subject: Payment Processing Definitions You Need To Know [print this page] Payment processing forms the backbone of every business. It's difficult to generate a profit when you can't accept payments from customers. But as important as payment processing is, many small business owners find themselves confused by industry jargon and thus unable to make informed decisions regarding their payment processing needs.
Here's an alphabetical list of payment processing definitions all small business owners should know before their initial meeting with a merchant services provider.
Address Verification Service (AVS) - AVS serves to provide verification for a card. When checking out, the customer is asked to enter their address, if the address does not match the address associated with the card, the card is declined. AVS is most frequently used for online, mail and telephone purchases.
Annual Fee - Some merchant services providers charge an annual fee for their services. The terms annual fees and membership fees can mean the same thing.
Application Fee - An application fee is a onetime fee charged when a business applies to work with a merchant services provider that covers the cost of processing the paperwork associated with applying for payment processing.
Authorization - Authorization occurs when the financial institution associated with the customer's card confirms that the card is both valid and has enough funds available to cover the cost of transaction. The authorization process prevents businesses from taking a card as payment that does not have the funds to cover the purchase. If a card does not get authorized, it will be declined.
Automatic Bill Pay - Automatic bill pay allows a business to draw payments from a customer's account automatically, usually on a monthly basis.
Chargeback- A chargeback occurs when a customer disputes a charge on their card. It is the reversal of a transaction; the transaction cost will be credited back to the customer's card.
CVV2 - A CVV2 is a three digit number located on the back of a VISA, MasterCard or Discover card. On an American Express card, a CVV2 is four digits and located on the front of the card. By knowing the CVV2 number, a customer can verify that they have the card in their hands when making an online, telephone or mail purchase.
Online Payment Gateway - Online payment gateways allow merchants to securely authorize payments in real-time for online purchases. The online payment gateway is the middleman between the shopping cart on a website and the business's payment processor.
Internet Merchant Account - An Internet merchant account is an account that allows businesses to accept credit or debit card payments from customers via the Internet. Every online store is connected to an Internet merchant account.
Merchant Bank - Merchant banks are financial institutions like Mastercard or Visa.) that provides support in payment processing. The merchant services provider and the merchant bank are not the same thing.
MOTO - MOTO is an abbreviation for mail order, telephone order.
Transaction Fee - Transaction fees are charged on every transaction to pay for the cost involved in authorizing the card.
Putting payment processing in place is not a choice to be made without some research. There are a multitude of things to consider when choosing a merchant services provider to handle your payment processing needs. Becoming familiar with these terms makes it possible for you to make educated decisions regarding payment processing.
by: Nathan Randel
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