.
Batch - The accumulation of captured transactions
waiting to be settled. Multiple batches may be settled
throughout the day. Make sure you know if your sales are
automatically batched out at the end of the day or if
you need to manually batch out. Do not find yourself waiting
for your money to hit your bank account because you never
batched out your terminal or software.
Capture - Converting the authorization amount into
a billable transaction record within a Batch. Transactions
cannot be captured unless previously authorized, and authorizations
cannot be captured until the goods or services have been
shipped or transmitted to the consumer.
Cardholder - Any person who opens a credit card
account and makes purchases using a credit card.
Credit Deposit - The value of a merchant's credit
card purchases that are credited to its bank account after
the acquirer buys the merchant's sales slips. The deposit
is credited. It is not funded until the acquirer gets
the monetary value from the issuer during settlement.
Discount Rate - The fee a merchant pays its acquiring
bank/merchant bank for the privilege to deposit the value
of each day's credit purchases. The fee is usually a small
percentage of the purchase value.
Interchange - The exchange of information, transaction
data and money among banks. Interchange systems are managed
by Visa and MasterCard associations and are very standardized
so banks and merchants worldwide can use them.
Interchange Fee - A fee paid by the acquiring bank/merchant
bank to the issuing bank. The fee compensates the issuer
for the time after settlement with the acquiring bank/merchant
bank and before it recoups the settlement value from the
cardholder. Interchange fees are roughly 1.4% and ten
cents per transaction for a typical swiped business and
1.8% and ten cents per transaction for a Mail Order /
Telephone Order (MOTO or internet business. This is the
money that for the most part goes to the bank that issued
the credit card. You could say this is the Merchant Account
Provider's cost of sales.
Issuer - The bank that extends credit to customers
through bankcard accounts. The bank issues the credit
card and receives the cardholder's payment at the end
of the billing period. Also call the issuing bank or the
Merchant Bank - The bank that does business with
merchants who accept credit cards. A merchant has an account
with this bank and each day deposits the value of the
day's credit card sales. Acquiring Processors through
the Merchant Account Provider buy (acquire) the merchant's
sales slips and credit the tickets' value to the merchant's
Settlement - As the sales transaction value moves
from the merchant to the acquiring bank, to the issuer,
each party buys and sells the sales ticket. Settlement
is what occurs when the acquiring bank and the issuer
exchange data or funds during that function.
Ticket - Another name for the sales slip or its
monetary value that results when a credit card purchase
Transaction - One example of transaction is the
process that takes place when a cardholder makes a purchase
with a credit card.
(For a complete listing of all the terms relevant to the
Merchant Account Industry including internet terms go
to the Glossary of this Guide.)