Payment Terms & Phrases Every Business Owner Needs To Know

Katie Sawyer

Katie Sawyer

May 30, 2019

Payment Terms & Phrases Every Business Owner Needs To Know

Katie Sawyer,
May 30, 2019


Getting paid is a very important (and fulfilling) part of being a business owner. It shows you’re doing things right and are right on track for growth.

But there’s a number of tricky terms and phrases out there you need to be aware of so you’re prepared for whatever the world throws at you. To make sure your business is up to date on everything in the world of payment, take a look at the terms and phrases below.

And to ensure your business is up to date in the world of optimized & streamlined employee scheduling, click on the link below to use Deputy, the workforce management platform trusted by brands like Nike & Amazon.

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ABA:

This is a nine-digit number which appears on checks, and allows the bank from which it was issued to be identified at the federal reserve.

Access card:

This is a card with a chip/magnetic strip used for account transfers, cash withdrawals, etc.

Account history:

This is the history of transactions associated with a particular account, including statistics regarding whether the owner of the account has been over the account limit, over a specified period.

Account number:

This is a unique number assigned to the cardholder’s account and it is the identifier of a particular account.

Account number prefix:

The account number prefix is the first six digits of a cardholder account number.

ACH:

ACH refers to the Automated Clearing House mechanism of payment, a U.S funds-transfer system that enables electronic payments to be made.

ACH payment:

These are electronic payments that a customer allows to be taken from their account by authorized companies.

Acquirer/Acquiring member:

This is a financial institution which receives all bankcard transactions from merchants, and processes these transactions for the card issuer. This can be a member of MasterCard or Visa.

Acquiring bank:

This is a type of bank which receives and processes transactions from merchants, as well as being a card issuer.

Address verification (manual):

This is a process in which the merchant can verify a cardholder’s billing address with the cardholder’s issuing bank before completing a mail or telephone order transaction.

Activity file:

This is a file that is maintained within the MasterCard or Visa processing system which lists account numbers which stand-in authorization has been approved.

Annual Fee:

This is a fee which a cardholder pays annually to the card issuer in exchange for the privilege of having access to a card which allows them to make transactions freely in exchange for goods and services. Not all card issuers require this annual fee.

Annual percentage rate:

This is an interest charge which is issued in one year if there are outstanding credit balances. This is often calculated as: monthly rate x 12.

ARN:

The Acquirer’s Reference Number is a number which identifies, and is assigned to, each INET record by the acquirer. It includes acquirer’s processing date and the Bank Identification Number (BIN).

ARU:

ARU stands for Audio Response Unit. This unit provides pre-recorded voice responses and is able to ask and answer questions over the phone. They are useful for providing voice authorizations.

ATM:

Automated Teller Machines are unattended computer terminals which perform basic bank-teller functions such as displaying a cardholder’s balance and allowing cardholders to withdraw cash.

Authorization:

Authorization is a process by which transactions (in particular- purchases) are approved by the card issuing bank, and also on behalf of the issuer by MasterCard or Visa. Transactions may, or may not, be authorized, depending on whether the cardholder has sufficient credit and other factors. Authorizations can be made through a terminal, via a voice operator or through an automated response unit.

Authorization code:

This is a numerical code which is assigned to a sales transaction to show that the sale has been authorized.

Authorization date:

This is the date that the authorization request was made.

Authorization file:

This is a file used by the card issuer to record a cardholder’s account information and status. This file is accessed during an authorization request.

Authorization request:

This is the request that a merchant sends for a transaction to be approved for a particular cardholder.

Authorization terminal:

This is a point-of-sale terminal which facilitates electronic authorization of transactions.

Available credit:

This is the disparity between the cardholder’s credit limit and the balance in their account, taking into consideration outstanding transactions that haven’t yet been processed through interchange.

Average monthly volume:

This is the total number of sales made per year, divided by 12.

AVS (Complete):

AVS stands for Address Verification Service: a service which verifies the cardholder’s billing address in order to combat fraud in mail order telephone order transactions.

