Merchant Credit Card Processing Glossary

Here is a list of terms to help you understand merchant credit card processing.

ACQUIRER
The financial institution that establishes and maintains the merchant account, receives transactions from the merchant. The acquirer must be a licensed member of Visa and MasterCard.

ADDRESS VERIFICATION SERVICE (AVS)
A service/system that verifies the cardholder's address, this is used mostly by mail, phone and internet order merchants.

BATCH
A group of accumulated transactions that have been captured but not settled. Most merchants settle their batches at the end of the day.

CARDHOLDER
The owner of the credit card being used to make a purchase.

CHARGEBACK
A transaction that has been disputed by the cardholder or issuer, the transaction is sent back through interchange to the acquirer and must be resolved by the merchant or the acquiring bank.

CLEARING
The exchange of transaction details between an acquirer and an issuer which posts the transaction to the cardholder's account and reconciles it for a settlement.

CVC2 and CVV2
Card verification value 2 adn CVV2 a 3 digit code printed on the back of a Visa card, this is a security feature that protects internet and phone order transactions from fraud.

DISCOUNT RATE
The amount charged to the merchant by the acquirer for processing their credit card transactions.

INTERCHANGE
The settlement system for MasterCard and Visa; this includes the transmittal of cardholder information, transaction data and the fees to the merchant.

INTERCHANGE FEE
The amount that Visa and MasterCard charge acquirers for each transaction that they process. This fee is passed along to the merchants in the DISCOUNT RATE.

ISSUER
The financial institution that issues a credit card to a cardholder. The issuing bank must be a licensed member of Visa and MasterCard.

POINT OF SALE TERMINAL
The machine used to transmit credit card transactions electronically for authorization and processing.

SETTLEMENT
The exchanging of data or funds between the acquirer and the issuer. This includes funding the merchant for the transaction and paying the fees due to the issuer and the acquirer.

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