Merchant Account Glossary of Terms

May 09, 2014

 

ACH: ACH, Automated Clearing House, is a regional organization that bank members use to electronically transfer funds between members.

AMEX: AMEX is an abbreviation for American Express. American Express is an organization that not only acquires transactions but also issues entertainment and travel cards.

Account Number: An account number consists of a unique sequence of numbers that identifies the issuer along with the type of card. Each cardholder has a unique number assigned to them.

Acquirer: An acquirer is a licensed member of MasterCard and/or VISA, or they are its agent.  Some of the responsibilities of an acquirer are keeping merchant relationships, initiating the data in the interchange system, and receiving bankcard transactions.

Acquiring Bank/Merchant Bank: This bank does business with merchants and enables them to accept credit cards. In turn, the merchant keeps his account with that bank and deposits the total of his credit card sales for the day. Then, the acquirer buys the sales slips and credits the ticket’s value to that merchant’s account.

Adjustments: Adjustments are used when a dispute or discrepancy with another institution needs to be processed.

Authorization: When a transaction is positively authorized, the specified amount is deducted from the cardholder’s available credit limit. Authorization is the act of seeing whether or not the cardholder has the requested amount available against their line of credit.

Average Ticket: Used in pricing decisions and calculations, an average ticket is the average size of a merchant bankcard transaction.

Bank Routing Number: This number is the first nine digits that appear across the bottom of a personal check, identifying the financial institution that the user is established with.

Bankcard: A bankcard is transaction card issued by a financial institution; it may be debit, credit, etc. A batch is the accumulated of sale transactions which need to be settled.

Batch Processing: This is a type of data processing and data communications transmissions used to group transactions and then transmit them for further processing.

Business Day: A business day is a day on which the Federal Reserve Bank is open to receiving applicable items for presentment from member(s).

Capture Date: The capture date is the date the transaction is processed by the acquirer.

Card Issuer: The Card Issuer is the institution that is responsible for issuing the card to the consumer or organization and is therefore liable.

Card Verification Code (CVC):  During the authorization process the CVC is used to validate the card; it is a unique value calculated from the data encoded on the magnetic stripe (of a MasterCard card).

Card Verification Value (CVV): During the authorization process the CVV is used to validate the card; it is a unique value calculated from the data encoded on the magnetic stripe (of a VISA card).

Cardholder: Is either the individual the card was issued to or the additional person who is authorized to be able to use the card.

Cash Advance: The amount advanced by the bank teller to the bankcard holder against his or her line of credit.

Cash Back: This option is given at purchase allowing the cardholder to receive some or all of the purchase in cash.

Chargeback: This occurs when either the cardholder or the card issuer challenges a transaction is sends it back through interchange to the merchant bank for resolution.

Chargeback Period: This refers to the number of days in which the issuer has the right to charge the transaction back to the acquirer; the number of days given depends on the type of transaction.

Check Verification: Although this does not guarantee payment to the merchant, it is a service allowing them to access whether or not the person has outstanding bad check complaints at any of the member merchants.

Chip: A small square that has been chemically processed in order for it to have a specific set of characteristics; such as, circuits storage, and/or logic elements.

Compliance: A procedure used to resolve a dispute between members when there is no chargeback reason code that applies. This entails the challenging member to prove that financial loss has occurred.

Counterfeit Card: A card that has been fraudulently printed so that it appears to be a genuine bankcard, but it has not been authorized by MasterCard, VISA, or any other member.

Credit Card: A card issued to allow the holder to purchase goods and services and/or obtain cash advances on credit. The cardholder is then later billed by the issuer for repayment.

Credit Limit: The credit limit is the maximum amount that is allowed to be owed on the account at any given time.

Data Encryption: Sometimes referred to as a key, it is the process of transforming information in order to make it unusable to anyone but the ones with special knowledge.

Debit: A debit is a charge to a customer’s bankcard account.

Debit Transaction: When a bankcard is used for purchasing services and good and/or to obtain cash, it then debits the cardholder’s personal deposit account.

Decline OR Declined: When an authorization request is made but is denied by the Issuer Member.

Discount Rate: Is an amount that is charged to a merchant for the act of processing daily credit card transactions.

Doing Business as (DBA): This term refers to the specific name and location of a merchant establishment where all of their credit card purchases take place.

E-Check: An E-Check is equivalent to a paper check but is electronic.

Electronic Banking: Rather than exchanging cash and checks between financial institutions, electronic banking allows funds to be transferred through an exchange of electronic signals.

Electronic Bill Payment (E-pay): An alternative to paper checks, electronic bill payment (E-pay) lets the consumer use PCs, telephones, screen phones, or ATMs to pay their bills electronically.

Electronic Check Acceptance or ECA: This system captures bank information from a paper check and converts it into an electric item that is capable of being processed through Automated Clearing House network.

Electronic Commerce (E-commerce): Refers to transacting business electronically instead of via paper.

Electronic Funds Transfer (EFT): The transferring of funds electronically instead of using the conventional paper-based payment method is referred to as Electronic Funds Transfer, or EFT.

EMV: EMV stands for EuroPay, MasterCard, and Visa. This system uses microchip-based technology that successfully reduces fraud at the point-of-sale.

Encryption: This technique involves the scrambling of data automatically before data is transmitted for the purpose of security/anti-fraud.

Financial Institution: This term refers to any organization that is involved in the business of investing and/or lending money, moving money, dealing in financial instruments, or providing financial services.

Funding: Funding refers to the payment a merchant receives for his submitted deposits.

