Merchant Account Glossary

The Envelo glossary is provided for your better understanding of the words used throughout the payment processing industry.

  • Automated Clearing House (ACH): An ACH transaction is an electronic fund transfer, routed through the Federal Reserve Bank from a checking or savings account.
  • ACH reject: This occurs in the midst of processing a credit card transaction when a bank tries to deduct funds from a cardholder’s account, but there are insufficient funds in the account to cover the charge. An ACH ‘reject’ is similar to an overdraft in a personal checking account.
  • Acquiring bank or acquirer: A financial institution that maintains agreements with merchants for the sole purpose of accepting credit card payments.
  • Address Verification System (AVS): A fraud-protection tool in credit-card processing equipment which verifies that the billing address entered online, or provided in person or by phone, matches the address on file for the card being processed. Learn more about fraud-protection tools.
  • Authentication: Verification that the credit-card holder is who they claim to be. Fraud-protection tools in card-processing equipment, including AVS (see above) and card code verification systems, aid in the authentication process, which is essential in Internet, phone and mail orders where the card is not present. Checking signatures and asking for other forms of ID also aid in authenticating face-to-face credit card transactions. Learn more about fraud-protection tools.
  • Authorization: Formal authorization by a cardholder’s bank of an approved credit-card transaction. Average ticket: The average credit-card sale amount that you (the merchant) receive in your business.
  • Batch settlement: The closing (settlement) of all your credit-card transactions (batch) for a business day, or other designated time period. As a merchant, you may perform this closeout manually, or your merchant account will be set up to automatically settle a batch of transactions before funds are deposited in your account.
  • Batch header fee: The fee a merchant service provider assesses for closing out each batch of credit card transactions before funds are deposited in the merchant’s checking account. (Also see “batch settlement” above.)
  • Basis point: A basis point is 1/100th of a percentage point and is used to note changes in the rates of financial instruments. In the context of credit-card billing, the basis point is used in calculating interest charges to credit-card holders.
  • Card-not-present transaction: A credit-card transaction where the cardholder or the card is not present; thus the card can’t be swiped at a terminal for authorization. “Card-not-present” transactions include those conducted over the Internet, by phone or by mail.
  • Card-present transaction: A face-to-face credit-card transaction, where the cardholder and the card are present; thus, the card can be swiped at a terminal for authorization.
  • Cardholder Information Security Program (CISP): Visa’s program to ensure compliance with the Payment Card Industry Data Security Standard, or PCI DSS (see below).
  • Chargeback: A reversal of a credit-card transaction, as viewed from the merchant’s perspective. A chargeback usually occurs when a customer disputes an item on a credit card bill with a card issuer, most often because the customer believes the charge is fraudulent.
  • Check truncation: The conversion of a check to an electronic debit or image of the check; the check image serves as the official record.
  • CVV2, CVC2, or CID: Card Verification Value 2 (CVV2), Card Validation Code 2 (CVC2), and Card Identification (CID) number refer to the 3-digit numbers on the back of Visa, MasterCard and Discover cards, and the 4-digit number on the front of American Express cards. Like AVS, the card code verification tool accepts or rejects transactions based on the code provided by the cardholder; this tool is used primarily for Internet, phone and mail order transactions. Learn more about fraud-protection tools with CVV2 and CVC2 checks. Customer service fee: See “Statement fee” below.
  • Debit card: Debit cards are used in place of cash or checks to pay for purchases. The cardholder must enter a PIN number to enable a transaction, which involves withdrawal of funds from his or her checking account. Debit cards look like credit cards, but unlike credit cards—they are not attached to a line of credit.
  • Debit transaction: A transaction involving a debit card (also see “Debit card” above).
  • Decline: A transaction that is rejected for payment by a credit-card holder’s bank.
  • Discount rate: This is essentially a fee, calculated as a percentage of a sale (including shipping and handling charges plus taxes), charged by an acquiring bank (see above) for processing a credit-card transaction. As noted in the FAQs, a merchant service provider (such as Open Your Storefront) passes on the discount rate to their customers. Learn more about Open Your Storefront rates.