Bad debt:

Bad debt is a monetary figure which is very unlikely to be paid back or cannot be recovered, and is written off. A person is said to have ‘bad debt’ if they have not made payments in 90 days.

Balance:

An account balance is a figure which represents how much money a cardholder has in their account at any time. Alternatively, ‘balance’ can refer to the sum of money owed by the cardholder to the card issuing bank.

Bankcard:

This is a card, such as a credit or debit card, which is issued by a financial institution, and which can be used to make transactions.

Batch processing:

Batch processing is a term which refers to the act of using scripted running programs to process payments. This is performed all through technology and is typically achieved overnight.

Billing statement:

This is a document, usually sent monthly, to customers, informing them of the sum of money they owe and the amount which is due to be paid, as well as providing other information about the account.

Capture:

The act of reading and storing information from a POS device, to keep for use in funds settlement.

Card activation:

This is a security process which ensures that the card can only be used by the legitimate holder of the card and prevents losses from fraudulent use of cards stolen from the mail. Card holders receive their card and have to activate it (usually over the phone) by confirming their identity.

Card number:

This is a unique credit card number which is assigned to the cardholder by their issuing bank. This number is used in online transactions, so that merchants can identify and request authorization from the card issuing bank.

Card registration company:

This is a company which provides a service to cardholders: if a card is lost or stolen, the cardholder simply notifies the card registration company who then notifies all the relevant institutions of the loss. There is usually an annual fee associated with using this service.

Card re-issue:

This refers to the process of preparing, packaging and sending a new bankcard to the cardholder prior to the card’s expiration date.

Card type:

This is the type of card a cardholder has, including: Visa, MasterCard, Discover, American Express Diners etc.

Card verification code (CVC):

This is a figure which is encoded onto the magnetic strip of a MasterCard, for authenticating the card information when authorization is taking place.

Cardholder:

A cardholder refers to the individual whom the issuing bank has given a card to use for transactions with merchants.

Cardholder bank:

Also known as the card-issuing bank, this is the bank which issues a bankcard to an individual.

Cash advance:

This is a process by which cardholders can withdraw cash up to a certain limit, for credit card holders, this is the credit limit.

Cashback amount:

This is the sum of money returned to the cardholder each month after the cardholder has paid their bills, as an incentive to keep using the bank.

Charge cards:

This is a card which must be paid back in full each month.

Chargeback:

This is a dispute procedure which is initiated by the issuer in response to the initial presentment from the acquirer. This procedure is used to correct erroneous presentments.

Chip card:

This is a debit or credit card which has a computer chip embedded in it. The chip has memory and interactive capabilities so that it can be updated with information. This can also be called an integrated circuit card.

Commercial card:

This is a term which represents a corporate, business and government bank card.

Confirmed fraud transaction:

This is a transaction which is reported by an issuer to MasterCard or Visa, involving a card that was lost or stolen, and which is fraudulent.

Counterfeit card:

This is a plastic card which has been fraudulently printed and designed to appear as a genuine bankcard, but has not been authorized by MasterCard or Visa or issued by a member.

Credit:

This is the process of returning a balance to an account of a cardholder for goods that have been returned.

Credit amount:

This is the combined number of credits for a card type and specific category within a batch.

Credit balance:

On a revolving line of credit, this is the amount currently owed by the cardholder to the bank.

Credit/bank card:

This is a plastic card used as an alternative to cash in order to make electronic transactions in exchange for goods and services. The money that a cardholder spends must be paid back each month; money not paid back is considered a short term loan and interest is charged.

Credit draft:

This is a document evidencing a refund or price adjustment given by a merchant to be credited to the cardholder’s account.

Credit limit/credit line:

This is the maximum available dollars that an individual can use, set by the issuing financial institution. This is also the highest amount the cardholder can be indebted to the issuer on the card, in any given time frame.

Credit loss:

This is the amount lost as a result of the cardholder’s failure to repay the amount owed on the account.

Credit slip:

This is a form which states a refund or price adjustment which will be applied to a cardholder account. This is also known as a credit voucher.

Debit:

This is a charge associated with a customer’s bankcard account.

