Go to Merchant Account Terms M to Z

Authorization - Is a charge made on a credit card that is approved by the financial institution that was issued by the cardholder's card and approves for the amount of the transaction. The reciept is 4 to 6 digits and is retained by the merchant.

Authorization only - This special function is used to put a specific amount of money on hold without actually debiting the funds from the card. This is used by industries that aren't sure how much the total transaction will be but use a rough estimate.

This is commonally industries related to the travel industry which includes car rental companies and hotels where detemining the total amount of the transaction is difficult.

This is because the cardholder may end up cancelling, staying an extra period of time or staying shorter then the expected date of the reservation. The authorization does expire and is usually within 7 days from the approval date.

Batch Settlement - When you are finished processing credit cards for the day, you may do what is called a batch settlement. You close out all of the transactions for the day and submit them to the bank the way you would go to the bank with a wallet full of money and deposit it.

Capture Only - The merchant can capture funds in a transaction by using the capture only method when they have recieved the authorization code. This transaction is closed out in the next batch.

Card Verification Code (CVC2) - On the back of VISA and MASTERCARDS you will find a numeric security code. This code is used to help reduce credit card fraud by requiring this number on order checkouts in conjunction with using AVS.

Chargeback - Chargebacks occur usually when a customer is not happy with a particular service or product and choose to dispute the purchase. There are many other reasons why chargebacks occur but disatisfaction is the most common reason.

Credit card - This is the card the cardholder carries and is usually issued by American Express (AMEX), VISA, MASTERCARD, or DISCOVER. It is also usually 16 digits long and some offer rewards or cash back to their cardholders.

Currency conversion - This takes place when one currency is converted into another. For example if the transaction were to take place in Mexico then the currency would be converted from the Mexican Peso into the United States Dollar (USD). There is usually a fee associated with this type of transaction. After the transaction has been approved it is then converted not on the day the transaction took place.

Debit card - This is a card that withdrawls funds from the cardholders bank account. This transaction type is more popular in Canada then in the United States.

Digital Certificate - This is an electronic certificate that contains encrypted data, and uses secure information to identify the consumer, financial institution or merchant. Most popular types of certificates are called SSL certificates (Secured Socket Layer).

Digital Signature - This is a signature that is generated electronically from a source of encrypted text is next to impossible to forge. Once the recipient recieves the signature a match is used to authenticate the message.

Discount Rate - The discount rate is a % of the sale that is charged by the major credit card companies like VISA, MASTERCARD, and AMERICAN EXPRESS. For example if you sold a product for $100 and the discount rate was 2% then you would be charged $2.00 on top of the transaction fees associated with the sale.

Electronic Data Capture (EDC) -This is when a Point Of Sale Terminal (POS) is used for submitting information regarding the credit card transaction to the merchant account provider.

Electronic Funds Transfer (EFT) - This type of transfer is done electronically which includes an Automated Teller Machine (ATM) telephone, electronic terminal, computer, or even magnetic tape. Electronic Funds Transfer is also applied to credit cards and to process bill payments.

Electronic Ticket Capture (ETC) - An Electronic Ticket Capture (ETC) is a type of system that captures the ticket information electronically. The buyer information is located on the magnetic strip on the back of the credit card.

Once the merchant swipes the card through the terminal and the purchaser's information is read by the computer system it merges with the sales information. Then the ticket is processed similiar to if the merchant was at the bank making a deposit. At the end of the day this occurs in batches where multiple tickets are submitted all at once.

Independent Sales Organization (ISO) - An Independant Sales Organization is a company or firm that provides merchant accounts for people or companies that need to process credit card transactions. An Independant Sales Organization represents the processor and markets the service in exchange for processing fees and a percentage of the sale that the processor makes. Some are agents of the processor and some have a direct relationship with the actual processor.

Issuing Bank - The Issuing Bank is the bank that issues the customer their credit card and sends the funds to the merchant account of the seller when the customer uses their card. Then the issuing bank takes the money from the cardholders account for the sale.

Merchant Account Terms M to Z