The ABC's of Credit Card Acceptance

When your business decides to accept credit cards, there is a lot of confusing language that you may have never heard of prior to dealing with a credit card processing company. Lucky for you, International Bancard deals with this language on a daily basis and we work with our clients to help them understand and become familiar with the industry lingo.

Here is your ultimate guide to the key terms of credit card acceptance. 

Authorization / Approval Code - Approval of a bankcard transaction by the card-issuing banks or approved independent service providers, for a specified dollar amount. An authorization indicates only the availability of the card member’s credit limit at the time the authorization is requested and is identified by a six digit code that can include alpha-characters and numbers.

Automated Clearing House or ACH – An electronic network for financial transactions in the U.S.

Assessments - Assessed fee that is paid directly to the card associations for the use of the card brand, and the ability to process credit and debit card transactions through their payment networks.

AVS - AVS stands for Address Verification Service. AVS is recommended for all card-not-present (see “card-not-present below) credit card transactions. When the transaction occurs, the cardholder’s street address, zip code, card number, expiration date and transaction account should be inputted.

When the transaction is submitted the information is checked against the cardholder’s billing address and zip code. The issuing bank then provides the AVS response which will be match, partial match, no match, or AVS not available/error.

AVS is used to help prevent fraudulent transactions, especially transactions that take place online.

Average Ticket - The average size of a merchant's transactions. Average ticket amounts are usually used when a credit card processor is creating pricing for merchants.

Basis Points - Discount or Basis points are the percentage that a business is charged for a credit card transaction and may or may not include Interchange. One basis point is equal to 1/100th of 1 percent. For example, Interchange + 90 basis points is the same as .90% plus Interchange.

Batch - A collection of credit card transactions that are saved for submission, generally at the end of the business day.

Card Association/Brands – Organizations offering credit cards including Mastercard, Visa, American Express, and Discover. These organizations make the rules for credit card acceptance in conjunction with the government.

Card Issuer – There are three types of Card Issuers:

1. A financial institution or retailer that authorizes the issuance of a card to a consumer and is liable for the use of the card. The issuer has full authority over the use of the card by person who had the card issued to them.
2. Any bank or organization that issues cards to applicants.
3. Any organization that uses or issues a (PIN).

Card-Not-Present - A credit card transaction when the cardholder and card are not both physically present, often referred to as MOTO. 

Card-Present - A credit card transaction when the cardholder and card are both physically present at the business.

Chargeback - A card transaction that is disputed by the cardholder or card issuing bank and is sent back to the merchant bank to be resolved.

CVV2/CVC2 - The three-digit value printed on the signature panel on the back of cards used to validate that the card holder has the card in their possession and the account is legitimate.

Data Breach – When sensitive, confidential or otherwise protected data and information has been accessed and/or disclosed in an unauthorized way.

Data Breach Fee – An assurance program fee that covers up to $100,000 in fines and fees in the event of a data breach.

Discount Rate - A discount rate is a fee associated with collecting, assessing, approving, processing, and settling credit card transactions. This fee is often a percentage of the transaction value.

Doing Business As – The name a business uses to operate. It is also referred to as DBA. 

Ecommerce – Transactions that occur electronically over the internet.

EMV - EMV, or EuroPay, Mastercard and Visa, is a microchip-based technology used to reduce fraud.

Federal Tax ID Number - A nine-digit number assigned by the IRS, which is used to track business taxes. All applications are required to specify their Federal Tax ID Number. Some smaller merchants who are sole proprietors may use their personal Social Security Number in place of a Federal Tax ID Number. Also called FTID. 

Fraud – Any illegitimate technique used to access or use another person’s cardholder data.

Interchange / Interchange Fee – Fees paid by the acquirer to the issuer to offset transaction-related costs. Visa and Mastercard establish the interchange fee rates.

Issuing Bank – A financial institution, licensed by Mastercard or Visa, which holds contractual agreements with, and issues cards, to cardholders.

Level I/II/III Data

• Level I Data -  Purchasing card data including the same information captured during a traditional credit card purchase transaction, including total purchase amount, date, merchant category code and supplier/retailer name.
• Level II Data - Purchasing card data including the same information captured at Level I, plus the additional information: sales tax amount, customer's accounting code, merchant's tax ID number, applicable minority – and women-owned business status and sales outlet ZIP code.
• Level III Data - Purchasing card data including the same information captured at Levels I and II, plus the additional information: quantities, product codes, product descriptions, ship to ZIP, freight amount, duty amount, order/ticket number, unit of measure, extended item amount, discount indicator, discount amount, net/gross indicator, tax rate applied, tax type applied, debit or credit indicator and alternate tax identifier.

MCC Codes - Special numbers defined by the Card Association to Seller types for identification and tracking purposes. MasterCard uses MCC (Seller Category Codes), while Visa uses SIC (Standard Industry Codes).

Merchant - A person or company involved in commerce.

Merchant ID – Merchant ID or MID is a unique identification number assigned to a merchant account to identify the business for all their processing activities.

MOTO - Short for Mail Order (MO) or Telephone Order (TO).

Next Day Funding - Next day funding deposits the funds collected from debit and credit card transactions into a merchant’s account the next business day if the batch is closed by the required cut off time.

Near Field Communication – Near Field Communication or NFC is a set of close-range wireless technologies that enable connection for processing mobile or contactless payments.

Payment Gateway - The internet bridge that allows the merchant to connect to their front-end host.  This allows the merchant to use a wireless, POS software, or website to process transactions. 

PCI DSS - PCI-DSS stands for Payment Card Industry Data Security Standards. It is a set of requirements established by the credit card networks to protect cardholder information and reduce the risk of data theft.

The standards apply to merchants, merchant account providers, issuing banks and the credit card networks. Meeting these requirements is known as being PCI compliant.

PIN - A PIN or Personal Identification Number is the number that is assigned by the bank to card holders for identification purposes. It can be used as an electronic signature so that ATM transactions and debit card transactions may take place without the card holder’s written signature. PIN numbers are also used in online payment processing.

Service Fee – The cost a merchant services provider charges to maintain a merchant account. Also known as Statement Fee or Account on File fee.

Settlement - As the sales transaction value moves from the merchant to the acquiring bank to the issuer, each party buys and sells the sales ticket. Settlement is what occurs when the acquiring bank and the issuer exchange data or funds during that function.

Transaction Fee - Service costs charged to a merchant on a per-transaction basis.

Value-Added Reseller (VAR) - A third-party that certifies their software to be used on a processor's system.

Want to know more about credit card processing? Schedule a call with one of our Certified Payment Professionals and they can walk you through everything you need to know!