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![*]()
Glossary of Credit Card Processing Terms
![*]() Lets look at various common credit card processing
terms. As a merchant offering credit
card payments, it's imperative that you understand
the lingo associated with the process.
Acquirer or Acquiring Bank - Also known as Merchant
Bank. The financial institution or organization that conducts
business with merchants who wish to accept credit cards
for payment of goods or services. The Bank processes the
merchant's transactions and credits payment to the
merchant account.
Authentication - Identification of individuals
and businesses through the use of digital certificates.
Authorization - The process, where it is verified
if the credit card has sufficient funds available to cover
the amount of transaction. Authorizations can be performed
via telephone, POS terminal, or via the Internet.
AVS - Address Verification System - The AVS system
compares the statement billing address on file with the
credit card issuer with a customer's billing address provided
with each order. The process helps in establishing the
legitimacy of the cardholder and deters fraud.
Account Number - A unique number assigned to the
cardholder that serves as a unique identity.
Batch- Also known as Batch Settlement File. A group
of credit card transactions that have to be settled with
the merchants acquiring financial institution. Batches
can be submitted for processing throughout the day or
continue to grow until their value is sufficiently large
enough and worthwhile to process.
Card Not Present - A transaction where the card
is not present like in case of mail order or telephone
order, it is termed as Card not present transaction.
Card Present Account - A transaction where the
consumer and the card are required to be present at the
same location. For a card present transaction, the credit
card is typically swiped through a card reader (or physical
point-of-sale terminal), and the consumer signs an authorization
slip, or sales receipt.
Cardholder - The person who holds debit credit
or charge card issued by issuer bank with an account established.
A cardholder is eligible to make a payment by card.
Corporate Card - A Card used for covering business
related expenses such as travel and entertainment.
Chargeback - Chargeback occurs when the cardholder
is not satisfied with the quality of product/service or
on the occurrence of fraud. In this case, the credit card
holder requests to debit the amount from Merchant's deposit
account.
Charge back Fees - Are the fees levied in the event
of charge back.
Credit Cards - These are the Cards issued by Issuing
Banks to customers with which to charge for the purchase
of products and services. The first general use credit
card was introduced in 1958, from the Bank of America;
called BankAmericard which was later renamed the VISA
card. Meanwhile, the MasterCharge card appeared later
renamed the MasterCard.
Debit Card - Card, which deducts the amount of
purchase directly from holders checking or savings account
to pay the merchant.
Discount Rate - Rates set by a Merchant Bank as
a privilege fee for using their account services. This
rate is arrived by taking into consideration the charges
of number of factors, including charge volumes, risk models,
size of the business, methods of submission, bank policies,
etc.
Encryption - The process where data is scrambled
and unscrambled using mathematical equation when sent
over the Internet. Data encryption ensures that only the
intended recipient has the ability to read and understand
the information.
Gateway - An application that accepts order transactions
from merchants and sends them.
Interchange - A system managed by Master and Visa
to bring global standard in exchanging data and money
between banks.
Issuer - Organizations or financial institutions
like banks, building societies that extend credit to their
customers (Cardholders) through payment cards, such as
credit or debit cards.
Late Settlement - Fees paid to MasterCard or VISA
by a merchant for late processing of settlement.
Merchant - Any business operation that accepts
payment cards for goods or services.
Merchant Account - The bank account the merchant
establishes with the Merchant Bank (aka as the Acquirer
Bank) into which the amounts of the credit card charges
made at the Merchants business are deposited.
Third Party Processor - Companies that enter into
third party agreements with Issuer and acquirer banks
to process settlements.
Transaction - Refers to the purchase or transfer
of money through credit card. Transactions are either
offline or online in nature, Offline transactions are
those that happen at physical establishments.
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