Defining Merchant Account Terms

Merchant Account Terms A-C
Merchant Account Terms D-I
Merchant Account Terms K-Q
Merchant Account Terms R-Z

Merchant Account Terms A-C

Acquiring Bank
The provider of your merchant account who processes all of your merchant transactions.

Address Verification Services (AVS)
AVS is a tool for merchants to reduce the risk associated with card not present transactions (mail order, telephone order or Internet). The billing address given by the customer is passed in the transaction and it is checked against the billing address on file at the customer’s card issuing bank.

Annual Fee
A fee charged to merchants, which can be used to lower the discount rate and the overall costs of processing credit transactions.

Application Fee
A fee for processing the paperwork and setting up your merchant account.

Authorization
The process whereby a transaction is approved by an issuing bank, authorized agent, or Visa/MasterCard on behalf of that issuer, before the transaction is completed.

Authorization Code
This code is given by the credit card issuer and authorizes a specific transaction.

Authorize.net
A payment gateway service provider allowing merchants to accept credit card and electronic check payments through their Web sites.

Automated Clearing House (ACH)
A processing organization networked with others to clear and settle electronic debit/credit transactions.

Average Ticket Size (AVT)
The average amount of each transaction the merchant anticipates processing or actually processes over time.

Batch Processing
This occurs when a merchant transmits the “batch” of daily sales for processing. An “open” Batch is one that is not yet “closed.” Batching generally occurs at least once per day and ensures that all of the transactions will be completed.

Card Issuer
The financial institution or company that has provided a card to a cardholder.

Card Present
A transaction evidenced by the action of swiping a card through a terminal or by an imprinted and signed credit card draft.

Charge Back
A charge back is the result of an action taken by a cardholder who disputes a credit card transaction through their credit card issuer.

CVV2
CVV2 is a three digit security code that is printed on the back of most credit cards. The CVV2 program is designed to reduce fraud in the card not present environment by validating that a genuine Visa/MasterCard credit card is being used during a transaction.
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Merchant Account Terms D-I

Discount Rate
A fee taken by the bank as a percentage of all sales transactions.

Doing Business As (DBA)
The DBA is the name the public sees, whether on a physical storefront or on the web. If the merchant has another business, a separate application for both would be needed while setting up merchant accounts.

Electronic Ticket Capture (ETC)
An ETC system reaches out and “grabs” sales ticket information electronically. Buyer information is contained on the magnetic strip on the back of the credit card. The merchant “swipes” the card through a terminal, and the buyer information is “read” by the computer system and merged with the sales information.

Gateway Fees
The fee for the use of a real time processing system (payment gateway).

Guarantor
Guarantor agrees to personally guarantee (make good on) any processing losses Merchant bank incurs as a result of the business relationship with this merchant.

Holdback
A portion of the revenue from a merchant’s credit card transactions, held in reserve by the merchant account provider to cover possible disputed charges, chargeback fees, and other expenses.

Imprinter
The now old fashioned manual, slide type device used to produce an image of the raised (embossed) characters on a credit card, to a transaction slip.

Integrated Point of Sale (IPOS)
This acronym refers to conventional terminals that are “smarter” and more sophisticated in that they may be setup to communicate with like terminals owned by the same merchant even if they are located at different locations and with different merchant numbers.

Internet Merchant Account
A relationship between a retailing company and a Merchant Bank, which allows the retailer to accept credit card payments from customers via the Internet.

Issuing Bank
A member bank that enters into contractual relationships with cardholders for the issuance of cards.
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Merchant Account Terms K-Q

Keyed
A transaction is “keyed” when the information from a credit card is manually typed into a terminal or computer.

Monthly Minimum
The minimum amount of discount fees charged by a Merchant Service Provider in a given month.

Monthly Volume
The maximum dollar volume a merchant is approved to process in credit card transactions within a month’s time.

Non-Qualified
A card not present transaction, which does not include the billing address being passed for an authorization or sale transaction.

Payment Gateway
This is a service which connects the shopping cart with the card processor.

Point of Sale (POS)
The physical location where a sale is completed.

Programming Fee
A fee charged for programming the terminal or card reader.

Qualified
These transactions are card present, a retail transaction that is card swiped and the merchant batches out at the end of the day.

Questionable Merchant
A merchant location at which an excessive number of confirmed fraud transactions have occurred within a specified period.
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Merchant Account Terms R-Z

Refund Policy
Merchant account providers require a written refund policy for each applicant, as a liberal refund/return policy may encourage the reduction in the number of chargebacks that a merchant receives.

Reserve
A practice in which a percentage of the sale amount is retained by the Merchant Bank to protect themselves against catastrophic losses.

Retrieval Request
When the cardholder’s bank request retrieval of information.

Secure Server
All Web servers that handle credit cards should use SSL (secure socket layer) encrypted communications to protect the purchaser’s credit card information.

Setup Fee
An initial fee paid to the merchant service provider to establish an account and for processing and reporting tools.

SSL Certificate
A certificate which is installed on a secure server. It is used to identify the merchant using it and to encrypt the credit card data and customer information.

Statement Fee
A monthly fee that entitles the merchant to customer support, and a statement to be mailed to the merchant.

Swipe
The action of physically sliding a credit card through a terminal or magnetic stripe reader that “reads” the magnetic strip on the back of all credit and debit cards.

Terminal Identification Number (TID)
Unique number assigned to each point of sale terminal that tells the Host which merchant a transaction came from and where an authorization is to be sent.

Trade Reference
A trade reference is a business that extends credit or otherwise has a business relationship with the applicant.

Transaction Fee
A per item fee charged for each transaction between your terminal or software and the processor’s network.

Unique Transactions
A transaction that cannot be categorized as a retail sale or a cash advance, and for which there are special merchant classification codes.
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