  • Domain name: A name that corresponds to the numeric address of a computer linked to the Internet; domain names are easier to remember than a long numeric address. A domain name is often the same as that of an organization and appears in its full website address. For example, “Google” is the domain name in the following address: www.google.com
  • Ecommerce: The process of buying and selling products or services over the Internet.
  • Electronic Interchange Reimbursement Fee (EIRF): Electronic Interchange Reimbursement Fee - These are electronically, card present or card not present transactions and are not CPS-qualified. This usually happens when certain information on the magnetic stripe is not transmitted during the card present authorization or certain information regarding the sale was not entered for the card not present transaction. Also, the transaction must be settled within 3 days of the transaction date.
  • Employer Identification Number (EIN): Also called a Tax Identification Number, an Employer Identification Number is the business equivalent of a Social Security number, although the Internal Revenue Service will issue an EIN to anyone, including individuals, who must pay withholding taxes on employees.
  • Gateway (or Payment gateway): A secure portal that connects to a shopping cart on an ecommerce website and transmits credit card information to a payment processor (such as Open Your Storefront) for authorization and settlement. Most gateways also can be used as virtual terminals, which provide the ability to key in customers’ credit card information for phone or mail orders.
  • Guarantor/guarantee: An acquirer may require a “guarantee” in writing from a merchant that he or she will make good on any credit-card processing losses; a merchant signing such an agreement becomes the “guarantor.”
  • Imprint: A physical impression of a customer’s credit card, taken on a swipe terminal during a face-to-face transaction at a store or other physical location.
  • Interchange fee: A fee set by credit card associations and paid by the acquiring bank to the card-holder’s bank to cover the cost of converting a charge on a cardholder's card to a cash deposit into the merchant’s checking account, as well as additional costs and profit. The interchange fee is included in the discount rate merchants pay to the acquiring bank or merchant service provider for processing credit-card transactions.
  • Internet: A series of interconnected computer networks, accessible to the public, that transmit data using the standard Internet Protocol (IP). The Internet encompasses millions of smaller computer networks that carry various information and services for businesses, schools, government agencies and other organizations. Internet services include e-mail, online chat, file transfer, and the interlinked web pages and other resources of the World Wide Web.
  • Internet Service Provider (ISP): A company that provides access to the Internet for individuals and groups or organizations. Issuing bank: A bank issuing a credit or debit card.
  • MATCH file: See Terminated Merchant File below.
  • Merchant Account: An account with an acquiring bank that enables a business or other organization to accept credit cards.
  • Merchant Identification Number (MID): A unique number an acquirer assigns a merchant identifying his or her business.
  • Mid-Qualified transaction: A transaction awaiting authorization of the billing address by the card-holder’s bank; any transaction on a government, corporate or international card; or a transaction keyed into a POS terminal (rather than registered in a swipe). “Qualified, Mid-Qualified” and “Non-Qualified” all refer to whether a transaction qualifies for an acquiring bank’s or merchant service provider’s standard discount rate. Thus, the discount rate for a mid-qualified transaction is higher than the standard rate, which applies to a qualified transaction (see below).
  • Monthly minimum fee: A charge assessed to merchants by an acquiring bank or merchant provider to cover maintenance costs for a merchant account plus minimal profits. The monthly minimum fee is tied to sales and the discount rate, and if a merchant’s monthly sales figure times the discount rate does not equal or exceed the agreed-to monthly minimum fee, the merchant will be charged for the difference.
  • MOTO: Stands for mail order/telephone order and is often used in reference to credit card transactions that involve these kinds of orders.
  • Non-Qualified transaction: A card transaction that does not meet qualifications for authorization by the card-holder’s bank—qualifications such as receipt of a valid billing address or completion of batch settlement within three days.  “Qualified, Mid-Qualified” and “Non-Qualified” all refer to whether a transaction qualifies for an acquiring bank’s or merchant service provider’s standard discount rate. Thus, the discount rate for a mid-qualified transaction is higher than the standard rate, which applies to a qualified transaction (see below).
