Glossary
Every term the primer defines, in one place, with a link to the page that teaches it. Pages introduce terms in the order a reader needs them; this page is for when you meet one out of order.
Where two pages both use a term, the definition here is the one to trust.
Every term below comes from glossary.yml. Terms marked in the text link here, and show their definition on hover or when tabbed to.
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- 3-D Secure (3DS)
the authentication step that sends the cardholder to their own bank to confirm identity. It shifts fraud liability towards the issuer.
A
- Arbitration
the network deciding a dispute the issuer and acquirer could not settle, and charging a fee to whoever loses.
- Assessments
the network's own fees, charged on volume and transaction count. Separate from interchange, which goes to the issuer.
- Auth code
the issuer's reference for an approval. A later capture is linked back to it.
a reduction in the cardholder's available balance that is not yet a charge. No money has moved.
releasing an unused hold. The cheapest way to undo a payment, and the only one available before capture.
Visa's single deadline covering approval through clearing, counted in calendar days from approval.
B
- Banking day
a day the settlement system runs. Not weekends, not bank holidays. Funding schedules count in these, not in calendar days.
- Batch
the day's captured transactions, submitted for clearing together.
- Batch close
the daily cut-off at which captured transactions go for clearing. It starts the funding clock; the purchase does not.
- BIN (bank identification number)
bank identification number. The leading digits of a card number identifying the issuing institution, and on the acquiring side the membership a transaction is submitted under.
- BIN sponsorship
the arrangement letting a non-bank operate under a licensed bank's network membership.
- Blind refund
a credit with no matching original sale. Restricted and monitored, because it is a money-laundering route before it is anything else.
C
- Card-not-present (CNP)
a transaction made online, by phone, or from stored details, where nobody can prove the card existed. The merchant generally carries the fraud loss.
- Card-present
a transaction made with the physical card at a terminal, dipped, tapped or swiped. The issuer generally carries the fraud loss.
- Chargeback
the issuer reversing a settled transaction on the cardholder's behalf. The money is debited from you before you are asked for your side.
- Chargeback ratio
disputed transactions as a share of volume. Both networks run monitoring programmes against it, and your acquirer sets your reserve by it. Refunds do not count towards it.
- Clearing
the exchange of records that decides who owes whom, assigns each transaction its interchange category and calculates the fees. This is where a transaction's price is finally set.
- Cut-off time
the daily deadline for joining the current batch, set by your processor and usually in its timezone rather than yours.
D
- Disbursement
paying third parties out of funds you collected, such as sellers on a marketplace. A separate flow with its own regulatory position.
- Dispute fee
your provider's per-dispute charge. You pay it whether you win or lose, which is why winning a small case can still cost money.
- Downgrade
a transaction landing in a worse interchange category than it qualified for, usually through late capture or missing data. Nobody tells you at the time.
- Dual-message
authorization and clearing sent as separate messages, which is what makes capturing later, capturing a different amount, and voiding possible.
E
- Effective date
the date ACH funds are meant to post, not the date the file was sent.
a hold for an amount that is not yet final, as at a fuel pump or on a bar tab.
F
a request flagged as settled, whose amount will not change. Carries a shorter clearing deadline than a preauthorization.
- Force capture
a capture with no matching authorization. It works, and it costs: a per-item fee, no confirmation the funds existed, and a weaker position in a dispute.
- Four-party model
issuer, acquirer, network and merchant, with the two banks connected only through the network. The reason a card works in a country neither bank operates in.
- Funding
your provider paying you. A separate event from settlement, governed by your contract rather than by network rules.
- Funding hold
a temporary stop on one specific payout, usually following a risk review or a volume spike.
G
- Gateway
a message router between the merchant and the processor. It never holds funds, which is the fastest way to tell it apart from everything else in the stack.
I
an addition to an existing hold as a bill grows. It does not extend the original clock.
- Interchange
the fee the acquiring side pays the issuer on each transaction. The main reason issuing cards is profitable.
- Interchange schedule
the network's published table assigning each transaction category its interchange rate. The network sets it but is not paid from it.
