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Merchant Account Glossary
A | B | C | D | E | F | H | I | M | P | R | S | T | V A - top of page Address Verification Service (AVS) A fraud-prevention mechanism that verifies that the customer address matches the credit card. This ensures that merchandise is shipped to a legitimate customer. Automatic Clearing House (ACH) A national electronic network that transfers funds between banking institutions on behalf of the merchants and their customers. B - top of page Batch A collection of credit card transactions that are saved for submission at the end of the business day. C - top of page Capture The submission of a credit card transaction for processing and settlement. Card Validation Code 2 (CVC2) & Card Verification Value 2 (CVV2) Fraud prevention mechanisms initiated by MasterCard and Visa to protect merchants. These three digit codes are printed on the back of the card and used to help validate that the cardholder has the card in his/her possession. Chargeback This is a fee that is charged to a merchant account when the cardholder disputes a charge that is found. D - top of page Debit Card A card that is similar to a credit card, but the funds are immediately transferred from the customer’s bank account. Discount Rate A percentage fee paid to the merchant account provider for handling the transaction. E - top of page E-Commerce The process of economic transactions such as buying and selling over the internet. Electronic Data Interchange (EDI) A global computer network used to handle financial transactions between banks and other institutions. Electronic Funds Transfer (EFT) Any transfer of funds between accounts using an electronic terminal, telephone, computer, or magnetic tape and that does not use checks or other paper. Encryption The process of scrambling an electronic message so that a key is needed to unscramble and read the message. F - top of page Factoring In e-commerce, this term is often applied to companies that offer to process credit card transactions through their own merchant account rather than having the merchant purchase their own, in exchange for a percentage of the transaction. Factoring of credit card debt is illegal. H - top of page Holdback A portion of the revenue that is held in reserve by the merchant account provider to cover any possible chargeback fees and disputed charges. Holdbacks are returned to the merchant after a predetermined period of time. I - top of page Independent Sales Organization (ISO) An organization that offers to process credit card transactions in exchange for transaction fees and/or a percentage of the sales. Interchange Fee A fee paid by an acquirer to an issuer for transactions entered into interchange. The interchange fee is a percentage applied, according to Visa/MasterCard regulations, to the dollar value of each transaction. Issuing Bank The bank that maintains the consumer's credit card account and must pay out to the merchant's account in a credit card purchase. The issuing bank then bills the customer for the debt. M - top of page Mail Order/Telephone Order (MOTO) Refers to businesses that conduct sales via the telephone, fax, or mail. Merchant Account A bank account established by a merchant to receive the proceeds of credit card purchases. By establishing a merchant account, the merchant bank agrees to pay the merchant for valid credit card purchases in exchange for the right to collect on the debt owed by the consumer. Merchant Bank A bank that holds a merchant account. After a consumer buys a product using a credit card, the merchant bank places funds into a merchant account in exchange for the right to collect on the debt owed by a consumer. See also merchant account provider. Merchant Account Provider (MAP) A bank or other institution that hosts merchant accounts and processes online credit card transactions. The term is also often used broadly to include any credit card processing service, including ISOs. Merchant Service Provider (MSP) A bank, ISO, or other firm that provides services for processing financial transactions, usually credit card sales. Many MSPs provide merchant accounts, while others require their clients to establish merchant accounts on their own. Micropayments Very small charges processed through the e-commerce systems. Micropayment systems are not widely available. Monthly Minimum The minimum amount in fees and percentages charged by a merchant services provider in a given month. If account activity does not generate the monthly minimum, the account holder must make up the difference. P - top of page Personal Identification Number (PIN) The cardholder’s unique identification number that is used in making debit card transactions. Point of Sale (POS) Refers to anything that is used at the merchant’s point of sale. Point of Sale Terminal Electronic device used by retail businesses to process credit card transactions. If the credit card is available, the merchant can swipe the card through the terminal. R - top of page Recurring Fees Regular, usually monthly, charges for maintaining a merchant account. Recurring fees include the discount rate, transaction fees, statement fee, and monthly minimum. Real-time Processing The processing of a credit card transaction immediately after the purchase has been made. S - top of page Secure Sockets Layer (SSL) A system for encrypting data sent over the Internet, including e-commerce transactions and passwords. With SSL, client and server computers exchange public keys, allowing them to encode and decode their communication. Setup Fees Fees charged by a merchant services provider for establishing a merchant account. These fees include application fees, equipment purchase, and software licensing fees. Shopping Cart Program A software package that runs as part of a Web site to collect and record purchasing decisions by a visitor. Shopping cart programs are stored on Web servers. Smart Card A plastic card containing a computer chip that can store electronic "money." Unlike a credit card, a smart card can only spend out the dollar amount its owner has already put into the card account. It's similar in function to a prepaid calling card but is available for all purchases. T - top of page Transaction Fee A charge for each credit card transaction, collected by the merchant account provider. Turn-Key Application A solution that provides an individual with a fully e-commerce enabled website. Transaction Any action between a merchant and a cardholder that results in activity on the account. V - top of page Virtual Terminal A secure website that you can log into and manually enter transactions through an online form. Voice Authorization Authorization that is required when an issuing bank sends a “Please Call” message to the merchant. |
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