Interchange: Interchange is the international and domestic systems card issuers (VISA and MasterCard) operate for authorization. It is also used for settlement, the passing through of interchange, and other fees.

Interchange Fee: This fee refers to the fees an acquirer pays to the issuer in order to compensate for transaction-related costs.

Issuer/Issuing Bank: An Issuing Bank is an institution that holds contractual agreements with cardholders and issues them cards.

Japanese Credit Bureau (JCB): The establishment that issues the JCB card.

MICR Number Method: This method involves checking account numbers, a check’s number encoded at the bottom of the check, and the bank routing/transit numbers in order to ensure the authorization of a check.

Magnetic Information Character Recognition (MICR): This refers to the imprinted banking numbers at the bottom of a check.

Magnetic Stripe: A magnetic stripe is a magnetically encoded device attached to a plastic card that contains the cardholder’s account information.

Member: A financial institution is a member when it belongs to VISA USA and/or MasterCard International, along with the licensed ability to issue cards and/or accept merchant drafts.

Merchant: A merchant can be one of many things: a retailer, a person, firm, or a corporation. A merchant will, according to a Merchant Agreement, agree to accept debit cards and credit cards when properly presented.

Merchant Acquirer: Also called the acquiring bank or acquirer, this member agrees to accept deposits from a merchant that have been generated by bankcard transactions.

Merchant Agreement: This agreement involves a written contract between a merchant and the acquirer; it details respective rights, warranties, and responsibilities.

Merchant Number: This number numerically identifies each merchant for the merchant processor for the purpose of accounting and billing those merchants.

Net Payment: A net payment is payment to the merchant for sales drafts less credits and minus the discount fee.

Net Revenue: Net revenue is calculated by discount income less interchange expense.

Net Settlement: When customers of two or more banks are involved, the net settlement involves the net effect of a series of financial transactions.

Originator: The originator is the institution that initiates a wire transfer (or an ACH payment).

Outlet: This term refers to a single location of a chain.

PIN (Personal Identification Number):A PIN is a confidential individual number or code that a cardholder uses at an ATM or POS transactions to authenticate card ownership.

PIN Authorization Request:This procedure allows the issuer to check the identity of the cardholder by the comparison of the PIN to the account numbers.

PIN Pad: A PIN Pad, or a Tamper Resistant Security Module, allows the cardholder to safely enter his or her PIN at a Terminal.

PIN Verification: When a transaction is requested, the PIN verification process allows the Issuer Participant to verify the identification of the cardholder.

Paper: The term paper, or as it is sometimes referred to as “media”, consists of credit slips, sales slips, cash disbursements slips, and whatever other obligations that indicate use of a card.

Payment Gateway:This e-commerce application service provider is used for authorization purposes. It is not only used for e-businesses and online retailers, but also traditional brick and mortar businesses.

Payment System: A payment system involves a set of instructions and procedures detailing the transfer of ownership and settlement of obligations, which arise after the exchange of goods and services.

Point of Sale (POS): The Point of Sale is the location at which a customer makes a purchase (location of the merchant).

Point-of-Sale System: The electronic system that accepts the financial data at the point of sale or near a retail selling location. After which the system then transmits the data to a computer or authorization network for reporting.

POS Terminal: This device connects to the bank’s system or authorization service provider to authorize, record, and forward data. It is placed in a merchant location and the data is forwarded electronically for each sale that is made.

Prepaid Cards: Prepaid cards can be reloadable or non-reloadable. They allow the holder to only spend the amount that has been pre-deposited into that account.

Processor: Is an organization connected to VISANet or Banknet.  It provides authorization, clearing, and settlement services on behalf of a member.

Reason Code: A reason code provides information to the receiving clearing member; such as, fee collection, request for source document, funds disbursement, nature of a chargeback, etc.

Receipt: A receipt is a hard copy describing the transaction that took place. It is considered a receipt if it contains the following details: date, name/location, account number, type of account accessed, the amount charged, an action card, and a reference number.

Recurring Transaction: A recurring transaction is charged to the cardholder on a periodic basis.

Reference Number: This number (twenty-three position number) is assigned by the acquiring member and is used to identify a transaction.

Remittance Information: This information is required for the biller to be able to post payments effectively.

Sales Draft: This paper documents the transaction that was made.

Settlement: After the sales transaction has been bought and sold by each party-merchant to bank, bank to the issuer-settlement finally occurs when the acquiring bank and the issuer exchange data or funds.

Settlement Statement: This document details the sales and credit activity, billing information, discount fee and chargebacks during a specified time frame.

Shopping Cart Software: Shopping Cart Software allows the customer to place select items from an online store and place them in a virtual shopping cart; this cart then remembers which items were selected by the cardholder until that he or she chooses to place their order.

Smart Card: Although it appears similar to a traditional credit or debit card, a Smart Card contains a computer chip that stores significantly more information than the traditional magnetic stripe.

Start Up Kit: Includes supplies like sales slips, credit slips, return envelopes, VISA/MasterCard decals, merchant plastics, etc. which are then shipped to new merchants.

Submission: Submissions may take place electronically or by mail; this process involves sending deposits to Merchant Services in order for processing to take place.

Support Documentation: These forms are necessary for a chargeback processing cycle and in order to uphold a dispute.

Telephone Bill Payment: This service allows a customer to give a corporation the authority to debit their account electronically for a range of amounts or a specified amount.

Transaction: When a transaction takes place it affects the organization’s net worth or financial position; such as, when a cardholder makes a purchase with his or her credit card.

Transaction Date: The specific date when the transaction actually took place.

Transaction Fees: Transaction fees are a service cost charged to a merchant on a per-transaction basis.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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