Check Gateway has compiled a list of terms as well as some helpful articles to assist you. Please click on the links below to find the answers to some of your questions. If your question is not answered on these pages please contact our office by phone or email and one of our Merchant Service Representatives will be glad to assist you.
Helpful Articles
Glossary of Terms
Use CheckGateway.com as your information resource. Look through our glossary to get the details you need about merchant services, fraud protection and ACH processing.
- Automated Clearing House
- The U.S. Federal Reserve Bank’s system that allows for electronic funds transfer between banks. Direct deposits, monthly debits and other fund transfer transactions are handled by the automated clearing house. Operations are performed in batch mode, so the time it can take for money to be transmitted is up to 72 hours. Insufficient funds will result in a return notification.
- ACH Fraud
- Criminals use stolen bank account information for purchases or the account holder makes purchases for the purpose of returning it for a refund. ACH fraud also occurs when account holders falsely dispute authorized transactions.
- ACH Network
- The group of financial institutions and similar entities that work together on electronic check transactions. Processing, clearing, delivery and settlement services are handled by the ACH Network, which is governed by the National Automated Clearing House Association.
- ACH Transaction
- Any payment that is processed via the ACH Network and goes to or from a receiver, or customer. The originator, third-party processor, originating depository financial institution and receiving depository financial institution are also involved in an ACH transaction, in addition to the receiver and network.
- Address Verification Services
- Credit card processing associations use address verification services to verify customer billing addresses linked to e-commerce payment transactions. Merchants can use AVS to accept or decline transactions based on the validity of billing address information.
- ABA Number
- The account number assigned to a bank by the American Bankers Association. This number generally appears at the bottom of a check before the account number.
- American Bankers Association (ABA)
- An organization that represents US banks and financial institutions. The ABA assigns members unique identification numbers commonly called ABA or routing and transit numbers. A bank’s ABA number generally appears at the bottom of a check before the account number.
- Application Program Interface (API)
- A computer communication procedure that makes possible the transfer of or access to information between two separate software or computer applications.
- Authentication
- The process of verifying the identity of a person or association. There are varying degrees of authentication for accepting payments. Examples include checking a driver’s license when accepting payment for a retail transaction or validating a login and password at a merchant Web site.
- Authorization
- Verification from the bank that issued a credit card to a merchant’s transaction approval request. The authorization indicates that payment information is authentic and that the purchasing customer has sufficient credit on the credit card to cover the amount of a transaction.
- Authorization Amount
- The transaction amount submitted to a card issuing bank for funds approval.
- Authorization Capture
- A credit card transaction request to authorize and capture, or settle, funds for a purchase. A payment gateway submits a request to a card issuing bank for authorization and, if approved, automatically submits the transaction for settlement.
- Authorization Code
- The code a card issuing bank assigns to a credit card transaction once a transaction is approved.
- Authorization Only
- A credit card transaction request to just reserve funds for a purchase. A payment gateway submits the request to the card issuing bank for authorization, but takes no further processing action.
- Authorization Request
- A transaction request submitted by a merchant to verify the availability of funds on a customer’s credit card. Further action by the merchant depends on whether the transaction request type is an Authorization Capture or an Authorization Only, and whether the transaction request is authorized by the card issuing bank.
- Automated Clearing House (ACH) Network
- The group of financial institutions and similar entities within the banking industry that work together to facilitate the processing, clearing, delivery and settlement services for electronic check transactions.
- Bank Card Association
- A consortium of or banks that form an association to issue bank cards. Bank card associations generally work with other payment issuers to provide specific bank card offers.
- Basis Points
- A unit that is equal to 1/100th of 1%, and is used in denoting the change in a financial instrument. Basis points are commonly used for calculating changes in yield of a fixed-income security, interest rates and equity indexes.
- Batch
- A group of transactions submitted as a group to the appropriate processing networks for clearing and settlement.
- Batch Upload
- A Merchant Interface tool for uploading multiple transactions at once from a spreadsheet or proprietary business application.
- Broadband
- Refers to data transmission where multiple pieces of data are sent simultaneously to increase the effective rate of transmission.
- Capture Only
- A credit card transaction request to capture funds that were previously authorized, but NOT via the payment gateway. For this type of transaction, the merchant will submit the authorization code previously received from the issuing bank through some other means than a payment gateway request, e.g., by telephone.
- Card Associations
- Credit card issuing companies like American Express, Visa and MasterCard that govern the use of credit cards for payment transactions.
