July 19, 2019 Last updated July 18th, 2019 1,459 Reads share

Take A Look At ABCs Of Terms Used In Credit Card Processing

ABCs Of Terms Used In Credit Card ProcessingImage Credit: Deposit Photos

There are a few common terms used in the credit card processing industry. For you,t knowledge read this article. It will be easier for you to figure out things that you found hard to apprehend the date while trying to find a merchant account for your business. Here is the list of common terms.

The A-list

  • ABA or American Bankers Association Routing Number: This is also called the Transit Routing Number which is actually a nine-digit number. This is seen on all checks with the bank account number. This number identifies the bank in which the account belongs since each bank has its unique identification number. During bank wire or an ACH transaction, you will need to specify both your bank account number as well as this nine-digit number.
  • Automated Clearing House: Commonly known as ACH, this is useful when you wire money from one bank account to another, called electronic payment from one bank account to the other. This is a useful alternative to accepting credit cards but is subject to clearing of which there is no guarantee just like a check payment. The ACH file contains the ABA number, account number and the amount and is submitted for processing nightly. It passes through different networks controlled by the Federal Reserve before the payment is finally made.
  • Acquiring Bank: This has a relationship with Visa or Master Card and your bank and provides credit card merchant accounts. Also referred to as the clearing bank sometimes they practically make the deposits into the bank account while a credit card is used and processed.
  • Associations: These are the familiar brands of Visa, MasterCard, American Express and Discover that you see. Also known as Payment Brands and Networks, these are identified by their logos. These brands ideally regulate the rules for card acceptance for their member financial institutions.
  • ATM Debit Card: Needless to explain much about it, Automated Teller Machine or ATM debit cards come with a magnetic stripe at its backside. When it is swiped through a Point of Sale terminal the user has to enter the PIN as and when prompted. The funds are typically drawn from the bank account of the customer in real-time after authorization, much unlike a credit card.
  • Authorization: This is the process of validating the availability of funds on a credit or debit card within a second or two after it is swiped through a Point of Sale terminal. On approval, a six or seven-digit authorization code is sent back along with the Address Verification Service or AVS response.
  • Authorization Only Transaction: Also called ‘Auth Only’ type of sale transaction. This authorizes the amount on the card but it is not settled even in days or weeks. This is actually done to reserve a specific amount from the available credit limit of the customer for a certain period of time. It is commonly used in the hotel industry as the exact amount of transactions is not yet known.
  • Authorization Response: This electronic reply to any authorization request includes approval or decline of the transaction and call center response pending due to lack of info.

The B-list

  • Basis Points: These are actually the percentage charged to the consumer for making any credit card transaction. 1% indicated one basis point. That means if the rate is 2.75% it is equivalent to 275 basis points.
  • Breach Security Coverage: This is a value-added service provided by the credit card processing companies up to $100,000. This provides coverage to offset the costs of any suspected or even an actual data breach.
  • Batch Processing: Sometimes referred to as ‘batch’ by the credit card processing service this is actually a collection of transactions in a single day. This processing refers to settling or closing of the whole batch of transactions at one time. You can set the Point of Sale terminal or your credit card processing reader or software on manual or automatic batch close.

Business Type:

This is the common question that is asked to almost any new merchant application. There are different types of businesses that can use credit cards for accepting payments for a sale or service. These are:

  • Retail: In this setting, transactions are done face to face with the customer actually being present on the spot with the card to swipe in a terminal after making the purchase of a tangible good.
  • Restaurant: Much like retail outlets, these also follow face to face transactions. However, since food is served and consumed there is a lower amount of risk of chargebacks. The tips offered in such cases are usually included as a part of the transaction.
  • Hotel: In this setting face to face transactions are made typically using the conventional terminals to swipe the card.
  • MOTO: This stands for Mail Order Telephone Order and refers to ecommerce businesses primarily where there is no face to face interaction with the customers when the transaction info is entered to the credit card terminal.
  • Internet: This involves all those transactions wherein the orders are received over the internet via different websites.

The C-list

  • Capture: This refers to the process of collecting the account information that is needed to process a payment by swiping a credit or debit card in the card reader.
  • Card Not Present: CNP is the process of making payment for an online or phone order where the cardholder is not present physically during processing.
  • Card Present: Just the opposite of CNP transaction, this is sometimes also referred to as a face to face transaction especially carried out in retail stores.
  • Chargeback: This is the process when a cardholder disputes a specific transaction or use of it with the issuer of the card. A retrieval request is issued against you and the amount disputed is withdrawn till it is settled.

The list may also include some common terms such as credit card imprinter, credit card processor and credit card reader all of which are essential elements to facilitate easier and faster credit card processing.

Credit Cards – Deposit Photos

Jason Norman

Jason Norman

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