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Glossary
chargeback: A chargeback is charged to a merchant (or seller) when the customer
claims their card has been charged and the merchant has not delivered a
product or performed a service. The buyer asks the bank to remove the
charge from their credit card bill. The most common explanations given
by customers are that their card was stolen and used fraudulently or
that the seller failed to perform their side of the agreement.
Although sellers and credit card companies often work together to
resolve a dispute, the customer's credit card company ultimately
decides whether a charge is legitimate or not, and if the charge is not
found in the sellers favor, a chargeback fee is issued. So not only do
you NOT receive the money from the sale, an additional fee is charged.
These fees are used to recoup financial loss incurred when processing
such complaints. Click here to learn more about preventing chargebacks.
chargeback fees: Chargeback fees are the costs charged by a
processor to cover disputed charges.
contingent liability: This means the customer satisfaction relies on
the business being able to continue to perform some action in the
future.
Credit-card processing: is the act of taking a credit-card number from
a customer and authorizing it for payment and collecting funds.
discount rate: The percentage of each transaction
paid to the merchant account processing company. If your monthly charges are
less than a certain volume, the processor may charge a higher
percentage
fraud:
Fraud risk is the risk of inadvertently processing credit card
transactions that have not been authorized by the credit card holder.
high risk: a term that usually
encompasses adult sites, online casinos, and many other types of
business (see our article on high-risk credit card processing). Some merchant account credit card processing providers even refuse to
process any transactions that originate on the Internet-even from their
own existing brick-and-mortar clients-or may require that you create a
separate merchant account to process orders that are not taken
face-to-face but are received by mail, phone, or via the Internet.
High-risk refers to the fact that these industries have been
known to have a higher incidence of credit card fraud, chargebacks and
problems with transactions.
merchant account:
A merchant credit card account is
a line of credit provided by a financial institution such as a bank
that enables merchants of various fields to accept payments online via
credit cards. Merchant accounts or MAPs,
will verify customer's credit cards, process the transaction, and
deposit the funds into your account, usually within 2 to 4 business
days.
monthly minimum fees: There are monthly minimum fees
that the
merchant account provider collects each month from the merchant if
the merchant's discount rate and transaction fees don't add
up to the monthly minimum specified on the original merchant
application.
cardholder: Your customer, who obtains their credit card from an issuing bank or financial institution, such as a Visa cardholder or American Express cardholder.
factoring: otherwise known as "credit card laundering", this is using another business's credit card merchant account (perhaps a friend or colleague) to run your company's credit card transactions. This is against Visa/Mastercard regulations and can land you with hefty fines and possibly more.
Net Settlement Amount: is the amount deposited into your bank account after the merchant account processing fees have been deducted.
Pass-Through Fees: fees deducted from your account, because a credit card transaction did not meet Visa/Mastercards necessary requirements, such as address verification.
Processors: the company that processes the credit card transactions for you by verifying the information, and processing the funds from the credit card company to your bank account.
MOTO: stands for mail
order/telephone order, but also includes internet orders. You
will see financial institutions using this abbreviation for card-absent credit card transactions.
Offshore merchant accounts:
Offshore
financial institutions are not bound by U.S. banking and credit card
regulations and so have less strict thresholds governing processing
volumes and chargebacks and this works to offset some of the
liability risks associated with high rates of chargebacks, credit card
fraud, and other disputes. Offshore merchant accounts are a
popular option for high-risk businesses.
reserve: Often required for higher-risk merchant accounts to counteract the risk of processing money for your business, reserves are usually a
percentage of the monthly charge volume and are created by withholding
a percentage of each transaction for an agreed upon duration.
Furthermore, reserve amounts belong to the merchant. They
are held in escrow by the bank in the event they are needed to offset unexpected chargebacks.
storefront solutions: applications that you might need t effectively operate the financial aspects of your web site, such as
shopping carts, Web hosting, payment gateways, virtual terminals,
virtual checks, databases for fulfilling orders, customer tracking,
and a way to calculate tax and shipping charges.
transaction fee: A flat transaction fee is charged for each
transaction processed.
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