Glossary of Payment Terms
ACH
Automated Clearing House - a process whereby funds are directly transferred through the Federal Reserve system to a specified checking account
Acquiring Bank
The bank who acquires the credit drafts from a merchant at a discount
AID
Acquirers Interchange Discount - similar to TIRF (see TIRF) but through MasterCard
Annual Fee
This fee is hard to spot because it will only appear once a year. For low volume merchants, this fee can be used to lower your percentage rate.
ARU
Audio Response Unit
Authorization Code
A code received, either verbally or electronically, from an Authorization center verifying that a credit card is not listed on a warning bulletin and has the available open-to-buy for the transaction submitted
Average Ticket
The most important element driving price is your average ticket. Your average ticket history will need to be verified if you require a customized bundled pricing structure. For example: If you are a restaurant, your average credit card transaction or ticket would be two meals, drinks, tax and tip, not just the price of an entree.
Bankcard
The term refers to MasterCard and Visa because banks issue them. Cards issued by American Express, Discover (Novus), Diners Club, and JCB have their own rates and rules. Merchants choose to accept these card types separately from their decision to accept bankcards.
Banknet
International's authorization/settlement network
Batch
A grouping of credit card transactions as captured by a merchant - usually an entire day's activity
Basis Point (BP)
1% is 100 Basis Points. A Basis Point is used to express a fraction of a percent. 50 BPs is a half a percent. When working with merchants processing several hundreds of thousands of dollars on credit cards, just a few BPs can mean big annual savings in processing fees.
Bill on Sales
Gross sales before credit/returns or Net sales after credit/returns. With Net sales billing, qualified discount paid is returned when you issue a credit.
Bundled vs. Unbundled rates
Bundled rates mean that transaction cost and monthly statement cost are expressed as basis points and added to the discount rate. Unbundled rates list each cost separately.
Capture
To read and maintain applicable information as to a sale for use in the settlement of funds for the transaction
Chargeback
A transaction returned from an issuing bank to a merchant and charged to his account
Check Card & Debit Card
This can be confusing because a check card can be used like a debit card but a pure debit card can't be used like a check card. A check card has a MasterCard or Visa logo on it. A pure debit card does not. From the consumer perspective, these two products do the same thing - use available funds in their checking account. The method by which the merchant accepts and processes the card however does carry differences. A check card can be swiped just as a credit card would and be processed over the credit card networks; or the transaction could be handled as a debit card using a PIN pad to capture the cardholders PIN (personal identification number) and process the transaction over the debit networks. There are also cost differences between the two processing methods for the merchant in addition to the necessary equipment.
CPS
Certified Payment Systems.
CPU
Central Processing Unit
DBA
Doing Business As - common name of a company
DDA
Demand Deposit Account - a checking account where funds are payable upon demand
Discount
A fee assessed to a merchant for services and payment of credit drafts
Down Time
The period of time during which a computer or authorization terminal is not functioning
ECR
Electronic Cash Register
EFT
Electronic Funds Transfer
Equipment
Your point of sale system plays an important role in functionality, transaction capacity, and transaction qualification. Categories include stand-alone terminal equipment from makers like Verifone, Ingenico and others, and cash register systems and point of sale systems.
Embossed
The raised numbering/lettering on a credit card used to make an imprint on a sales draft
Float
The period of time between the purchase and the billing for goods or services
Floor Limit
The transaction value above which a merchant must obtain an authorization
Front-end Networks
Processing companies that operate authorization networks
Grace Period
The period of time between the billing for goods or services and the time at which payment is due or interest is assessed
Host
A mainframe computer that acts identically to an IBM-PC
IBM-PC/Clone
A personal computer that acts identically to an IBM-PC
Industry
Also known as the Merchant Category Code, is important because, not only do the rules and regulations differ by industry, but so does card association Interchange pricing.
Interchange
A fee assessed by the issuing bank to the acquiring bank to cover the costs of float time before recovering their funds, credit and fraud losses incurred due to the float of funds and the cost of processing and posting the credit transaction to a cardholder account
ISO
Independent Sales/Service Organization (VISA)
Issuing Bank
The bank who issues a bank card
LAN
Local Area Network
Magnetic Stripe
The magnetic tape on the back of a credit card containing encoded information regarding the cardholder
Merchant
Any person, firm or corporation which has contracted with a Visa or MasterCard member bank to originate paper through the acceptance of cards and displays the Visa or MasterCard decal
Mainframe
Main computer system or Central Processing Unit (CPU)
MERIT
MasterCard Electronically Reduced Interchange (similar to Visa's TMP)
MasterCard/Visa Transaction Fee
Card association interchange has an item fee as does the network that handles the authorization and settlement communication. A bundled rate without an item fee incorporates this cost into the percentage rate. Transaction cost can also appear as an authorization fee, a per item fee, or a communication fee.
Monthly Minimum Billing
If your discount billing at the end of the month doesn't meet this minimum, then you will be charged the difference between your actual discount and the minimum. If your billing exceeds the minimum, then this fee doesn't come into play.
Monthly Statement
Also sometimes termed as a monthly service fee, it represents the small fee that is required to provide account maintenance, statement mailings, ACH transfers, 24-hour help desk, etc.
MSP
Member Service Provider
Non-Qualified Billing
This is a complex part of pricing based on downgrade pricing for transactions like "card-not-present" or when the magnetic stripe contents are not fully read. Other Interchange categories for business, commercial, international card types as well as those not settled in the allotted time. There are several pricing structures to consider: 1. Bill Back Interchange will pass through the exact Interchange increase imposed by the card association. 2. One Rate pricing with no increases for non-qualified pricing, but instead all costs are bundled into your qualified rate. 3. Tiered pricing in which you have a mid-qualified rate and a non-qualified rate designed to simplify billing.
Open-to-buy
The unused credit available on a credit card
PC
Personal Computer
POS
Point of Sale refers to the location where goods or devices are purchased
Revolving Account
A credit account in which one pays a minimum due, usually $10, or 1/365 of the balance, monthly and incurs interest on the remaining revolved balance
Sales Draft
Paper evidencing a purchase of goods or services by a cardholder from a merchant through the use of a credit card
Settlement
The process of settling funds between an issuing bank and an acquiring bank by Visa/MasterCard for funds due on submitted bank card sales
Swipe
The action of sliding a credit card through the cardreader portion of an authorization terminal
T&E
Travel and Entertainment
TIRF
Terminal Issuers Reimbursement Fee - a reduced Interchange fee for authorizing a credit card transaction electronically through Visa
TMP
Technology Migration Program - a reduced Interchange fee from Visa for the use of advanced authorization systems
Voice Grade
Common telephone lines
Voucher
A bank draft or credit slip that is imprinted with a credit card number and expiration date and signed by a customer as proof of purchase
Warning Bulletin
A bulletin issued by Visa and MasterCard combined that contains listings of invalid bank cards