FAQs

Q?What is Address Verification Service (AVS)?
A.

The process of validating a cardholder’s given address against the issuer’s records, to determine accuracy and deter fraud. This service is provided as part of a credit card authorization for mail order/telephone order transactions. A code is returned with the authorization result that indicates the level of accuracy of the address match and helps secure the most favorable interchange rates.

Q?Authorization Code?
A.

A code that a credit card issuing bank returns in an electronic message to the merchant’s POS equipment that indicates approval of the transaction. The code serves as proof of authorization.

Q?Automated Clearing House (ACH) File?
A.

A file with instructions for the exchange and settlement of electronic payments passed between financial institutions. It represents debits and credits to be deducted from an account automatically as they occur.

Q?Credit (Reversal)?
A.

Nullification of an authorized transaction (sale) that has not been settled. If supported by the card issuer, a reversal will immediately “undo” an authorization and return it to the open-to-buy balance on a cardholder’s account. Some card issuers do not support reversals.

Q?Interchange Fee?
A.

A fee paid by an acquirer to an issuer for transactions entered into interchange. The interchange fee is a percentage applied, according to Visa/MasterCard regulations, to the dollar value of each transaction. There are multiple categories of interchange, and Visa and MasterCard each have their own criteria for their own categories. A transaction must meet the specified criteria for a category in order for that category’s rate to be applied. Each transaction is evaluated individually, so various interchange rates may apply within one batch of merchant transactions.

Q?Issuing Financial Institution?
A.

The financial institution that extends credit to a cardholder through bankcard accounts. The financial institution issues a credit card and bills the cardholder for purchases against the bankcard account. Also referred to as the cardholder’s financial institution.

Q?Non-Qualified Transaction Fees (NON-Qual)?
A.

Bankcard sales transactions that do not meet set Visa/MasterCard criteria for that particular merchant and are processed at a higher interchange rate. An example of this is a merchant that is retail (card present) that processes a card-not-present transaction (or manually enters card data rather than swiping the magnetic stripe through the terminal). The merchant will pay the difference between what they should have paid on retail and what they actually qualified for (card not present). This difference is called non-qualified interchange fees.

Q?Reserve Account?
A.

One method that ACH Processor’s use to mitigate risk, is to require that merchants maintain a Reserve Account at the Processor’s Sponsoring Bank. This allows the Processor to issue a Hold on funds in this account when fraud has been detected or an excessively large number of returns is received. Merchants with good credit and history can usually meet the expectations of ACH Processors for covering returns and so are not always required to keep a reserve account. In cases where a reserve is required, the minimum-reserve-balance in the account is set at about 20% of the anticipated processing volume. New merchants are usually allowed to build up their reserve by sending in transactions which are not withdrawn until the minimum reserve balance is achieved; after that, the merchant is allowed to withdraw the excess funds for transfer to their home town bank.