- Interchange-plus
pricing that itemises interchange, assessments and the provider's markup separately.
M
- Master merchant account
a facilitator's own merchant account, through which its sub-merchants transact.
- Merchant account
the account an acquirer holds for a merchant, distinct from a normal business bank account. Settlement funds land here before they reach you.
- Merchant of record
the party responsible for the sale and its disputes. On a platform this is frequently not the seller who shipped the goods.
- Merchant-initiated transaction (MIT)
a charge raised against a stored card without the customer present, on consent given earlier. Subscriptions and installments are the common cases.
Visa's charge for an approved authorization that is neither settled nor reversed. Small per item, and a real cost at volume.
N
- Negative net position
a period where refunds and chargebacks exceed sales, so there is nothing to fund and the provider recovers the difference.
- Net funding
fees deducted before the deposit arrives, so no deposit matches a figure anyone else in the business recognises.
- Net settlement
sales, refunds and chargebacks offset into a single figure. This is why no settlement amount will ever match one order.
- NOC (notification of change)
notification of change: an ACH message telling you to correct the account details you are debiting.
O
- ODFI / RDFI (ODFI, RDFI)
the originating and receiving banks in an ACH transaction.
- Over-capture tolerance
the allowance to claim slightly more than was held, which is how tips and fuel work.
P
- Partial capture
claiming less than the authorized amount, typically because you shipped less than was ordered.
- Payment facilitator (PayFac)
a PSP that onboards sub-merchants under its own master merchant account, doing the underwriting and carrying the losses itself.
- Payment service provider (PSP)
an aggregator placing many merchants under one acquiring relationship.
- Pre-arbitration
a second exchange after a representment is rejected, before the case goes to arbitration.
a request flagged as an estimate, with the real amount to follow. Given longer to clear than a final authorization.
- Processor
the party running authorization and clearing messages on an acquirer's behalf. Batches are a processor construct.
- Pull payment
the payee instructing the payer's bank to take money in. Cards and ACH debits are both pulls.
- Push payment
the payer instructing their own bank to send money out.
R
- Reason code
the network's identifier for what a cardholder is claiming in a dispute. It determines which evidence counts, so it is the first thing to read on a dispute notice.
- Refund
a new transaction going the other way, referencing the original, after settlement. It carries its own fees and its own settlement delay.
- Representment
re-presenting a disputed transaction to the issuer with evidence. The merchant's one substantive move in a dispute.
- Reserve
funds an acquirer withholds against future chargeback risk. A **rolling reserve** holds a percentage of each day's volume for a fixed window then releases it; a **fixed reserve** accumulates a set amount once.
- Return
the receiving bank sending an ACH transaction back, with a reason code. Unlike a chargeback, it cannot be contested.
S
- Sale
a single message that authorizes and captures at once. Right for instant delivery, wrong for anything you ship later.
- Scheme rules
the network's published rulebook, setting deadlines, dispute rights and evidence standards.
- SEC code
the ACH entry class identifying how a debit was authorized.
- Settlement
the movement of funds between issuer and acquirer, normally the next banking day after clearing. It does not put money in your bank account; funding does.
- Single-message
authorization and clearing combined into one message, fixing the amount at approval. Capture later, partial capture and void do not exist on it.
- Soft decline
a decline inviting a retry with stronger authentication rather than a refusal.
- Stand-in processing
the network approving on the issuer's behalf when the issuer is unreachable, within limits the issuer set in advance.
- Sub-merchant
a merchant operating under a facilitator's master account rather than holding its own.
T
- T+n
funding counted in banking days from batch close. T is the day the batch closed, not the day of the purchase.
- Three-party model
a closed loop where one company both issues the card and acquires the merchant, so there is no interchange to pay.
V
- Velocity limit
the issuer's cap on how often a card may be used in a period. A rate limit rather than a judgement, so the transaction will usually succeed later.
- Void
cancelling a captured transaction before the batch closes, so it never reaches the network. Usually avoids interchange, and the customer's pending charge simply vanishes.
Z
- Zero floor limit fee
Visa's per-item charge for a settled transaction that cannot be matched back to an authorization.