  • Point of sale (POS): Refers to a physical place, such as storefront or other location, where a sale transaction occurs.
  • PIN pad: A small keyboard device attached to an electronic payment terminal on which a cardholder enters his Personal Identification Number (PIN) to authenticate his identity. PIN pads are used in debit card transactions.
  • Pre-Authorization (Pre-Auth): Also called an authorization hold, pre-authorization occurs when the card-holder’s bank immediately authorizes a credit-card transaction but holds the funds as unavailable from the merchant until he or she officially clears (settles) the transaction. This allows for changes in the sale amount that might occur between the time of authorization and settlement, as in hotel stays where last-minute phone calls or room service use could affect the amount of the final bill after checkout.
  • Post Authorization (Post Auth): Completion, or settlement, of a sale in which pre-authorization has occurred (see above). At this point, the cardholder’s bank would remove the hold and release funds for payment to the merchant.
  • Purchase Cards: These are essentially credit cards used by employees of businesses (where they are often called “company credit cards”), government agencies or other organizations. Purchase cards work like credit cards, but often carry restrictions for employees on where they may be used.
  • Qualified transaction: A card transaction that qualifies for an acquiring bank’s standard discount rate. (Also see “Mid-Qualified transaction” and “Non-Qualified transaction” above.)
  • QSR: Short for Quick Service Restaurant.
  • Retrieval request: Occurs when a cardholder’s bank asks a merchant for documentation of a sale. Retrieval requests are generated for a variety of reasons, including cardholder disputes, point-of-sale errors or fraud inquiries.
  • Reserve: Acquiring banks and merchant service providers sometimes
  • Search Engine Optimization (SEO): The process of improving the volume and quality of traffic to a website from search engines via “natural” or “organic” (unpaid) search results for targeted keywords.
  • Secure Socket Layer (SSL): A communication protocol that permits secure transmission of sensitive information, such as credit card details, over the Internet.
  • Shopping cart software: Shopping cart software allows customers to select items from an online store, adding and removing items as they browse through an ecommerce website. Upon checkout, the software calculates a total for the order, including shipping and handling (i.e. postage and packing) charges and the associated taxes, as applicable.
  • Sole proprietorship: An unincorporated business with a sole owner in which the owner may be personally liable for business debts and claims against the business.
  • Statement fee: Also called a “customer service fee,” acquiring banks and merchant service providers charge this fee to merchants for generation of a monthly statement, including detailed information about their monthly transactions.
  • Tax Number: An identification number assigned to a business by a state’s revenue department that enables the business to buy wholesale without paying sales tax on goods and products.
  • Terminated Merchant File (MATCH file):The Terminated Merchant File (TMF), now called the MATCH file, lists businesses, and their principals, whose merchant accounts were terminated for cause. Technically the TMF no longer exists, but many refer to the MATCH file—which contains the same information—by that name. MATCH stands for Member Alert to Control High-Risk. Card-issuing banks and merchant service providers have access to the MATCH list.
  • Terminal ID Number (TID): A number assigned by an acquiring bank or merchant service provider to a merchant’s terminal devise of POS system.
  • Trade reference: Anyone applying for a merchant account will be asked for trade references. These are other businesses that have extended credit to, or have some kind of standing relationship with, the applicant. Basically, an acquiring bank or merchant services provider wants trade references to ensure the applicant is reliable and trustworthy.
  • Transaction fee: A fee charged to a merchant by an acquiring bank or merchant services provider for each credit card transaction.
  • Virtual terminal: Allows processing of card transactions received from customers over the phone or mail through an Internet browser. Most payment gateways (required for ecommerce websites) also can be used as a virtual terminal.
  • Voice authorization: Authorization of a credit card transaction by cardholder’s bank following a phone call to the bank by a merchant.
  • Void: Occurs when a merchant reverses an approved transaction before settlement.

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