Glossary Of Terms

Glossary Of Terms

ACH

Automated Clearing House; an electronic payment network most commonly associated with payroll direct deposit, recurring payments, and is the network most commonly used to settle merchant card accounts.

Acquirer

the company (typically a federally insured financial institution) responsible for connecting merchants to Visa and MasterCard authorization and settlement systems. Acquirers are one of only two entities (the other being merchant banks) that are the actual signatories to merchant agreements. To sell bankcard services, you must have a signed agreement with an acquirer and acquirer-sponsored ISO.

Assessments

fee paid to MasterCard, Discover, and VISA for marketing and administrative costs. Assessments are part of the cost paid by the processor to the brands.  Visa and Mastercard’s assessments are .11% and Discover is .105% as of 10/1/2012.

Authorization

an electronic exchange between a  card-issuing bank and the merchant-acquiring bank, initiated through a POS  terminal, wireless credit card terminal, virtual terminal, or an internet  gateway, confirming a cardholder has sufficient credit (or funds in a DDA if it is a pin-based  debit transaction) to cover a pending transaction.

Average Ticket

Average transaction size or ticket size for credit card transactions. To calculate average ticket on credit card transactions, take $ volume and divide by total # of transactions. For example, $5000 volume 50 transactions, the average ticket equals $100.

AVS

Address Verification System (AVS) is an optional service that helps protect against fraud by verifying the identity of the person claiming to own the credit card. The system will check the billing address and billing zip code of the credit card provided by the user with the address on file at the credit card company. All merchant accounts with DonUp come with AVS at no additional charge.

Back End

the transaction information gathered by the front end is processed for settlement, chargebacks, retrievals and statements.

Basis Point

one one-hundredth of a percent; one basis point is 0.01% or 0.0001 in a decimal; 10 basis points would be 0.10% or 0.0010 in a decimal; 35 basis points would be 0.35% or 0.0035; 100 basis points would be 1.0% or 0.0100. The decimals are used to multiply to determine an amount. Most of the time basis points refer to interchange pricing models and refer specifically to processor margin. So if a merchant is processing $20k in Visa, Mastercard, and Discover volume and they are paying .25% margin or 25 basis points; the merchant is actually paying $50 in margin to the payment processor.

Batch

Is a group of transactions from the day or a shift.  Batches may be opened and/or closed automatically or manually. Most terminals can be programmed to send the batch out automatically at a certain time each day, called a settlement.

BIN

bank identification number; a numerical code assigned to each federally insured financial institution for the routing of transactions and other purposes. ISOs board merchants using the BINs of their respective acquiring or merchant banks. Sometimes, a merchant will see BIN sponsorship fees on their merchant statement. With a DonUp merchant account, there are no BIN sponsorship fees.

Bundled Rate

a discount rate is offered to the merchant that includes both the qualified discount rate and the transaction fee. A separate transaction fee is not billed to the merchant. The mid- and non-qual bumps are added to the bundled qualified rate as normal.  This typically is a flawed model, because the processor bases everything on an average ticket.  If the processor is not making enough because the merchant missed their average, rate increases are common. 

Card Not Present

credit card transactions (for example, Ecommerce or MOTO purchases) for which the customer's card is not presented to the merchant in person. Interchange is set higher on these transactions because there is an increased risk with these types of transactions.  AVS and CVV2 are recommended for all Card Not Present transactions.

Card Type

refers to the brand of card – Visa, MasterCard, Discover, Amex and what type of card – consumer credit, business, check card, rewards, enhanced rewards, purchasing, etc.

Charge Type

refers to the individual kind of card within each card type. The charge type also provides a pattern for downgrades. Some card type/charge types are only available for certain MCC/SIC codes (certain merchant industry types: fuel, hotel/motel, car rental are some examples).

Chargeback

occurs when a cardholder's bank (the card issuer) reverses all or part of a credit card transaction, leaving the merchant financially liable for the payment and subject to penalties – unless it can be proven the merchant was not at fault. Chargebacks can be initiated by disgruntled customers or by cardholders' banks (due to procedural errors, for example). We provide tools to help fight unwarranted chargebacks.  Soon, EMV will help merchants with chargebacks.

Check Cards

a card tied to a cardholder's DDA bearing the logo of Visa, MasterCard, or Discover. A PIN is not entered at the point of sale and the transaction is assessed through the Visa, MasterCard or Discover Interchange. The transaction does require a cardholder signature, similar to a normal credit card transaction. There are two general types of interchange for check cards, exempt and regulated.  Regulated check cards have a consistent interchange of .05% + $0.22 per transaction, due to the Durbin amendment to the Dodd-Frank Consumer Protection Act of 2010.

