credit card processing

Credit Card Processing: 17 Terms You Need to Know

If you are new to the world of credit card processing, you might not know key industry terms. As the CEO of International Bancard, a premier payment acceptance solutions provider, I am an industry expert and can tell you some of the key credit card processing terms you will need to know when talking to a payment acceptance provider.

Assessments

Fee assessed 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.

Basis Points

1/100th of a percentage point. In “Interchange Plus” pricing, merchants are charged cost (set by Visa and MasterCard), plus a specified number of basis points. 

Batch

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

Batch Fee

A fee that can be charged to a merchant whenever the merchant “settles” their terminal, sending their completed transactions for the day to the acquiring bank for payment.

Card Association

Any entity whose members issue credit or debit cards, or acquire card payment transactions on behalf of their customers. 

Chargeback

A disputed credit card transaction. This can be initiated either at the request of the cardholder, or by a card issuer. A chargeback will cause the amount of the original sale, as well as a chargeback fee, to be deducted from the checking or savings account associated with the merchant account in question. 


Also on StartupNation.com: Credit Card Processing Best Practices for Small Business


CVV2/CVC2

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

Data Breach Program

Data Breach Merchant Loss Protection Program offers merchants/businesses monetary loss protection against the costs that accompany a compromise of their customers’ credit card data. 

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. 

Downgrade

Higher percentage based upon cards not falling into a more preferable category. 

EMV (Europay, MasterCard and Visa)

A global standard for credit and debit payment cards based on chip card technology.

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 that are sole-proprietors may use their personal Social Security Number in place of a Federal Tax ID number.

Interchange

Cost as set by Visa, MasterCard and Discover.

Interchange Plus

Pricing structure based on Interchange, plus dues, assessments and a processing percentage. Also referred to as Wholesale Pricing, IDA+, Cost Plus and Interchange Pass Through.

MID (Merchant Identification Number)

The number a financial institution assigns a merchant to identify their business. 

Tiered Pricing

Pricing structure where all interchange categories are grouped into two to four plus tiers. Example: Debit, Qualified, Mid Qualified and Non-Qualified.

Void

The reversal of a current transaction, one that has been authorized, but not settled. Settled transactions require processing of a credit or return in order to be reversed.

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