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Glossary of Terms

 Merchant Account & Merchant Services Terms and Definitions

Automated Clearing House (ACH)
The automated "bank" that transfers electronic funds into and out of the merchant's bank account.

Authorization
The permission of the issuing Bank to accept a credit card for payment.

Authorization Code
The code sent by the issuing Bank in response to an authorization request to indicate that a credit card can be accepted as payment.

Authorization Fee
A fee charged by Credit Card Processor for every response a merchant receives through a terminal.

Authorization Request
A request sent to the issuing Bank by the merchant for approval to accept a card for payment.

Average Monthly Volume
Total amount of sales for the year divided by 12 months.

Average Ticket
Total net merchant sales divided by the number of transactions.

Address Verification Services (AVS)
When a card is not swiped, the address must be verified to combat possible fraud. This feature is used primarily by mail or telephone order merchants but can be used by retail merchants when a card cannot be swiped. A prompt appears on the terminal asking the merchant to enter at least the Zip Code of the Cardholder so that the address can be verified. Complete AVS is a service that verifies the Cardholder's billing address.

Charge Back
When a Cardholder disputes a charge, the issuing Bank charges the amount of the charge back to the merchant until the dispute is settled.

Clearing
The exchange of financial transaction information.

Closing
The sending through the interchange of the credit card transactions accumulated by the merchant in the terminal or Host so the merchant can be paid for them.

Data Capture
The collection, formatting, and storage of information in computer memory.

Demand Deposit Account (DDA)
The bank checking account to which the merchant's deposits are made or funds debited.

Discount Rate
The fee charged by Credit Card Processor to a merchant for processing credit card transactions. Also called "Discount Fee," "Base Rate or Fee," "Monthly Rate or Fee," or Just "Rate" or "Fee."

Electronic Draft Capture (EDC)
Sending the information about each credit card transaction to the issuing Bank electronically through the point of sale terminal.

Interchange Fees
The fees deducted from the transaction amount by the issuing Bank to cover the cost of the process. The Acquirer pays the net amount to the Issuing Bank.

Japanese Credit Bureau (JCB)
A credit card issued in Japan that has become more widely accepted in the United States in recent years due to the growing number of Japanese business people traveling and working here.

Merchant Category Code (MCC)
Code used by MasterCard to identify what a merchant sells.

Merchant File
A file used by the Acquirer to list pertinent information on its merchants.

Merchant Identification (MID) Number
Each merchant is assigned a unique identification number that is used in all Processing systems to locate information concerning the merchants and their accounts.

Merchant Processing Agreement (MPA)
A signed contract between the merchant and the credit card processor that outlines the responsibilities of the processor and the merchant in the credit card transaction process.

Merchant Qualification Standards
The minimum standards established by MasterCard and VISA for merchant acceptance that requires the merchant to be financially responsible and of good repute.

Minimum Discount Fee
The minimum discount fee a merchant agrees to pay each month based on his or her expected sales volume. The Credit Card Processor will charge the merchant the actual amount of fees generated or the minimum discount fee, whichever is greater.

MO/TO
Mail Order/ Telephone Order.

Non-Qualified Rate
The discount rate level, at which the transaction qualifies when it did not meet any of the qualifications for the other lower rates. All paper merchants will qualify at this level, as will all business cards.

Off-Line Sale
Allows the merchant to enter a transaction if unable to process under the regular sales key. Also called a Force of Post Auth.

Off-Line Debit Card
A debit card that does not deduct funds from the checking account immediately. Transactions are processed like a regular credit card and funds are not deducted for 24-72 hours. No Personal Identification Number (PIN) is needed to process the transaction.

Partially Qualified Rate
The discount rate level at which the transaction qualifies when it did not meet all requirements for the best (lowest) rate but met more requirement than needed to qualify for the Standard (highest) rate.

Per-Transaction Fee
A fee that can be charged to a merchant for each transaction that is processed.

Personal Identification Number (PIN)
A number that must be entered by the customer before an ATM will allow access to the customer's bank accounts. Also used at a retail establishment when a customer pays for a purchase with an ATM or on-line debit card.

Posting
The process of recording charges and credits to the Cardholder's account.

Processing
The procedure by which the merchant sends the information about each credit card transaction to the issuing Bank so that the Issuing Bank can pay the merchant for the transactions.

Qualification Level
Each transaction is assigned a Qualification Level at interchange. The level assigned depends on how well the transaction met the requirements for the merchant's industry. For example, for a retail merchant's transaction to be assigned the Qualified level, the card must be swiped, the terminal must be settled each day, and all other criteria for that level must be met.

Qualified Rate
The discount rate level, at which the transaction qualifies when it met all requirements for the best (lowest) rate.

Settlement or Settling
The sending through the interchange of the credit card transactions accumulated by the merchant in the terminal or Host so the merchant can be paid for them.

Swipe
Running a credit card's magnetic stripe through a reader that interprets the data encoded on it.

