Credit Card Processing Glossary

As a Visa merchant, you need to know how to use an authorization code and Visa'a Address Verification Service. But before you can use them, you need to know what they are. See definitions for these important terms and more.

Browse By Letter:

A

• Accounts Payable:
  Debts your business owes to creditors.

• Accounts Receivable:
  Debts owed to your business.

• Address Verification Service (AVS):
  Visa's fraud-reduction service. You use AVS to verify a cardholder's billing address before you make a mail or phone transaction.

• Audit:
  Inspection and verification of financial accounts, records, and accounting procedures.

• Authorization:
  This is the approval from the financial institution that issued the cardholder's card that allows you to accept the transaction for a given amount.

• Authorization Code:
  Notifies that you have obtained the authorization for a specific Visa card transaction. Note: You should print this on the sales draft.

• Automatic Bill Payment:
  An arrangement between a merchant or service provider and a customer that allows recurring automatic charges for a service to an agreed-upon credit or debit account.

B

• Better Business Bureau:
  A national member organization that uses codes of ethics, news alerts, databases, and other programs to maintain a high level of trust between businesses and the public.

C

• Cancellation Code:
  The code that a lodging or car rental merchant gives to a cardholder. The cancellation code confirms that the cardholder did, indeed, cancel a reservation.

• Card-Not-Present (CNP) Transactions:
  Credit or debit card transactions which take place over the phone or in the e-commerce environment.

• Cardholder Information Security Program (CISP):
  Defines a standard of due care and enforcement for protecting cardholder information.

• Cash Flow:
  The difference between your incoming cash and your outgoing cash.

• Chargeback:
  Also known as a "Debit Memo," a chargeback is a reversal of a sales transaction. So if you deposited a $50 transaction in your merchant bank account, a chargeback for that transaction means that the $50 has now been debited from your merchant account.

• "Code 10" Authorization:
  This is a voice authorization code that you might initiate when you suspect a card is stolen or fake, or when a customer is acting suspiciously.

• Collateral:
  Property that is provided to secure a loan or other credit and that becomes subject to seizure upon default.

• Commercial Credit:
  This is short-term credit that a seller gives to a buyer to pay for a service or product.

• Credit Bureau:
  Firms, like Experian or Equifax, that gather information about your finances, especially loans you have taken out. In turn, they sell the information to businesses and lenders, which helps them decide if they will approve your loan or sell an item like a house or car to you.

• Credit Rating:
  This tracks your or your business' history of paying back loans. Your credit rating determines your chances of getting future loans.

D

• Debit Memo:
  See Chargeback.

• Disclosure:
  These are the terms or conditions for refunds, cancellations, or modifications made to reservations.

• Draft/Sales Draft:
  A record (usually paper) used to document that a good or service was purchased.

E

• Employer Identification Number (EID):
  This is an IRS-assigned number given to a business after it files an application form called "SS-4." Once you receive it, put your EID on all business tax returns and other significant documents.

• Equity:
  When you subtract all your business' debts from its current market value, that's your business' amount of equity. For example, if your debts come to $75,000, but your business could sell today for $275,000- you have $200,000 worth of equity.

• Escrow:
  A kind of holding pen for money, which is released after a specific event has occurred. A buyer might put money into an escrow account, which is supervised by a neutral party, such as a financial institution. The financial institution (which would be called the "escrow agent" in this case) releases the money to the seller only after the seller has carried out certain agreed-upon tasks (e.g., deliver a product, complete a work, or perform a service).

• Expense Account:
  Account that business people use expressly to pay for business-related travel and entertainment costs.

F

• Floor Limit:
  A specific dollar limit used to determine which Visa card transactions you must authorize. If your business has a floor limit $1,000-you must get authorization for any transaction over that amount.
  
  Note: All airline, telephone, and mail order transactions must be authorized, even if the amount is under your floor limit.

I

• Imprint:
  This is a physical impression you make from a customer's card which appears on the draft. This proves that the card was present when the sale was made.
  
  Note: An imprint can be created electronically if you use a magnetic-stripe-reading terminal that includes the correct point-of-sale (POS) entry code.

• Incubators:
  These are organizations that offer entrepreneurs a variety of resources, including mentoring, financing advice, technological training, business space, and research facilities.

• Internet Payment Gateway Service (IPGS):
  Provides a standard Internet connection for merchants and merchant aggregators (businesses that provide hosting and other e-commerce processing services for multiple merchants) to securely and reliably send and receive payment transaction messages.

L

• Leverage:
  A term for when you leverage your business by intentionally taking on debt(s) to expand the size or scope of your company.

• Lien:
  This is the legal right to hold onto a piece of intangible property that secures someone's debt on personal or real property. If the person or company owing the debt defaults, the property can be taken or sold.

• Line of Credit:
  This is a financial institution's commitment to lend your business up to a certain amount of money during a specified period. For example, your financial institution might extend you a $50,000 line of credit during the first quarter of 2000.

M

• Merchant Identification Number:
  This is the number a financial institution assigns to a merchant to identify your business.

• MO/TO:
  Short for mail order (MO) or telephone order (TO).

O

• Overhead:
  Business expenses-such as property taxes, utilities, and insurance-that are not directly connected to the goods or services you produce.

S

• Secure Sockets Layer (SSL):
  A security standard that many merchants use to keep their Web sites secure and to protect the safety, privacy, and reliability of payment data traveling over the Internet. SSL encrypts the channel between browser and Web server so only the intended parties can read certain data, such as payment or customer information.

• Service Corps of Retired Executives (SCORE):
  Experienced experts from a variety of fields, SCORE members can advise you, whatever your business, on anything from advertising to pricing to cold calling, and more.

• Small Business Administration (SBA):
  A government agency committed to helping entrepreneurs become successful through programs ranging from counseling to financing.

• Sole Proprietorship:
  A business in which you have complete control and responsibility.

T

• Tax Number:
  Your state department of revenue assigns you your business tax number. The number makes it possible for your business to buy items at wholesale costs and not pay sales tax.

V

• Venture Capital:
  Money available to invest in new, and/or risky, enterprises.

• Verified by Visa:
  Visa's online security program that enables consumers to add their own password to their existing Visa card, giving them added confidence that their personal information is safe when they buy online.

• Visa ePay:
  A fully electronic, bi-directional solution for payment delivery. It reduces your business costs, streamlines operations, and improves payment service.

• Visa Flag:
  The Visa logo that denotes your acceptance of Visa debit and credit cards, as well as Visa Corporate and Business cards, at the point of sale.

Z

• Zero Liability:
  Visa's policy that virtually eliminates consumer liability in cases of card fraud for all Visa card transactions processed through the Visa network, including online purchases.