Industry Terms and Definitions

ACH See automated clearinghouse (ACH).

Acquirer The merchant's bank or authorized service provider who process credit card transactions on its behalf.

Address Verification System (AVS) A fraud-reduction service that allows the merchant to verify a cardholder's billing address prior to completing a mail or phone transaction.

Agent bank               A bank which, by agreement, participates in another bank's card program, usually by turning over its applicants for bank cards to the bank administering the bank card program and by acting as a depository for the merchants.

Audio Response Unit authorization Occurs when the merchant calls an appropriate authorization center, and keys in "exact" cardholder and purchase information through the telephone keypad. The authorization center stores and records the specific data key entered, and an electronic voice provides the merchant with an authorization number that the merchant must write on the sales draft. If more than two errors are key entered, the ARU system rolls over to a live operator to obtain the information. The system also rolls over to live operators for referrals.

Authorization             Verification of a bank card transaction by a card-issuing bank, other institution, or an approved independent service provider. Authorization is initiated by accessing (by voice or electronic terminal, as appropriate) the bank's designated authorization center(s). See also magnetic swipe authorization, manual entry authorization, voice authorization.

Authorization Code A code assigned by a card-issuing bank (or other approved service provider) for a merchant sale or cash advance that has received approval.

Automated Clearinghouse (ACH) A group of U.S. processing institutions that have networked together to exchange (clear and settle) electronic debit! credit (EDC) transactions. All EDC merchants receive credit for their deposits via ACH and discount fees are debited from all merchants via ACH.

Average Ticket          The average dollar amount of sales drafts processed within a given time period. It is calculated by dividing the total dollar amount of sales drafts processed by the total number of sales drafts processed.

AVS                         See Address Verification System (AVS).

Bank Card                A financial transaction card issued by a bank or other financial institution; examples are Visa and MasterCard credit cards and debit cards.

Bank Card Transaction Transactions between the merchant and a cardholder for the sale or rental of goods or provision of services as evidenced by a sales draft or credit voucher; or, where permitted by agreement between the bank and merchant, by an electronic equivalent of a draft or credit voucher, which the merchant presents to the bank for processing through the interchange system.

Bank Identification Number (BIN) A four- to six-digit identification number assigned to both cardholder and merchant banks.

BIN                          See bank identification number (BIN).

Cancellation Code A code that a lodging or car rental merchant gives to a cardholder. The cancellation code confirms that the cardholder did, indeed, cancel a reservation.

Cardholder                The person or entity whose name is embossed on a card or whose name appears on a bankcard as an authorized user.

Card Imprint              See imprint, imprinter.

Cash Advance           A cash loan obtained by a cardholder through presentation of his/her credit card at a bank office or automated teller machine.

Chargeback              Also known as a debit memo, it is a reversal of a sales transaction in which the bank debits the previous sale amount from the merchant's deposit account. When a chargeback occurs, the bank is seeking to recover the value of a disputed transaction.

Code 10,                   Code 10 authorization A telephone call that allows the merchant to inform the authorization center of a possible fraudulent transaction without alerting the cardholder. If the charge is allowed, the authorization code is the Code 10 authorization.

Credit Card               A plastic card used to purchase goods and services, or to obtain cash advances. Each credit card has a preestablished limit, which affords the consumer a personal line of credit for shopping. The account balance accrues as the consumer makes purchases or obtains cash advances. Generally, if the consumer pays the entire bill at the end of the month, no interest charges are assessed to the consumer. If, however, the balance is not paid by the consumer, interest is charged at a predetermined annual percentage rate (APR). The APR is set by the bank issuing the card. The APR rate varies greatly from bank to bank.

Credit Slip                 Document showing the return of merchandise by a cardholder to a merchant. Also known as a credit voucher.

Credit Voucher   A record of a return or credit transaction presented to the bank by the merchant for processing through the interchange system for crediting to the cardholder's account and debiting to the deposit account.

CVV2                       A three-digit value providing a cryptographic check value of their information embossed on the card. The CVV2 value immediately follows the account number printed in the signature panel on the back of Visa's cards.

DBA                         See doing business as (DBA). DDA See demand deposit account (DDA). debit memo See chargeback.

Demand Deposit Account (DDA) A commercial checking account, which is used as the depository accounts for a merchant's credit card deposit.

