Frequently Asked Questions Credit Card Processing | Glacier Payments

Glossary of Terms

Acquirer, Acquiring Bank

A financial institution that is a member of Visa® and/or MasterCard® and maintains the merchant credit card processing relationship. The acquirer receives all transactions from the merchant to be distributed to the issuing banks.

 

Address Verification Service (AVS)

A service supported by Visa, MasterCard, Discover and American Express® that verifies the cardholder's billing address against the one on file with the issuer. AVS is designed to help combat fraud in non-face-to-face transactions.

 

Arbitration

A procedure used by an acquirer on behalf of the merchant to resolve a chargeback-related dispute with a card issuer

 

Association

MasterCard International, Visa U.S.A. or Visa International, which are licensing regulatory agencies for bank card activities.

 

Authorization

The process by which a transaction is approved by the issuer, or by Visa/MasterCard on behalf of the issuer. Permission is given to (or denied) the merchant, via the acquirer, to accept a specific transaction from the cardholder account. An authorization indicates only that the card is valid and that sufficient funds are available on the cardholder's credit limit at the time the request is made.

 

Authorization Request

A merchant's request for an authorization to accept a cardholder's sales transaction. An authorization request can occur electronically via a credit card processing terminal or via telephone as a voice authorization.

 

Average Ticket

The average dollar amount of sale for credit card transactions

 

B2B

Business to Business - refers to one business communicating with or selling to another.

 

Balance Sheet

A financial statement that lists assets, liabilities and net worth as of a specific date.

 

Batch

A group of approved credit card transactions, usually accumulated during one business day.

 

Batch Deposit

The electronic depositing of a batch file transmitted to the transaction processor for settlement.

 

Card Identification Number/Card Identifier (CID)

An American Express and Discover verification process that utilizes a non-embossed three- or four-digit number printed when authorizing credit card transactions where the physical card is not present. On American Express cards, the CID is a four-digit code printed on the front of the card. On Discover cards, the CID is a three-digit code printed next to the card number in the signature panel.

 

Card-Not-Present

A type of card transaction in which the card is not present at the point of sale for the magnetic stripe to be read. These are considered higher risk transactions.

 

Card Present

A type of transaction in which the card is present and is swiped through an electronic device that reads the contents of the magnetic stripe

 

Card Reader

Input device on a card terminal that translates the information stored on the magnetic stripe on the back of a card.

 

Cardholder

The person to whom a payment card is issued, or an additional person authorized by the original cardholder to use the card.

 

Cardholder Account Number

A sequence of numbers assigned specifically to a cardholder account that also identifies the issuer and type of payment card. The cardholder account number is the embossed number imprinted on the payment card.

 

Cardholder-Initiated Chargeback

A chargeback that results when a cardholder contacts the card issuer and refuses to accept a charge appearing on a monthly billing statement. A cardholder has 90 days to initiate a chargeback.

 

Chargeback

A challenge to a transaction initiated by the issuer or cardholder that is returned to the acquirer for resolution.

 

Chargeback Fee

The amount assessed by the acquirer for processing chargebacks.

 

Chargeback Reason Code

A numerical code that identifies the specific reason for a chargeback. MasterCard and Visa each have their own chargeback codes.

 

Commercial Cards

Formal name for the following three types of cards:

  • Corporate Card – usually issued to the employees of a large corporation where the corporation assumes all liability for the card's usage.
  • Purchasing Card – issued to corporations. It allows the corporation numerous parameters to control daily and monthly spending limits, total credit limits and where the card may be used. Many employees may be issued the same card number.
  • Business Card – similar to the Corporate Card, but issued to a business with fewer employees. Each employee is responsible for his or her purchases.

 

DBA

Doing Business As - the name a business uses to operate

 

Decline

A response from the card issuer denying the use of the card for the attempted transaction. If a request for approval is declined, the merchant must ask the cardholder for another form of payment.

 

Demand Deposit Account (DDA)

A checking account.

 

Discount Rate

The fees charged by the card acquirer to the merchant for processing payment card transactions.

 

E-commerce

Electronic Commerce - the sale and purchase of goods or services over the Internet.

 

Expiration Date

The embossed date on a bankcard. After that date, the card becomes invalid and should no longer be accepted.

 

Front-End Network

Network provider responsible for authorizing and capturing transactions and forwarding the information to the back-end network

 

Gateway

Manages the electronic connection between consumers and their financial institutions and transmits data.

 

Gift Card

A reusable, stored-value card that enables merchants to have an electronic alternative to paper gift certificates.