Dial-up terminal:

This is an authorization terminal that dials the authorization centre to ensure the validity of the transactions.

Direct mail merchant:

This is a merchant that submits actual sales drafts for payments through the mail for payment.

Discount fees:

This is the amount charged by an acquiring bank to the merchant for processing credit card drafts.

Duality:

This is a membership of a financial institution in both MasterCard and Visa.

EFTS:

An Electronic Funds Transfer System is an electronic system does away with the need to use paper when moving funds around.

Exception report:

This is a report which details questionable charges and chargebacks.

Expiration date:

This is the date, embossed on the bankcard, which shows when the card becomes invalid.

Fictitious account number:

This is a made-up cardholder account number that doesn’t, and has never, existed; this is used for fraudulent purposes.

Force:

This is a function which is performed at a POS device which allows the merchant to enter a transaction if unable to process under the regular sale key. This is also referred to as an Off-line Sale.

Fulfillment:

This is an acquirer’s response to an issuer’s retrieval request for a sales draft. The acquirer supplies the issuer with the original draft or a clear reproduction. The fulfilment record confirms the response and initiates reimbursement to the acquirer for fulfilling the request.

Grace period:

This is the span of time between the statement date and the payment due date, during which no interest is charge if the amount owed is paid in full.

Highly suspect merchant:

This is a merchant location where an unusually high number of suspect transactions have occurred in proportion to the merchant’s total transaction volume.

Hot card:

This is a card account on which there is excessive spending occurring; this is often an indication that the card has been stolen.

ICA number:

This is the Interbank Card Association number, a four-digit number which is assigned by MasterCard to a financial institution, third-party processor or other member to identify the member in transactions. This is usually located by the expiration date on the credit card.

Interest:

Interest is a fee which is charged by the card issuing bank, when the cardholder fails to pay their balance in full every time they receive a statement.

Issuing bank:

This is a type of bank which issues credit cards to cardholders.

Late settlement fee:

This is a fee paid to MasterCard or Visa by the member, when there is a late processing of settlement.

Line of credit:

This is the sum of money that a lender will extend to a borrower over a specified period of time.

Lost/stolen card reporting service:

This is a service provided by the issuer, which enables cardholders to register their account numbers with an issuer who will alert other card issuers in the event that cards are stolen or lost. Card registration companies provide this service.

Maestro (Point-of-sale debit program):

The Maestro program, is a global, online point-of-sale debit program whereby transaction amounts are immediately debited from the cardholder’s account.

Magnetic stripe:

This is the stripe on the bankcard which contains magnetically encoded cardholder account information.

MCC- Merchant Category Code:

This is typically a four-digit code which identifies a merchant’s principal trade, or line of business, in accordance with their standard industry classification (SIC).

Merchant:

Merchants are businesses that have gone through the process and have met the required standards by MasterCard and/or Visa. Merchants also have the authority and permission to accept MasterCard and/or Visa cards from customers.

Minimum discount fee:

This is the fee that the merchant needs to pay in discount rates on a monthly basis.

MSP:

This is a merchant service provider: a processor or organisation that provides services for a merchant.

NDI:

Next Day Inquiries show the daily activity of a merchant.

Negative file:

This computer file is used for stand-in authorization and has a list of accounts which have had their card privileges canceled by the issuer.

Non-face-to-face transaction:

This is any transaction that takes place in which the card is not present for the transaction, such as a mail order purchase.

Non-bank card:

This is a card which is not issued by a financial institution, such as American Express.

Open-to-buy:

This is the unused credit which is available to use on a credit card.

Over the counter:

This is a process whereby merchants submit actual sales drafts for payment to a local bank, in exchange for payment.

Outgoing chargeback:

This is a transaction which is challenged by the card holder’s bank against a merchant bank and where the challenge is sent out to the merchant bank through interchange.

P&V:

This stands for Proof and Verification.

Paid by merchant services:

These are funds which are paid by the U.S bank to the merchant, typically for Visa and MasterCard transactions, but can also involve other non-bankcard organisations.