Check Imager

a counter-top device used to scan images of checks, according to legal specifications, for electronic clearing and settlement. Typically, check imagers are used in check guarantee and check conversion.

CVV

Card Verifcation Value; a value encoded on the magnetic stripe of the card. CVV is used as a security feature for transactions in person (swiped retail transactions).

CVV2

Card Verification Value 2; a three or four digit number physically imprinted on the back of the card. CVV2 is used as a security feature, and often is mandatory, for card-not-present (MOTO/Internet) transactions. CVV2 data is not embedded in the magnetic stripe. Entering this information correctly with a match will protect the merchant if that card came back stolen.

Daily Discount

Deducting a percentage of the settled transactions and only depositing a portion of each settlement. At DonUp, some clients like the daily discount, because it reduces the amount deducted at the end of the month. The daily discount is calculated by the interchange fees assigned for the cards accepted by the merchant.  These fees are received once we submit the settlement for payment.  At the end of the month, the transaction fees and monthly fees are deducted from the merchant's DDA.

DBA

doing business as; the name under which a business is operating. The DBA name may or may not be the same as the corporate name.

DDA

demand deposit account; also known as a checking account.

Debit Cards

issued by financial institutions and tied to cardholders' DDAs. Sometimes referred to as online debit cards, these cards carry the logo of one or more debit network and require the input of cardholder's PIN at the point of sale.  The PIN takes the place of the signature.  In some instances, these cards are much cheaper for merchants to accept. However, that usually depends upon how the merchant was priced by the prior processor.

Dial-Up

a traditional connection type; the credit card terminal is connected to a dial phone line. Must be analog to ensure the credit card terminal works properly. Call waiting, voicemail, and roll over lines can cause problems with dial up credit card terminals. DonUp recommends a low traffic or dedicated line or IP, transactions run over the internet through a router or switch.

Discount Rate

Fee expressed as a percentage charged by credit card Processor. A per item fee (p/i) is typically added. Expressed together, .75% + $0.31 would be a discount rate. DonUp uses interchange pricing on most accounts, so the discount rate is really derived from the card brands’ interchange.

Downgrade

when a transaction does not meet the qualifications for a particular level and it is assessed an additional fee. For example, if a transaction that would normally be swiped is keyed, that transaction will downgrade and will be charged accordingly. Late settlements and retail with tips can also cause downgrades.

EBT

Electronic Benefits Transfer (EBT) is an electronic system that allows a recipient to authorize transfer of their government benefits from a Federal account to a retailer account to pay for products received. EBT is used in all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and Guam. EBT has been implemented in all States since June of 2004

Ecommerce Gateway or Internet Gateway

in payment processing, any network via the internet, that connects merchant POS terminals with transaction processing and settlement networks, such as the MasterCard and Visa settlement networks. Gateways can also provide related services, including transaction management and reporting. Virtual Merchant and Authorize.Net, are gateways which allow merchants to set up shopping carts for e-commerce or accept transactions when the card is not present.

EMV or Smart Cards

(Europay, Mastercard and Visa) a different way to accept credit card transaction using a smart chip or a smart chip and pin. These cards will be blended, a magnetic stripe and smart chip, in the near future, until magnetic stripes are eliminated. EMV is a much more secure way for merchants to accept non-cash payments. Liability will switch to the consumer, if the merchant has an EMV/Smart Card reader enabled terminal. So the consumer and merchant benefit from EMV. DonUp currently stocks EMV terminals.

Future Delivery or Travel Merchants

The item purchase has not happened yet. For example, custom furniture, if the client changes their mind, the merchant will need to issue a refund if a credit card was used. Future Deliver increases the risk of chargeback and loss due to change in customer purchase or travel plans.

Gateway or Internet Gateway

in payment processing, any network that connects merchant POS terminals with transaction processing and settlement networks, such as the MasterCard and Visa settlement networks. Gateways can also provide related services, including transaction management and reporting. Virtual Merchant and Authorize.Net, are gateways which allow merchants to set up shopping carts for e-commerce or accept transactions when the card is not present.

Gift Card

Electronic stored value card not tied to a card brand, but typically tied to a small business or chain. An electronic gift card program is a way for the merchant to increase sales and accuracy of redeemed gift transactions over a paper system. For example, gift cards are available for purchase and use at Cabela’s and Scheels and Kroger. Card brands also issue gift cards with their brand logo on them.

Gross Effective Rate

A simple way for a merchant to calculate on average what a credit card costs him or her to accept. Simple calculation is done by dividing total fees by total sales volume from the merchant statement, & multiplying by 100 to get a %. For example, total sales $20,000 total fees $800. $800/$20000 = .04 * 100 = 4%. If this is your gross effective rate, please give us a call. We will save you some money.

