Banking & Transaction Types
Automated Clearing House (ACH): An electronic fund transfer routed through the Federal Reserve Bank from a checking or savings account.
ACH Reject: Occurs when a bank attempts to deduct funds for a transaction but the account has insufficient funds. This is similar to an overdraft.
Authorization: The formal approval of a credit card transaction by the cardholder’s bank.
Batch: A collection of authorized transactions stored in the merchant's equipment awaiting settlement.
Batch Settlement: The process of sending a "closed" batch to the processor to finalize transactions and transfer funds to the merchant’s bank account. This usually happens automatically at a set time each day.
Card-Present Transaction: A face-to-face transaction where the card is physically swiped, dipped (EMV), or tapped.
Card-Not-Present Transaction: A transaction where the card is not physically present, such as payments made over the internet, phone, or mail.
Debit Transaction: A purchase using a debit card where funds are withdrawn directly from a checking account, typically requiring a PIN.
Decline: A transaction rejected by the cardholder’s bank.
Void: The reversal of an approved transaction before it has been settled in a batch.
Fees & Financial Logic
Authorization Fee: A flat fee charged to send transaction data through the network for an approval or decline response.
Discount Rate: A fee calculated as a percentage of the total sale volume charged by the acquiring bank to process transactions.
Effective Rate: The actual percentage cost of processing, calculated by dividing total fees by total processing volume.
Interchange Fee: Fees set by card associations (Visa/MasterCard) paid by the acquiring bank to the card-issuing bank to cover processing costs.
Monthly Minimum Fee: A charge assessed if the total discount rate fees for the month do not meet a minimum threshold required to cover account maintenance.
On File / Statement Fee: A monthly fee for generating processing statements and providing customer service.
Fraud Prevention & Security
Address Verification System (AVS): A tool that compares the billing address provided by the customer with the address on file at their bank to prevent fraud.
CVV2 / CVC2 / CID: The 3 or 4-digit security code on a card used to verify that the person providing the card info has the physical card in their possession.
PCI-DSS (Payment Card Industry Data Security Standards): A set of security requirements created by major card brands to ensure all companies processing, storing, or transmitting credit card information maintain a secure environment.
Secure Socket Layer (SSL): A protocol for encrypting information sent over the internet to ensure secure transmission of sensitive data.
Industry Entities & Identifiers
Acquiring Bank / Processor: The financial institution that enables merchants to accept credit card payments.
Card Associations: Networks of banks that process specific card brands (e.g., Visa, MasterCard, Discover, American Express).
Issuing Bank: The bank that issues the credit or debit card to the consumer.
Merchant Account: A specialized bank account that allows a business to accept credit card payments.
MID (Merchant Identification Number): A unique ID number assigned to a merchant by their acquiring bank.
TID (Terminal ID Number): A unique number assigned to a specific terminal or POS system.
Disputes & Regulations
Chargeback: When a customer disputes a transaction through their bank. Common reasons include fraud or dissatisfaction with services.
Retrieval Request: A request from a cardholder's bank for documentation regarding a sale. This is often a preliminary step before a formal chargeback.
Durbin Amendment: A federal provision that limits the interchange fees card brands can charge on certain debit card transactions.
Truth in Lending Act of 1968: Federal law designed to protect consumers in their dealings with lenders and creditors.