Merchant Card Processing Glossary

A highly secure encryption system that encrypts data 3 times, using 3 64-bit keys, for an overall encryption key length of 192 bits. Also called triple DES.

The financial institution that establishes and maintains the merchant account, receives transactions from the merchant, and initiates the interchange via VISA/MasterCard. The acquirer must be a licensed member of MasterCard or VISA. Also called the acquiring bank.

A service that verifies the cardholder's address, used primarily by mail/phone order merchants. AVS does not guarantee that a transaction is valid.

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

Payment networks such as VISA® or MasterCard® (and others) that act as a gateways between acquirers and issuers for authorizing and funding transactions

The owner of the credit or debit card that is being used to make a purchase

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

A check protection service by which a merchant scans a check image and converts it into an electronic transaction, similar to a PIN-based debit, for which the merchant is paid immediately. Check conversion requires a check imager peripheral.

A check protection service by which a merchant guarantees he or she will receive payment for a check, even in the event of insufficient funds. Check guarantee requires a check reader peripheral.

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

See CVV2. Card verification code 2 (CVC2) is MasterCard's term for this security code.

Card verification value 2. CVV2—a 3 digit code printed on the back of a Visa card—is an important security feature that protects Internet and phone transactions from fraud. CVV2 ensures that the credit card number is legitimate and that the card is in the possession of the purchaser.

The amount charged to a merchant by the acquirer for processing the merchant's daily credit card transactions.

Derived Unique Key Per Transaction. An encryption technique for secure key-management that uses a unique key for each separate transaction to prevent the disclosure of any previously used key.

A government-funded cash assistance program that distributes payments such as Food Stamps and Temporary Assistance for Needy Families (TANF) on cards that can be swiped and used with POS terminals.

A manual device used to imprint embossed card information onto sales drafts for transaction records. An imprinter only captures card information; it cannot authorize a transaction. Imprinters are primarily used as a backup when the other processing equipment is unable to read data on the card's magnetic stripe. For merchants without an electronic printer, an imprint is needed to prove a card was present if a customer disputes a key-entered transaction.

The process of authorization and settlement of card transactions through VISA or MasterCard. Interchange includes the transmittal of cardholder information, transaction data, and fees.

The amount card associations charge acquirers for each card transaction they process. The card associations pay the interchange fee to the issuer as compensation for expenses incurred in providing lines of credit to cardholders. The acquirer's cost is passed on to merchants as a part of the discount rate.

The financial institution that issues a credit card to a cardholder. The issuer must be a licensed member of MasterCard or VISA. Also called the issuing bank.

Purchases made with personal credit cards issued from U.S. banks qualify as Level I transactions. This means that the only information the merchant must pass to process the transaction is the merchant's name, transaction amount, and the date.

Level II transactions normally involve corporate cards issued from a U.S. bank. Transactions that qualify for Level II processing cost the merchant less than Level 1 transactions. To qualify for Level II, a transaction must be passed with: merchant name, transaction amount, date, tax amount, customer code, merchant postal code, tax identification, merchant minority code, and merchant state code.

Of the 3 different levels of credit card processing, Level III provides the lowest transaction processing rate. But, in order to qualify for the lowest rate, Level III transactions must be passed through the processing system with much more detailed transaction information that Level I or II transactions. Because so much information must be transmitted, not all terminals are equipped to process Level III transactions. Purchases that qualify as Level III transactions generally are made with government credit card or corporate cards.

A business that has contracted with an acquirer for card processing services and accepts credit cards as a method of payment for goods or services.

The contract between a merchant and an acquiring bank for providing card processing services.

A data security feature that produces a unique code for every digital message that allows the recipient to verify that data has not been altered since being transmitted by the sender.

See virtual terminal.

A device used to record and transmit card transactions electronically for authorization and processing. POS terminals can transmit information via a regular telephone line, broadband Internet connection, or wireless signal. Also called a card processing terminal.

A security feature that keeps Internet communications private and ensures they have not been forged or tampered with.

The exchanging of data or funds between the acquirer and the issuer. Settlement includes funding the merchant for the transaction and paying any necessary fees due to the issuer or acquirer for processing the transaction.

A software application needed for ecommerce and online transaction processing. Shopping cart software collects the items a cardholder selects for purchase, maintains a running total, and may calculate taxes and shipping.

An Internet-based portal used for processing card transactions. Brick-and-mortar merchants may use an online payment gateway to process card transactions online without a POS terminal or card processing software. Online merchants must have an online payment gateway to enable their business for ecommerce. Also called an online payment gateway.