Interchange

The fee charged by Visa, Mastercard, or Discover to the Processor for the specific card type presented to the merchant and batched to the processor for payment. For example, Visa CPS rewards 1, interchange is 1.65% + $0.10 per item. The exact Interchange fee charged to the processor by the brands is effected by how the transaction is transacted (over the internet or face-to-face) and again the specific card type, which is set by the card issuing bank.

Interchange Pricing

The most effective in minimizing merchant discount fees or gross effective rate, as interchange fees are passed through directly to the merchant, as the processor is billed by the card brands plus a small margin. Interchange pricing, when done properly, is full disclosure pricing in the credit card processing industry.  The fees are broken out line by line for each card type, per item, Base II, DFA, Visa FANF, and so on. For years, merchant service providers would only use this pricing for the largest merchants, such as Wal*Mart, Cabela’s, Target, and so forth.  At DonUp, we use this pricing structure, unless the merchant asks for tiered pricing.

IP

internet protocol; refers to the connection type of merchant’s point of sale set-up. Examples of IP connections are high-speed Internet connections, T1 lines, cable modems, DSL, etc. IP is the fastest way to authorize and settle transactions. Equinox/Hypercom terminals work best for IP, as the T4220 can be downloaded via IP.

ISO

an independent sales organization that is registered with Visa and MasterCard to sell and process bankcard transactions or an independent sales organization that works with and does business under the name of such a registered ISO.

Level 2 Data

Level 2 data or level 2 processing refers to entering more information than just card number and expiration date into a transaction. Level 2 data, when entered properly, can save a merchant up to .50%. The level 2 data when entered into the proper processing gateway is much easier to complete the required information, verses entering level 2 data onto a credit card terminal. Many of our gateway options will do level 2 data. When level 2 data is required on a credit card terminal, it requires the information on every transaction, even cards that do not benefit from level 2 data. Level 2 data can save money to merchants. Here are the requirements for level 2 data: Merchant Name Transaction Amount Tax Amount Transaction Date Customer Code or PO number Merchant Zip Code

Loyalty Program

Electronic way for a merchant to track customer spending either by visits, dollar value, or points. Typically, a reward is given to the customer at certain levels. Mobile loyalty without the use of a card is gaining steam.

Merchant Bank Sponsor

a bank that sponsors an acquirer into the MasterCard and Visa card systems.

MO/TO

Mail order/Telephone order; 100% keyed merchant environments.

Mobile Payment

The ability to use a smart phone with internet access to process a credit card transaction.

MONTHLY MINIMUM

Fee charged to generate a minimum amount of fees. If a $25 minimum, then merchant has to do at least $25 in qualified fees. If merchant does $10 in fees, then $15 is typically added to make the $25 minimum. At DonUp, we use monthly minimums once in a great while. Mostly, monthly minimums are used for free terminal placements.

MSP

Member service provider; an ISO or other company registered with a Visa or MasterCard member financial institution to sell bankcard services.

PER TRANSACTION, HIGH TICKET LIMIT

Flag on many merchant accounts, used by loss prevention personnel to manage account risk. When the merchant exceeds a high ticket limit, typically their account is placed in suspense and funds are withheld. DonUp uses soft caps based on monthly volumes, not a per transaction high ticket.

PIN

personal identification number; used to process PIN-based debit transactions.

POS

Not what one might think… point of sale; the place where retail sales occur and payment transactions are initiated; commonly used to describe POS systems (such as cash register systems) and/or computer software programs used for electronic payment processing (such as PC Charge).

Processor

the company that moves transactions on behalf of acquirers between merchants, banks, and the card networks.

QSR

quick serve restaurant; no signature required for transactions under $25.00 for certain MCC/SIC Codes. Makes for quick checkout, but no tips can be taken.

References

Seasonal Merchant Account

Merchant account open for a specified month or months. Can be open any number of months and the months can be sporadic. For example, the merchant can have a seasonal account and have one month, October to process. They could have October-December, and May and July. Any combination or singular month is acceptable.

Settlement or Batch

The process by which members exchange financial data and value resulting from sales transactions, cash disbursements, or merchandise credits, which are ultimately billed to the cardholder's account. For a merchant, a batch or a settlement means, please deposit this money in my bank account. These transactions are good.

Small Ticket

pricing available on the interchange for certain MCC/SICs when the average ticket is less than $15.00. Used to be really beneficial before the Durbin amendment changed the transaction fee cost from $0.04 to $0.22 for regulated small ticket check cards.

What Do Our Clients Think?

Money shows up the next day.
High ticket transactions are run with no issues or holding of funds.
If an issue arises, it is handled quickly- excellent customer service.
The money we saved, pays for our delivery truck.

Alan R.Nevada
www.consignfurniturenow.com/

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