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15 Credit Card Processing Terms To Get Familiar With

Practically all businesses out there provide services for their consumers to make purchases with a credit or debit card. If you, as a merchant, already provide a credit card processing service or are in the process of setting this up, it is vital that you become familiar with the credit card processing terms below. After all, if you’re going to be dealing with it on a daily basis, why not learn the lingo?

1.       Credit Card Processing

This one is obvious, but still important. This term refers to the electronic process of carrying out a credit card transaction. After authorization, the process initiates the transfer of funds from the credit card processers’ bank, who then deposit the funds from the individual’s bank account directly into the business’s merchant account.

2.       Merchant Account

A merchant account is simply a business arrangement between a merchant and a credit card processor which allows the merchant to accept payment via credit card from its customers.

3.       Credit Card Processor

This is an entity that handles the electronic verification of Electronic Funds Transfers (EFT) into the ACH system, on behalf of clients.

4.       Associations/Payment Brands/Networks

These three terms describe the popular and familiar logos that appear on many credit and debit cards throughout the USA, including Visa, MasterCard and American Express. The associations are the ones who regulate card acceptance rules.

5.       Card Not Present (CNP)

‘Card Not Present’ or CNP is used to refer to a transaction in which the cardholder and payment card are not physically present at the time of payment, whereas a ‘Card Present’ transaction is the opposite, and is also known as a face-to-face transaction. Card not present transactions typically occur in online, mail order and telephone order sales.

6.       PCI DSS

This stands for ‘Payment Card Industry Data Security Standards’ and are requirements set up by credit card networks to protect cardholders’ individual information and prevent identity theft. When a merchant meets these requirements, they are classed as being PCI compliant.

7.       Payment Gateway

This is software on a third-party provider’s server that deals with the transmissions between a merchant and their processor to complete an electronic transaction. For example, TransFirst provides their electronic payment gateway, Transaction Express.

8.       ACH (Automated Clearing House)

This refers to the electronic payment between one bank account to another. It is initiated by a business to debit money from an account, which submit an ACH file which is then processed through networks controlled by the Federal Reserve.

9.       Basis Point

A basis point is a percentage charged to an individual on a credit card transaction. The term is used in terms to rates, in particular, surcharge rates. For example, one basis point equates to 1/100th of 1 percent. Therefore, 2.33% is the same as 233 basis points.

10.   Discount Fee

Discount fees are charged by merchants to its clients for allowing them to use their processing services, including interchange and assessments that are usually paid directly to credit card associations and issuing banks.

11.   Monthly Processing Limit

This is the amount of money that a merchant service provider will allow the merchant to process each month. It is outlined in their Merchant Processing Agreement (MPA).

12.   Monthly Processing Volume

The monthly processing volume is the total monthly payment card sales that a merchant processes. The figure is stated in the merchant’s application for card processing, as well as the average ticket size.

13.   Chargeback Shield

A chargeback occurs when a cardholder disputes a merchant charge and a debit is made to the retailer’s account. Merchants are charged a fee by the issuing banks by every chargeback received. A chargeback shield aims to prevent this and informs merchants when a chargeback has been reported. This gives merchants the opportunity to credit the transaction and stop the chargeback prior to it being sent to the bank.

14.   Offshore Merchant Account

An offshore merchant account is an internet trading account for e-merchants that is established in a different country. They give merchants lots of economic advantages.

15. High-Risk Merchant Account

This is a special type of merchant account that is specifically designed for those e-commerce merchants who own businesses classed as high-risk. These may include gambling websites, online dating, and software/hardware sales.

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