Understanding Small Business Credit Card Terminology – Glossary of Important Terms

Acquiring Bank: Gives the merchant the capability for handling credit cards. It communicates with the customer’s card to permit payment and money transfer.

Address Verification Service (AVS): Provides fraud protection for the merchant by verifying the customers billing address during a transaction where the card is not physically swiped.

Authorization: Occurs when the merchant account communicates with the card customer’s bank to ensure that the customer has enough credit to make the purchase.

Batch: Generally at the end of the business day, the authorized transactions that are stored in the merchant account are processed in one group.

Card network: Is the linkage between the customer’s card issuing bank and the merchant’s account.

Cardholder: Is the person that has been issued credit by a credit card issuing bank, which allows them to use this credit for purchases.

CVV2 (Cardholder Verification Value) or CVV2 (Card Verification Value): Are numbers printed on the card (3 or 4 digits) for added security.

Chargeback: If a customer feels that they did not place the order or did not receive and good or service they have the ability to bill the charge back to the merchant.

Discount Rate: Is a per transaction fee paid to the merchant account provider for handling the transaction.

Gateway: Connects the shopping cart to the card processor during an online transaction. (see Payment Gateway)

Imprinter: A device that physically makes an embossed imprint of a credit card on a transaction slip.

Interchange Fee: A fee charged to the merchant account provider by the customer’s card issuing bank for allowing the merchant to accept a credit

Issuing Bank: Issues card to the cardholder, usually a bank or financial institution.

Keyed: A method to enter credit card information by physically “keying” in the information rather than “swiping” it.

Merchant account: Allows the merchant to accept paymentvia credit card.

Merchant Bank: (See Acquiring Bank).

Point Of Sale (POS) terminal: Is a device used when the customer is physically present to magnetically read the magnetic strip on the back of a card.

Payment gateway: Permits the merchant to accept online credit card payments.

Shopping Cart: Used during online shopping to allow the customer to put a number of purchases together in one group so that that group can be paid for with one credit card payment.

Swipe: The method of getting a customer’s card information by reading the magnetic strip on the card using a POS machine.