- Card Code
- A Card Code is a three- or four-digit number that appears on the back of a credit card (on the front for American Express). This code may be used to validate customer information on file with the credit card association.
- Card Code Status
- A value returned to a merchant by the processor indicating whether billing information provided by customer matches information on file at the credit card association for the cardholder associated with the credit card number and Card Code.
- Card Not Present
- Means a cardholder’s credit card is not physically presented to a merchant at the time of a transaction. This term is used in the payments industry to distinguish e-commerce merchants, such as those that operate via Web sites or from mail order/telephone order locations, from "brick and mortar," or retail merchants.
- Card Present
- Means a credit card is physically presented to a merchant by a cardholder at the time of a transaction. This term is used in the payments industry to distinguish "brick and mortar," or retail merchants from those that operate from mail order/telephone order locations or via Web sites.
- Card Reader
- A device that reads and transmits information stored in the magnetic stripe on a card.
- Cardholder
- An individual or business that establishes an account with a credit or debit card issuer. A cardholder is eligible to initiate a payment card transaction.
- Cardholder Authentication Programs
- Security programs created by Visa and MasterCard to provide identity authentication for Visa and MasterCard cardholders, and transaction protection for merchants. By registering for these programs, merchants minimize the risk of chargebacks and returns while providing optimal security for their Visa and MasterCard customers
- Chargeback
- A credit card transaction billed back to the merchant after a sale has been settled. Chargebacks are initiated by the card issuer on behalf of the cardholder. Typical cardholder disputes involve product delivery failure or product/service dissatisfaction.
- Chargeback Code
- A code provided to a merchant by the card issuing bank indicating the reason for the chargeback transaction.
- Check 21
- The Check Truncation Act of the 21st Century, a Federal Reserve Bank law allowing financial institutions the option to clear checks electronically rather than having to forward the original paper check. Also called: CTA and Check 21
- Check Verification
- A risk management process that verifies the trustworthiness of an electronic check transaction against an extensive high risk or bad check database.
- Customer ID
- A unique identification code assigned to a customer by a merchant, who may be associated with the invoicing or billing for a transaction.
- Cut-Off Time
The time a merchant’s payment transactions are batched and electronically picked up by a payment gateway for processing.
- Depository Financial Institution (DFI)
- An Originating Depository Financial Institution (ODFI) or Receiving Depository Financial Institution (RDFI) that participates in an ACH network. Click here to link to our ACH flowchart.
- Digital Certificate
- Online identification that authenticates a consumer, merchant and a financial institution. Digital certificates are used to encrypt information exchanged in SET transactions. A certificate is a public key that has been digitally signed by a trusted authority (the financial institution) to identify the user of the public key.
- Digital Signatures
- Electronic signatures which cannot be forged. Instead it is generated from a computed digest of the text that is encrypted and sent with the text message. The recipient decrypts the signature and retrieves the digest from the received text. If the digests match, the message is authenticated and proved to be from the sender.
- Electronic Check
- A check or bank account payment submitted and/or processed electronically.
- Electronic Data Capture
- The use of a Point Of Sale (POS) terminal for submitting credit card transaction information to a merchant account provider.
- Electronic Funds Transfer
- The transfer of money initiated through an electronic terminal, automated teller machine, computer, telephone, or magnetic tape. EFT also applies to credit card and automated bill payments.
- Electronic Funds Transfer Act
- The federal law governing the use and administration of electronic funds transfer services.
- Electronic Signatures in Global and National Commerce Act
- A federal law governing the use of digital signatures and records in e-commerce.
- Federal Reserve Bank (FRB)
- The governing financial institution of the United States of America. Also referred to as "The Fed."
- Independent Sales Organization
- An organization that processes merchants’ online credit card transactions in exchange for a percentage of the sales or transaction fees.
- Interchange
- The process by which all parties involved in a credit card transaction manage the processing, clearing and settlement of credit card transactions, including the assessment, and collection and/or distribution of fees between parties.
- Issuing Bank
- Also known as an "Issuer". This is the bank that maintains a consumer's credit card account and will pay out to a merchant's account when the consumer makes a credit card purchase. At the end of the month the issuing bank will bill the customer for the debt.
- Joint Account
- A bank or credit card account naming two or more parties as account owners.
- Level 2 Data
- Extra data that may be submitted with the minimum required data for a payment transaction. Examples include shipping and tax information.
- Level 3 Data
- Broad data that may be submitted with the minimum required data and level 2 data for a payment transaction. Examples include product codes and other merchant-specific order information.