Paper processor:

This is a company which keys in the information on paper credit slips so that the information can be sent on to issuing banks electronically.

Per transaction fee:

This is the amount that the merchant could pay for each transaction that is processed.

Portfolio:

These are merchants who are bound by contract to a financial institution or processor for credit card processing services provided by that institution or processor.

POS:

POS stand for Point-of-Sale, which is a place where goods or services are purchased.

POS terminal:

This is a terminal at the point-of-sale which connects to a central computer through a telecommunication line. The terminal performs functions, such as transmitting of transactions and authorization.

Processor:

This is an organization which can provide authorization and settlement of services on behalf of a member.

Quick Payment Service (QPS):

Many businesses which deal with a high volume of customer transactions, such as restaurants and retail shops, choose to use Quick Payment Service (QPS) when taking payments. When using QPS, a signature or printed receipt is not required unless requested by the cardholder.

Referral:

A referral is an authorization response that asks the merchant to call their payment authorization center for approval. Referrals may be generated due to unusual spending patterns or an especially large transaction.

Representment:

Representment is the second stage in the chargeback process. It is the step in which an acquirer responds to an issuer’s chargeback by returning a disputed transaction to the issuer.

Restricted account:

A restricted account is a cardholder account which cannot be used without authorization.

Terminal based:

Terminal based is a software protocol in which sales are stored on the terminal.

Third-party processor:

Third-party processors allow online payments to be accepted without owning a merchant account. The third-party processor allows access to their merchant account.

Transaction:

A transaction is any act between a merchant and cardholder which results in something happening on the account. Examples of transactions are, cash advances, purchases and adjustments

Transaction currency:

This is the currency where a transaction initially took place, which is generally the local currency of the merchant.

Transaction date:

This is the specific date when a transaction happened and is used to track and record transactions.

Transaction reference:

This is a unique number which identifies a specific transaction.

Transmittal slip:

When a bank accepts paper drafts from merchants, they must complete a transmittal slip. Information on the transmittal slip includes, total credits and total sales.

Travelers’ check:

Travelers’ check allow travelers to take currency abroad in a secure non-cash form. Each check can be uniquely identified by a serial number and can be exchanged for cash at any major bank in the local currency.

Unique transactions:

Unique transactions are individual transactions from unique merchants.

Valid date:

This is the date which is embossed on the card that shows when the card remains valid until.

Visa:

Visa was previously known as BankAmericard. Visa is governed by a board of directors who give permission to members to use cards, which has the Visa design and operates under the Visa program. Visa provides a wide range of services to cardholders and merchants via its international processing system.

VisaNet:

VisaNet is part of Visa and includes networks, operations and data processing systems that maintain and provide authorization, clearing and different payment-related services.

Voice authorization center:

A merchant can call a voice authorization center to receive authorization from an issuing bank in order to continue with a credit card transaction. Where an issuing bank has sent a message to the merchant that more information is required, the merchant will call the voice authorization center to get the all clear to accept the credit card.

White plastic fraud:

Genuine account numbers are imprinted on empty or changed cards. Then, false sales drafts are imprinted from the fake cards where they are deposited in the merchant’s account.

Zero floor limit:

A zero floor limit requires that all cardholder transactions be authorized.


 

Important Notice
The information contained in this article is general in nature and you should consider whether the information is appropriate to your needs. Legal and other matters referred to in this article are of a general nature only and are based on Deputy's interpretation of laws existing at the time and should not be relied on in place of professional advice. Deputy is not responsible for the content of any site owned by a third party that may be linked to this article and no warranty is made by us concerning the suitability, accuracy or timeliness of the content of any site that may be linked to this article. Deputy disclaims all liability (except for any liability which by law cannot be excluded) for any error, inaccuracy, or omission from the information contained in this article and any loss or damage suffered by any person directly or indirectly through relying on this information.


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ABOUT THE AUTHOR
Katie Sawyer
Katie is the Director of Content Marketing at Deputy. She's happiest when she can help people do more of what they love. She likes telling stories, meeting new people, and being a word nerd.
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