It’s amazing how the definition of a word can change so drastically depending on what industry you’re dealing with. The automotive industry has acronyms for everything, and you truly speak a different language when you’re a chef. Not to be outdone, the credit card processing industry has a language unto its own. Here are six of the most common, most misunderstood words in the credit card processing:
1. Address Verification System (AVS) — This service allows a merchant to verify a cardholder’s billing address against what the card issuer has on file. It is done before completing the transaction in hopes it will cut down on fraud. This is especially helpful for seeing if there are any red flags before completing Mail Order/Telephone Order (MO/TO) or online transactions. This optional service is not foolproof; the system returns an AVS flag, and it’s up to the merchant to decide, based on what was flagged, to approve the transaction or not. Note that regardless of the AVS flag, the issuing bank will authorize the credit card.
2. Batch — When 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 reconcile their tips and then manually batch their terminal to ensure accurate batches and get the best cost associated with those transactions.
3. Chargeback — A 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.
4. Code 10 — Code 10 calls are made when a merchant is suspicious of accepting a credit card for whatever reason. The phrase "Code 10 authorization" is used to avoid alerting the customer to the fact that the merchant is suspicious of their card. A Code 10 might be appropriate when an error message occurs when swiping the card that reads “Pick Up Card or Stolen Card,” the signature on the receipt and card don’t match, the card has been tampered with, and if the customer is acting suspiciously. The operator then asks the merchant a series of YES or NO questions to find out why the merchant is suspicious of the card or the cardholder. If it’s deemed a questionable transaction, the merchant may be asked to keep the card if safe to do so.
5. Payment Card Industry -Data Security Standard (PCI – DSS) — Created to help ensure that there is a standard for security of payment card information in the industry. There are 12 standards that must be adhered to, click here to learn about each one. Failure to adhere to the standard (by any party that handles card information, including merchants and ISOs) can result in hefty fines.
6. High-risk merchant — Humboldt Merchant Services specializes in hard to place and high-risk merchants, so this term is special to us. We classify a high-risk merchant as someone who might be in an industry who is susceptible to chargebacks, and their acquirer might have different policies in place to work with them.
To learn more of payment card industry terms, visit Humboldt’s glossary.