Acquirer: the company (typically a federally insured financial institution) responsible for connecting

merchants to Visa and MasterCard authorization and settlement systems.

Acquirers are one of only two entities (the other being merchant banks) that are the actual signatories to

merchant agreements.

Assessments: fee paid to MasterCard and VISA for marketing and administrative costs. This is a

percentage of the sales passed through interchange.

AVS: Address Verification System (AVS) is an optional service that helps protect against fraud by

verifying the identity of the person claiming to own the credit card. The system will check the billing

address of the credit card provided by the user with the address on file at the credit card company.

Authorization: an electronic exchange between a card-issuing bank and the merchant-acquiring bank,

initiated through a POS terminal, confirming a cardholder has sufficient credit (or funds in a DDA if it

is a pin-based debit transaction) to cover a pending transaction.

Back End: the transaction information gathered by the front end is processed for settlement,

chargebacks, retrievals and statements.

Backbilling: a pricing structure where the qualified discount rate for the current month is detailed on

that month’s statement and downgrades, transaction fees, and monthly fees are billed on the following

month’s statement. In order to accurately analyze a backbilled merchant’s pricing, two consecutive

statements are required.

Batch: the merchant electronically sends their captured transactions to their acquiring bank for

settlement. Batches may be opened and/or closed automatically or manually. Most terminals can be

programmed to batch out automatically at a certain time each day. However, some merchants, such as

those taking tips (like salons or restaurants), need to manually reconcile their tips and then manually

batch their terminal to ensure accurate batches and the most advantageous cost associated with those

transactions.

BIN: bank identification number; a numerical code assigned to each federally insured financial

institution for the routing of transactions and other purposes.

Card Not Present: card transactions (for example, Internet or MOTO purchases) for which the

customer's card is not presented to the merchant at the POS. Interchange is set higher on these

transactions because there is an increased risk with these types of transactions.

Card Type: refers to the brand of card – Visa, MasterCard, Discover, Amex and what type of card –

consumer credit, business, check card, rewards, etc.

Charge Type: refers to the individual kind of card within each card type. The charge type also

provides a pattern for downgrades. Some card type/charge types are only available for certain

MCC/SIC codes (certain merchant industry types).

Chargeback: occurs when a cardholder's bank (the card issuer) reverses all or part of a card

transaction, leaving the merchant financially liable for the payment and subject to penalties – unless it

can be proven the merchant was not at fault.

Check Cards: a card tied to a cardholder's DDA bearing the logo of Visa, MasterCard, or Discover. A

PIN is not entered at the point of sale and the transaction is assessed through the Visa, MasterCard or

Discover Interchange. The transaction does require a cardholder signature, similar to a credit card

transaction.

Check Imager: a counter-top device used to scan images of checks, according to legal specifications,

for electronic clearing and settlement.

CVV: Card Verifcation Value; a value encoded on the magnetic stripe of the card. CVV is used as a

security feature for transactions in person (swiped retail transactions).

CVV2: Card Verification Value 2; a three or four digit number physically imprinted on the back of the

card. CVV2 is used as a security feature, and often is mandatory, for card-not-present

(MOTO/Internet) transactions. CVV2 data is not embedded in the magnetic stripe.

Debit Cards: issued by financial institutions and tied to cardholders' DDAs. Sometimes referred to as

online debit cards, these cards carry the logo of one or more debit network and require the input of

cardholder's PIN at the point of sale.

Dial-Up: a traditional connection type; the terminal/software/POS system is connected to a dial phone

line. To ensure uninterrupted service, NAB recommends the POS equipment be connected to a

dedicated analog phone line, not shared with any other items and without call waiting or other options

that could interrupt the connection.

Downgrade: when a transaction does not meet the qualifications for a particular level and it is assessed

with an additional fee. For example, if a transaction that would normally be swiped is keyed, that

transaction will downgrade and will be assessed accordingly.

EBT: electronic benefits transfer; commonly referred to as food stamp benefits. Merchant must

coordinate with their local government office to get set up for EBT acceptance and provide their EBT

certificate to NAB in order to accept EBT transactions.

IP: internet protocol; refers to the connection type of merchant’s point of sale set-up.

Merchant Bank: a bank that sponsors an acquirer into the MasterCard and Visa card systems.

MO/TO: mail order/telephone order; 100% keyed merchant environments.

PIN: personal identification number; used to process PIN-based debit transactions.

Processor: the company that moves transactions on behalf of acquirers between merchants, banks, and

the card networks.

QSR: quick serve restaurant; no signature required for transactions under $25.00 for certain

MCC/SICs. Please refer to the agent info center for additional information.

Rewards Surcharge: additional discount rate charged for swiped rewards transactions. The default

pricing for swiped rewards cards is mid-qual.

Touch Tone Capture: allows the manual keyed entry and subsequent authorization of a credit card

over a cellular or land-line telephone. With this method, a merchant typically imprints their customers

card with an imprinter to create a customer receipt and merchant copy, then process the transaction

instantaneously over the phone.

Transaction: a payment card sale or refund between the cardholder and merchant.