Terminal Based
Software through which transactions are stored in the terminal until settlement.

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

Terminal Provider
A company that supplies credit card hardware and software to a merchant.

Third-Party Processor
A non-member agent contracted by a member to provide authorization, processing, and merchant services.

Transaction
Any action between a Cardholder and a merchant or member that results in activity on the account, such as a purchase, cash advance, debit or credit adjustment, etc.

Visa
A national association, member-owned and governed by a board of directors, that licenses its members to issue VISA cards and accept VISA sales drafts. VISA owns and operates an international processing system and provides a number of various services to its members, Cardholders and merchants.

Retail & Restaurant
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Qualified Transaction Conditions

- The card is present, the full magnetic stripe is read by the terminal, and a signature is obtained


- One electronic authorization request is made per transaction and the transaction/purchase date is the same as the authorization date. The authorization code must be included in settled transaction (this is done automatically by the Credit Card Processor terminal application).


-The authorized transaction amount must match the settled (deposit) transaction amount, except for restaurants, where the transaction amount must be within 20% of original authorized amount.


-Additional data is required in the settled transaction on all Purchasing and Commercial cards at non-T&E locations. (Purchasing Card - customer code and sales tax; Commercial Card - sales tax)


-The transaction must be authorized and settled under a retail standard industry code.


-The transaction must be electronically deposited (settled) no later than 1 day from transaction/purchase date.
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-VISA calls this qualification level CPS Retail.


-MasterCard calls this qualification level Merit III.


(There can be other names for this qualification level depending on what type of card was used or how it was accepted but these are the most common.)
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Partially Qualified Transaction Conditions

One or more of the Qualified conditions were not met.


OR => The transaction was electronically deposited (settled) more than 1 day but within 2 days of the transaction/purchase date.


-VISA calls this qualification level CPS Card Not Present or EIRF. It is CPS Card Not Present if the only condition not met was that the card was not swiped. It is EIRF is one or more conditions were not met other than the card not being swiped.


-MasterCard calls this qualification level Merit I. (Certain types of merchants may see Key-Entered if the only condition not met was that the card was not swiped but only a small number of merchant types are eligible for Key-Entered rates.)(There can be other names for this qualification level depending on what type of card was used or how it was accepted but these are the most common.)

Non-Qualified Transaction Conditions
One or more of the Qualified or Partially Qualified conditions were not met.


OR => The transaction was electronically deposited (settled) more than 2 days from authorization date.


OR => Commercial card, World MasterCard, or Visa Signature card accepted at a T&E location.
OR => No additional data in the settled transaction on Purchasing and Commercial cards at non-T&E locations. (Purchasing Card - customer code and sales tax; Commercial Card - sales tax).
OR => Visa Infinite card accepted.


OR => Transaction was not electronically authorized (voice authorization) or the authorization code was not included in settled transaction.


VISA and MasterCard both call this qualification level Standard.(There can be other names for this qualification level depending on what type of card was used or how it was accepted but these are the most common.)
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Mail Order / Telephone Order
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Qualified Transaction Conditions
-One electronic authorization request is made per transaction and the transaction date is the same as the shipping date. The authorization code must be included in settled transaction (this is done automatically by the Credit Card Processor terminal application.)


-The authorization request message must include Address Verification Service (AVS).


-The transaction/shipping date must be within 7 calendar days of the authorization date.


-The authorized transaction amount must match the settled (deposit) transaction amount.


-The settled transaction data must include the merchant's customer service telephone number, the order or invoice number, and the total authorized amount.


-Additional data is required in the settled transaction on all Purchasing and Commercial cards at non-T&E locations. (Purchasing Card - customer code and sales tax; Commercial Card - sales tax)
-The transaction must be electronically deposited (settled) no later than 1 day from transaction/purchase date.


-VISA calls this qualification level CPS Card Not Present.


-MasterCard calls this qualification level Merit I.(There can be other names for this qualification level depending on what type of card was used or how it was accepted but these are the most common.)

Partially Qualified Transaction Conditions
One or more of the Qualified conditions were not met.


OR => The transaction was electronically deposited (settled) more than 1 day but within 2 days of the transaction/shipping date.


-VISA calls this qualification level EIRF. MasterCard does not recognize this qualification level.
Non-Qualified Transaction Conditions


One or more of the Qualified or Partially Qualified conditions were not met.


OR => The transaction was electronically deposited (settled) more than 2 days from authorization date.


OR => Commercial card, World MasterCard, or Visa Signature card accepted at a T&E location.
OR => No additional data in the settled transaction on Purchasing and Commercial cards at non-T&E locations. (Purchasing Card - customer code and sales tax; Commercial Card - sales tax).


OR => Visa Infinite card accepted.


OR => Transaction was not electronically authorized (voice authorization) or the authorization code was not included in settled transaction.


VISA and MasterCard both call this qualification level Standard.(There can be other names for this qualification level depending on what type of card was used or how it was accepted but these are the most common.)