Credit Card Payments Definitions

CREDIT CARD COMPONENTS

CREDIT CARD

Physical card issued by a financial institution or card network which allows cardholders to borrow funds up to their credit limit to pay for firearms, ammunition, firearm accessories and firearm services under the condition cardholders pay back the borrowed money, plus applicable interest and agreed upon charges, in full or partially by the billing date or over time.

EMV CHIP

Microchip inlaid in the front of a card, embedded with cardholder account information, including the card holder’s name, card number, expiration date and security code. When the card is inserted in a card terminal, the cardholder’s data is encrypted as a token and used to process the transaction. EMV is named after the organizations which created the standard, Europay, Mastercard and Visa.

CARD ISSUER

Financial institution or card network which provided the card and associated account credit limit to the cardholder. The card issuer retains full authority over the card held by the cardholder. Also referred to as the issuing or customer bank.

Examples: Chase, Wells Fargo, American Express

CARD NETWORK

Financial service company which enable, process and settle card payments between card issuers and merchant banks. Some card networks are also card issuers. Also referred to as a card association.

Examples: Visa, MasterCard, American Express, Discover

CARD NAME

Name of card, often referencing a financial institution account or card network rewards program.

Examples: American Express Platinum, Capital One Venture, Chase Southwest Rapid Rewards Priority

CARD NUMBER

Unique identifying number, up to 16 digits, embossed on the card and stored in the card’s magnetic strip. Card numbers are set and assigned by the American National Standards Institute (ANSI) or the International Organization for Standardization (ISO).

BANK IDENTIFICATION NUMBER (BIN)

First four to six numbers of card number. The BIN is used to identify the card issuer.

CARDHOLDER

Name of individual issued card and authorized to use it to pay for firearms, ammunition, firearm accessories and firearm services.

EXPIRATION DATE

Date, formatted as month and year, embossed on the card at which the card will expire. Upon expiration, a new card will be sent to the cardholder by the card issuer with a new expiration date and security code. The account connected to the card will not close when the card expires.

MAGNETIC STRIPE

Metallic bar located on the back of the card, embedded with cardholder account information, including the card holder’s name, card number, expiration date and security code. When the card is swiped in a card terminal, the cardholder’s data is transmitted to process the transaction. Also referred to as the magstripe.

SIGNATURE BOX

Location for signature of cardholder.

CARD SECURITY CODE (CSC)

Unique identifying number, three to four digits, embossed on card as a security feature in card not present transactions. Also referred to as the card verification value (CVV) by Visa, card verification code (CVC) by MasterCard and card identification code (CID) by American Express.

PERSONAL IDENTIFICATION NUMBER (PIN)

Unique code, typically four digits, set by the cardholder when issued the card. Depending on the transaction and card network, the PIN must be entered using a card reader terminal’s PIN pad to verify the cardholder.

CARD PAYMENT METHODS

SWIPE

The act of sliding a magnetic stripe card through a magnetic stripe card terminal or POS system.

DIP

The act of inserting a EMV chip card in an EMV card terminal or POS system.

TAP

The act of scanning a near field communication (NFC) card on or near an NFC card terminal or POS system. Also referred to as contactless payment.

DIGITAL WALLET

The act of scanning an electronic device (e.g., mobile phone) with a digital payment service on or near an NFC terminal or POS system. Digital wallets are a form of contactless payment. Also referred to as a mobile wallet or e-wallet.

Examples: Apply Pay, Samsung Pay, Venmo

CARD NOT PRESENT

Payment in which the cardholder does not have or cannot physically present the card to a firearm merchant. Card not present payment is commonly used in ecommerce, mobile application, phone and mail transactions and typically requires the cardholder provide a card security code.

MAIL ORDER/TELEPHONE ORDER (MOTO)

Card not present payment in which a customer provides a firearm merchant with order and card information by regular mail, fax or telephone. MOTO payments give payees authorization to process the transaction and may require the payer provide their card security code and/or mailing address ZIP code.

CARD PAYMENT PROCESS

AUTHORIZATION

(1) Cardholder swipes, dips or taps card in/on a firearm merchant card terminal or POS as payment for firearms, ammunition, firearm accessories and firearm services. (2) Firearm merchant card terminal or POS sends card information and transaction details to the acquiring bank via internet or phone line. (3) Acquiring bank receives information and forwards to the card network. (4) Card network routes information to the cardholder’s issuing bank. (5) Issuing bank receives information and checks card details to ensure transaction is not fraudulent and cardholder has sufficient funds. (6) Issuing bank sends response back via the card network to the acquiring bank. (7) Response is received by firearm merchant card terminal or POS. If approved, cardholder completes transaction. If denied, transaction is cancelled. The response code is stored on the firearm merchant card terminal for settlement.

SETTLEMENT

(1) At end of day, firearm merchant sends batch of authorizations to the acquiring bank. (2) Acquiring bank confirms each authorization and sends batch via the card network to the appropriate issuing bank. (3) Card network debits the issuing bank for each transaction amount and credits the acquiring bank.

FUNDING

(1) Issuing bank pays the acquiring bank the total transaction amount via the card network (2) Merchant bank deposits funds, minus interchange fees, into the firearm merchant account.

CARD PAYMENT FEES

INTERCHANGE FEE

Transaction fee merchant bank pays when a customer uses a card to make a purchase at a firearm merchant, calculated as a flat rate plus a percentage of the sales total including tax. Interchange fees are dependent upon various factors (e.g., card type, payment method, business type) determined by the card network. Interchange fees are paid to the issuing bank to cover handling costs, fraud and bad debt costs, and the risk involved in approving the payment.

ASSESSMENT FEE

Transaction fee a firearm merchant pays directly to the card network. Assessment fees are dependent upon various factors (e.g., transaction volume, card type) determined by the card network.

PROCESSOR FEE

Transaction fee a firearm merchant pays to their payment processor and/or payment gateway provider. Processor fees are typically offered in four pricing structures: flat rate/blended, tiered, interchange-plus and membership-based. Also referred to as markup.

DISCOUNT RATE

Transaction fee a firearm merchant pays to their payment processor with each transaction, calculated as a percentage of a sale that goes towards paying card processing fees. Discount rate includes all interchange fees, assessment fees and markup. Also referred to as the merchant discount rate.