Common Terms in Payment /Transaction Processing
Authorization refers to the approval received from the purchaser’s credit card issuer to hold the funds on the card holder’s account until the hold expires with the card holder’s issuing bank. This does not capture the amount.
AUTHORIZATION & CAPTURE
Authorization & Capture does an Authorization and a Capture at the same time. This is sometimes referred to as a Charge.
Pr. Capture is a Prior Authorization Capture. After a card is authorized, a second set of data is passed for the transaction itself and this is called capture. It signifies that an actual transaction has taken place and the data is passed to the acquiring bank for settlement.
Credit refers to refunding back or reversing an already captured transaction to the purchaser’s credit card. This is usually done after the transaction has already batched or settled through a consumer’s debit or credit card account.
Void is the process of canceling a transaction. This is usually done before the transaction has already batched or settled through a consumer’s debit or credit card account.
A Batch is a collection of transactions that are combined into a single funds transfer.
A Chargeback is the reversal of a completed credit card transaction. This is most often initiated by the purchaser’s dispute of a charge.
The term Funding references the transfer of funds from the payment process to the Merchant’s bank account.
A fee specified by card associations that is paid by the acquirer to the issuing bank for each credit or debit card transaction to cover transaction costs. The acquirer passes this fee to merchants, in addition to any other fees charged for processing credit or debit card transactions. The fee depends on a number of variables, such as card type, business type, card acceptance method, settlement or batch timeframe, information submitted with the transaction, and more. Fees usually range between 1-3%.
A Merchant Account is the bank account where the organization’s funds pass through before depositing into the merchant’s checking account.
A Payment Gateway is a service that reads and authorizes payment cards and sends customer information to the payment processor to continue the transaction and transfer of funds.
A Payment Processor is a financial institution that handles funds transfer between your payment gateway, the card networks, the purchaser’s bank, and your merchant account.
Reconciliation is the process of comparing financial records between accounts to ensure that all funds are accounted for.
These are the fees collected by your payment processor during the process.