Deposit Account        A business checking account designated by the merchant through which all bank card transactions and adjustments will be processed by the bank.

Discount                   The fee paid by a merchant to their merchant bank for the processing of their credit card transactions. Discount is calculated by multiplying a preestablished discount rate by the volume of credit card transactions.

Doing Business As (DBA) The trading name of a merchant, which appears on business signs, customer literature, etc.

Downline Load           Loading of data (usually a program) from an acquirer's computer system to a merchant's credit card terminal.

Draft                         See sales draft.

EDC                         See electronic draft capture (EDC). See electronic funds transfer (EFT).

Electronic Draft Capture (EDC) A method of processing bankcard transactions electronically via a point-of-sale (POS) terminal or other compatible equipment. The transaction information (cardholder account number, transaction amount, transaction date, and authorization number) is captured electronically and housed in the POS terminal until the terminal is settled. During the settlement process, the electronic sales drafts and credits are transmitted to Interchange and on to the cardholders' banks to be posted.

Electronic Funds Transfer (EFT) An electronic system designed to eliminate the paper normally associated with funds movement.

Factoring                  A merchant's presentation to the bank of what would otherwise be a sales draft but is not, because (1) it did not originate with the merchant, (2) it is not reflective of a transaction (which, by definition can only be between the merchant and a cardholder), or both. This includes, but is not limited to, the merchant's processing, debiting, negotiating, or obtaining payment pursuant to the card acceptance agreement in connection with a specified transaction if the merchant did not furnish, or agree to furnish at some later time, the goods or services specified in the transaction.

Floor Limit                A specific dollar limit used to determine which Visa card transactions you must authorize. If your business has a floor limit $1000, for example, you must get authorization for any transaction over $1000. Note that all airline, telephone, and mail order transactions must be authorized, even if the amount is under your floor limit.

Imprint                      The physical impression you make from a customer's card and that appears on the draft. This proves that the card was present when the sale was made. An imprint can be created electronically if you use a magnetic-stripe-reading terminal that includes the correct point-of-sale entry code.

Imprinter                   A device supplied to merchants who have a merchant bankcard account to produce an image of the embossed characters of the bankcard and the plate with embossed merchant information on all copies of sales drafts and credit slips.

Interchange               The amount paid by the merchant bank (acquirer) to the cardholder rate institution (issuer) on each sales transaction. Interchange rates vary according to the type of merchant (retail, travel and entertainment, mail order) and the method of processing (paper, EDC).

Interchange System See MasterCard/Visa Interchange System.

Issuer                       A bank that issues bankcards to consumers. Also known as a cardholder bank or issuing bank.

Laundering                See factoring

Private Label             A proprietary card meant to be used only in the stores of a specific merchant.

Recurring Payments A series of transactions for which sales drafts will be processed by the merchant on an ongoing basis, unless and until cancelled by the cardholder.

Retrieval Request      A request initiated by the cardholder/card issuing institution requiring the merchant to reply with legible copy of the cardholder signed transaction receipt with in a specified time frame.

Sales Draft                A paper or electronic record of a sale, rental, or service transaction that the merchant presents to the bank for processing through the Interchange system or otherwise, so that the cardholder's card account can be debited and the deposit account credited.

Settlement                The process by which merchant and cardholder banks exchange data and value resulting from sales transactions.

Split Sale                  Preparation of two or more sales drafts for a single transaction on one card account in order to avoid authorization procedures and/or to circumvent the applicable floor limit.

Summary Card          See merchant identification card.

Terminal                   A device placed at the merchant location to electronically process credit card transactions. Attached to a telephone line at the merchant location, the terminal is capable of authorizing, capturing, and settling credit card transactions.

Transaction               See bank card transaction.

Terminal                   A device placed at the merchant location to electronically process credit card transactions. Attached to a telephone line at the merchant location, the terminal is capable of authorizing, capturing, and settling credit card transactions.

Transaction               Receipt See sales draft.

Voice Authorization   Occurs when the merchant calls the appropriate authorization vendor and provides the operator with cardholder and purchase information over the phone. The authorization center operator records the specific data and provides the merchant with an authorization number that the merchant must write on the sales draft. The authorization operator may direct the merchant to contact the issuing bank or decline the authorization.