- Magnetic Stripe
- The black stripe on a credit, debit or stored-value card that stores the cardholder’s account or payment information.
- Mail Order/Telephone Order
- A business, or merchant, that sells merchandise or services to consumers via mail or telephone initiated orders.
- Manual Entry
- Submission of payment information for a transaction by manually entering the customer’s payment information into a hardware terminal or virtual terminal. For instance, any transaction that is not submitted by allowing an organization or business to "swipe," or read, payment information from a magnetic stripe on a credit, debit or stored-value card; or transactions that take place by physically keying in payment information using a keypad. Additionally, for Web merchants a manual transaction might be considered any transaction that is not entered at their e-commerce website by a customer.
- MasterCard® SecureCode™
- A security program created by MasterCard® to provide identity authentication for cardholders and transaction protection for merchants. By registering for MasterCard® SecureCode™, merchants minimize transaction risks while providing additional security for their MasterCard customers.
- MasterCard® Site Data Protection Program
- A program created by MasterCard® stating its technology and sensitive data security requirements for merchants and merchant service providers. Compliance is required of its member institutions.
- Merchant
- The person or business entity that sells goods or services to a customer.
- Merchant Account
- An account established by a merchant to receive payment via credit cards.
- Merchant Account Provider
- A financial institution that provides a financial account to a merchant for the purpose of collecting proceeds from consumer bank account or credit card payment transactions.
- Merchant Identification Number
- A unique number assigned by a merchant bank to a merchant in order to identify the merchant in an e-commerce transaction.
- Merchant Interface
- The platform that allows merchants to access transaction information, management tools and account settings.
- Merchant Service Provider (MSP)
- The bank or firm that provides processing for credit card transactions. Most MSP's provide merchant accounts.
- National Automated Clearing House Association (NACHA)
- A membership organization that provides marketing and education assistance and establishes the rules, standards and procedures that enable Financial Institutions to exchange ACH payments on a national basis.
- Not Sufficient Funds (NSF)
- A type of ACH return indicating that a customer’s bank account does not have sufficient funds to cover a transaction.
- Notification of Change
- Notification to a merchant from a customer's bank indicating the bank account information provided with a specific transaction is incorrect.
- Originating Depository Financial Institution (ODFI)
- A participating financial institution that originates ACH entries at the request of and by agreement with its customers.
- Originator
- The individual or business that receives authorization from a customer to refund or charge their bank account.
- Payment Gateway
- A combination of software and hardware that provides an interface to the bank card processing network. These technologies allow merchants to electronically submit payment transactions to the payment processing networks (i.e., the Credit Card Interchange and the ACH Network). Payment gateways also provide merchants with transaction management, reporting, and billing services.
- Personal Identification Number (PIN)
- A code used to identify the customer attempting to use a credit card, or other type of bank card for a purchase/payment transaction. This code is alphanumeric or numeric.
- Per-Transaction Fee
- A fee applied to merchants by the payment processor for each transaction processed. Transaction types for which merchant services providers charge merchants are: charges, refunds, voids and declines.
- Point of Sale
- A term referring to the physical location where a payment transaction takes place. Point of Sale also describes credit card payment acceptance systems designed for the place of sale, such as card swipe terminals.
- Point of Sale Solutions Provider
- A Point of Sale device, system or software manufacturer that provides Point of Sale services to merchants.
- Point of Sale Terminal
- Electronic device used by retail businesses to process credit card transactions. If the customer is present, they swipe or slide their credit card through the machine.
- Prior Authorization Capture
- A credit card transaction request to capture funds for a separate, previously authorized authorization-only transaction. With this type of transaction, the merchant will submit an authorization code received from the issuing bank at the time of the original authorization-only transaction.
- Processor
- An entity in the credit card processing network that handles posting of transactions for authorization, clearing and settlement to credit card accounts at the card associations; and the settlement of funds to merchant bank accounts. Processors may also provide merchants with billing and reporting services.
- Real-Time Processing
- The processing of a credit card transaction immediately after the purchase has been made. Real-Time is the preferred choice for Internet-based merchants.
- Receiver
- The person or corporate entity that has authorized a merchant to initiate a refund or charge transaction to their bank account.
- Receiving Depository Financial Institution
- A financial institution that provides depository account services to consumers, employees, and businesses and accepts electronic debits and credits to and from those accounts.
- Reconciliation
- Comparing transaction activity or account statements from multiple banks or service providers involved with transaction processing align transaction activity. The reason for reconciliation is to confirm that no transaction activity is unaccounted for by anyone in the transaction loop.
