Common Credit Card Processing Terms
The world of payment processing has a lingo that’s all its own. Anyone involved in the process — including merchants — should know and understand these common industry terms.
Abbreviation for Automated Clearing House, an electronic network for financial transactions that clears credit and debit transactions under Federal Reserve and NACHA (National Automated Clearing House Association) rules and regulations.
A merchant acquirer provides credit card payment processing to businesses. Other terms that are used interchangeably with acquirer are merchant services provider and credit card processor. The acquirer has a relationship with the credit card network and the merchant’s bank. The acquirer is responsible for clearing transactions after they are charged to a cardholder and depositing the proceeds into the merchant’s bank account.
Sometimes called payment brands, credit card associations are groups of card-issuing banks or organizations that set common transaction terms for merchants, issuers and acquirers. Visa, MasterCard, Discover, and American Express are major associations.
The process of validating funds available on a credit or debit card that is performed at the time the transaction occurs. After the merchant initiates a payment card transaction, the acquirer routes it to the issuing bank to be approved or declined. Approval indicates that funds are available to be withdrawn from the customer’s account. A decline usually means there are either inadequate funds in the account (debit card purchase) or the credit limit has been reached (credit card purchase).
Also called a transaction fee, it is charged to a merchant account each time a communication happens between the point of sale terminal and the authorizing network. This fee is applied in both sales and refund transactions.
The closing or settling of a single days credit and debit card transactions. Batch settlement can be done manually or automatically. This process must be completed in order for the funds from those transactions to be deposited into the merchants bank account.
A payment card that is accepted by merchants. Credit cards are based on the cardholders promise to pay at a later date.
A payment card that withdraws money directly from a bank account. Debit cards come in two forms: PIN (requires the cardholder to input at personal identification number at the point of sale) and signature (requires the cardholders signature).
Merchants pay this fee to credit card processors for accepting credit card payments. The discount rate varies depending on the type of transaction. It’s typically higher for card-not-present transactions compared to in-person transactions due to the greater risk involved.
Stands for Electronic Benefits Transfer. This nationwide system allows federal and state governments to distribute financial benefits and assistance to recipients via debit cards.
A credit card issuer is any financial institution that issues credit cards -- typically this would be a bank.
Abbreviation for mail order/telephone order. These transactions are CNP (card not present) and the card credentials are provided by the cardholder by mail, fax or phone.
Shorthand for Payment Card Industry Data Security Standard, these are security requirements established by the major payment brands to protect cardholder information and reduce data breaches and theft. PCI DSS applies to businesses and service providers, who are said to be PCI compliant when they satisfy the requirements.
Abbreviation for point of sale, which is often referred to as the hardware or software used for processing credit card and debit card payments.
A secured card that is funded by a previously deposited cash balance. Also called a stored value card, they usually are imprinted with a major credit card association logo and can be used wherever that brand is accepted.
Have questions? Want to receive a Free Rate Quote?
One of our highly trained payment consultants will be more than happy to assist you.
Visit us online at www.TailoredTransactions.com or call us direct at (888) 669.1686