 

Hard Decline

A declined authorization attempt resulting from a lost or stolen card, pick-up card, etc. A Code 10 call should be made by the merchant to the authorization center.

 

Host Capture System (HCS)

A transaction is transmitted with an authorization request to the host computer at the front end, the information is captured at the host, then sent back to the POS device. Since the information is already stored at the host, it can be settled without the merchant performing a settlement function.

 

Interac

National debit card network in Canada.

 

Interchange

The exchange of transaction data between acquiring and issuing institutions.

 

Interchange Fees

Fees paid by the acquirer to the issuer to compensate for transaction-related costs. MasterCard and Visa establish interchange fee rates.

 

Internet Service Provider (ISP)

An organization that provides access to the Internet.

 

Issuer, Issuing Bank

The financial institution and member of Visa or MasterCard that holds contractual agreements with, and issues cards to, cardholders.

 

Magnetic Stripe

A panel located on the back of a payment card containing magnetically encoded cardholder account information.

 

Magnetic Stripe Reader

A point-of-sale device that reads the encoded information from the magnetic stripe when the card is passed through the reader. Readers may read Track Two, which contains the cardholder account number and expiration date, or both Track Two and Track One, which contains the cardholder name.

 

Member

A financial institution that is a member of Visa and/or MasterCard. A member is licensed to issue cards to cardholders (issuer) and/or accepts merchant drafts (acquirer).

 

Merchant

Store owner or seller of products.

 

Merchant Agreement

The written contract between the merchant and acquirer that details their respective rights, responsibilities and warranties.

 

Merchant Category Code (MCC)

A universal four-digit merchant classification code that identifies the merchant by type of processing, authorization and settlement. Similar to a Standard Industrial Classification (SIC), but more defined.

 

Merchant Discount

The fee an acquiring member charges the merchant to cover the costs of providing deposit credit and handling credit card sales transactions. See Discount Rate.

 

Merchant Identification (MID) Number

The identification number assigned to a merchant by the acquirer.

 

Pick Up Card

An issuer's electronic response to an authorization request, asking that the card be retained by the merchant and returned to the issuer.

 

Point-of-Purchase Conversion (POP)

A one-time ACH debit from a consumer's bank account for in-person purchases made at the point-of-sale; upon receipt of a check and signed authorization.

 

Point-of-Sale (POS)

The location at which a payment card transaction occurs, usually by way of a device such as a credit card terminal or cash register.

 

Point-of-Sale Terminal (POS Terminal)

A terminal at the point of sale, connected via telecommunication lines to a central computer. Authorization, recording and transmission of electronic transactions are performed through the terminal.

 

Processor

A company responsible for processing interchange transactions - operated by an acquirer or acting on the acquirer's behalf.

 

Reason Code

A two-digit code identifying the reason a chargeback was initiated.

 

Recurring Transaction

A transaction charged to a cardholder's account (with prior permission) on a periodic basis for recurring goods and services, i.e., health club memberships.

 

Referral

The message received from an issuing bank when an attempt for authorization requires a call to the Voice Authorization Center.

 

Refund

A refund occurs when the merchant rebates all, or a portion, of an original transaction amount to the cardholder. Refunds are made to the same card that was used for the original transaction. Similar to a Credit.

 

Retrieval Request

A request by the issuer to the acquirer for a copy of the original sales ticket.

 

Reversal

When an acquirer successfully represents a chargeback to the issuer, the chargeback is reversed and the funds are returned to the merchant.

 

Retail Transaction

A face-to-face transaction in which the cardholder presents a card to the merchant to pay for goods or services.

 

Representment

An attempt to reverse a chargeback initiated by a merchant or acquirer to the issuing bank that presented the chargeback, backed by supporting documentation.

 

Settlement

The process in which a merchant transmits batches of transactions to the acquirer. In interchange, it is the process by which acquirers and issuers exchange financial data resulting from sales transactions, cash advances, merchandise credits, etc.

 

Soft Decline

A declined authorization attempt that does not necessarily mean the card is bad (i.e., call referral, issuer unavailable or cardholder over limit). These transactions may be resubmitted a day or two later in an attempt to obtain a valid authorization.

 

Terminal Capture System (TCS)

The process in which transactions are stored in the terminal until the batch is settled to the host. Most often used in restaurant applications where tip adjustments need to be made.

 

Terminal Identification Number (TID)

Number identifying a merchant to the front-end network.

 

Transaction

Any action between a cardholder and a merchant or member that results in activity on the account, such as a purchase, cash advance or credit.

 

Transaction Date

The actual date on which a transaction occurs.

 

Transaction Fee

The amount a merchant pays per transaction for processing.