- Recurring Billing Transaction
- The submission of a transaction on a recurring basis, typically for ongoing billing or subscription payments.
- Reference Transaction ID
- The transaction ID that associates, a subsequent transaction to a different transaction. In the case of refunds, you must enter a reference transaction ID to identify the original charge against which the refund is being submitted.
- Regulation D
- Provision under the 1933 US Securities act for exempting some private companies under certain conditions from the filing requirements of the Act. If the private company meets the requirements, they are allowed to attempt to raise up to $1 million dollars without filing Form S-1 with the SEC. The Reg D filing format is a simple question and answer format. It allows public investment in your private company.
- Regulation E
- A regulation (12 CFR 205) promulgated by the Board of Governors of the Federal Reserve System to ensure consumers a minimum level of protection in disputes arising from electronic fund transfers.
- Reseller
- A Merchant Service Provider that uses merchant customers for payment processing services.
- Response Code
- A code provided to a merchant by the card providing bank indicating the result of a transaction request; and if declined, the reason why the transaction was declined.
- Return or Returned Item
- A transaction that could not be processed for reasons such as NSF, invalid account number, account closed or other rejection reason(s) provided by the customer's bank.
- Reversal
- A refunded transaction. This occurs when the merchant produces sufficient proof that disputes a chargeback or the customer rescinds the chargeback.
- Secure Sockets Layer
- Used to encrypt and protect data usually on an order from an online merchants web site. Once the order has reached its destination the encrypted data is decoded.
- Secure Electronic Transaction
- A secure payment protocol developed by MasterCard and Visa designed to ensure security for bank card transactions over the Internet. In denying merchants access to credit card information, details are secured between the shopper and the bank.
- Settlement
- The step in the clearing process when the acquirer credits the merchant account with the amount of a credit card purchase, and the bankcard association (such as Visa and MasterCard) credits the acquirer and debits the card issuer for the transaction.
- Settlement Amount
- The transaction amount sent to the credit card processor or the ACH Network for collection. This amount will be posted as a charge or refund against the specified method of payment, and for credit card transactions, may be less than or equal to the amount originally authorized for the transaction.
- Stored-Value Card
- A financial card that is loaded with a certain amount of money with each purchase amount deducted from the card.
- Terminal
- A device used by merchants to submit credit card payment information to the processing network. Terminals are connected to the credit card processing network via dial-up telephone connection or Broadband.
- Terminal Identification Number
- A unique number assigned to each Point of Service terminal.
- Third-Party Provider
- An entity not directly involved with transaction processing, or necessary for the exchange of a transaction between two parties, but that provides merchants with business enhancing services.
- Track Data
- The payment information stored in the magnetic stripe of a credit, debit or stored-value card.
- Transaction
- Any action between a cardholder and a merchant that results in activity on the account, such as an authorization and settlement. Merchants and financial institutions also conduct follow-on transactions that affect the cardholders' account, such as a capture and credit.
- Transaction ID
- An identification number assigned to each transaction processed through a payment gateway. Merchant service providers use this ID to search for or sort transactions.
- Transaction Type
- The type of transaction occurring. For charge transactions, a consumer allows a merchant to collect payment for services rendered. However, in the case of a refund transaction, a merchant returns funds to the consumer for a previous charge transaction.
- Underwriting
- The process of determining risk inherent in a particular applicant’s credit history for the purpose of establishing suitable conditions of merchant interaction.
- Verified by Visa
- Verified by Visa is a system used by Visa as an added layer of security for online credit card transactions. The same system is used by Master Card under the name SecureCode.
- Virtual Point-of-Sale Terminal
- A secure protocol that allows merchants, to manually submit transactions using a computer.
- Virtual Terminal
- A Merchant interface device for manually keying and submitting transactions.
- Visa Cardholder Information Security Program
- A Visa program stating its technology and sensitive data security requirements for merchants and merchant service providers. Visa requires compliance from its members.
- VISA PAS (Payment Authentication Service)
- Under Visa's PAS, cardholders must authenticate themselves by verifying their identity with a password when buying from a Web storefront. The ultimate aim is to secure merchant databases against compromise by hackers, and to password-protect card numbers stored in a database.
- Void
- Transactions used to cancel original charge transactions not yet submitted for settlement. To execute voids merchants must submit the transaction ID of the original charge transaction against which they are submitting the void.
- Zero Balance Account (ZBA)
- A checking account in which a balance of zero is maintained by automatically transferring funds from a master account in an amount only large enough to cover checks presented.
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