Everyone is capitalizing on the powerful capabilities of the Internet. CySpace City now offers start to finish solutions for access, hosting and the opportunity to develop your own on-line store, complete with back-end ordering and payment processing.

Frequently Used Terms =======================================================================================

ACH - A form of electronic payment. Automated Clearing House is typically used to process
high volumes of relatively small-dollar payments for settlement within one or two business days.
ACH transactions are settled in a manner similar to the way checks are settled: The clearinghouse
takes all ACH files received daily from its member banks, sorts them by the originating bank (the bank
where the check was cashed or deposited) and the paying bank (the bank against which the check was
drawn), totals the accounts, and credits or debits appropriate accounts accordingly.
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Address Verification Service (AVS) Fee - Allows you to run AVS on all transactions to check the billing
information that was provided to the information on file with the credit card company. This helps to fight
against charge backs and fraudulent orders. Depending on which merchant provider you choose, there
might be an extra fee per transaction for this service.
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Acquiring Bank: A financial institution that contracts with merchants to settle electronic transactions. The
acquiring bank provides the merchant with its credit card processing account. This acquiring bank sends
credit card and purchase information from transactions to a credit card association (such as Visa and
MasterCard), which forwards it to the issuing bank.
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Authorization: The process by which an issuing bank approves the availability of funds for a credit card
transaction for a specific amount.

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Bankcard Association: The Visa and MasterCard associations.

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Batch - A collection of transactions that have been made in a single day. Most terminals and
real-time processors will collect all of the transactions and then do a batch at the end of day,
instead of batching them throughout the day.

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Capture - The submission of credit card transaction to be processed by the merchant provider or
merchant account holder. This is used to check the funds availability on the credit card submitted.

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Chargeback - A payment dispute initiated by the cardholder with their credit card issuing bank. The
amount of the disputed transaction is immediately withdrawn from the merchant's bank account, and
the merchant can dispute the chargeback with proof of purchase, signature, proof of delivery, etc. A
chargeback fee is usually assessed to the merchant on top of the actual transaction. A chargeback
is usually generated when a cardholder disputes a transaction because of one of the following criteria:
non fulfillment of product or service, un-authorized purchase, product/service expectations not met.

**When a chargeback is generated, the issuing and acquiring banks must research the facts to determine
which party is responsible for the transaction. **

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Discount Rate - The Discount Rate is the percentage that is charged by the bank every month on all
your transactions. The higher the rate - the more they keep - and the more it costs you.

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Ecommerce - This pertains to doing business online and making transactions, sales, refunds and
selling online. This pertains to any online sales, and the way businesses communicate and grow.

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Gateway Processor - Most of the smaller merchant providers resell some other Gateway Processor,
which is the company that does all the charging on your customer's accounts.

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Interchange Rate: The rate that is set and charged by the bankcard association to the acquiring
banks for the transaction. The interchange rate, which is actually a percentage of the transaction amount,
also helps account for authorization costs, fraud and the general or average banks cost of funds.

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I.S.O.: An Independent Sales organization is an organization that provides a variety of merchant
functions (i.e. processing) on behalf of the acquirer. These functions can also include selling new
merchant accounts or providing back room services. An I.S.O. can also be referred to as an M.S.P.
(Merchant Service Provider).
It is important that the acquirer must register all ISOs/MSPs with bankcard associations.

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Issuing Bank - This is the bank that issues the customer the credit card and funds your account when
you make a charge to one of their accounts. They will then bill their customers for the debit on their card.

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Mail/Telephone/Internet Discount Rate - This is the discount percent fee for Internet/mail/telephone
related business. This fee is the highest fee on the market due to the increased risk of fraudulent
order submissions. It is much easier for a scamster to send a credit card number over the Internet
than it is in person at a retail store. This is the same thing as Credit Card Fee (Discount Rate). =======================================================================================
Merchant Provider - This is a company that will offer you a merchant account. They will usually have
a relationship with their sponsored payment processor to give you a merchant account. If they do not
own their own gateway system, they usually resell another company's system which will do the
processing, while the bank does the charging and depositing.

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Merchant Account - A merchant account is a relationship and trust you have with a bank that has
agreed to allow you to charge people's credit cards. The bank is responsible for debiting the funds
from the customer and depositing it into your account. There is usually a processor that is involved
that processes the credit cards for the bank and lets them know the funds are available. When you
are given a merchant account from a company, they are relying on you to uphold your promises to
your customers by delivering the products and/or services to them in a timely manner. Merchant
providers are taking a risk to allow you to take credit cards under their name.

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Merchant Bank - A bank that works with businesses to give them the ability to offer merchant
accounts. They take care of charging the customer and funding the merchant account holder.

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Monthly Minimum - The majority of Merchant Providers have a monthly minimum. This is a fee that is
imposed if your credit card charges (Discount Rate) doesn't add up to their monthly minimum. For
example, your monthly minimum is $25 a month. If you only sold $100 worth or products for that
particular month, then it would cost you say 2.39% for charging the card, 32 cent transaction which
equals to $2.71. Now, that is $25.00 - $2.71 = $22.29, so you would be charged $22.29 for that
particular month.

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Merchant Processing: The settlement of electronic payment transactions for merchants. It is
a separate and distinct business line from credit card issuing. Merchant processing involves
gathering sales information from the merchant, collecting funds from the issuing bank, and
payment to the merchant.

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Merchant Underwriting: Merchant underwriting & approval policy helps control credit risk. The
policy is effective in designating and targeting merchants who meet the acquiring banks processing
criteria. The policy also acts as an agreement between the third party billing agent & the acquiring
banks as to what information is needed from the merchants to measure the merchant against the
acquiring desired list of criteria. The policy also outlines and lists what information is needed from
the merchant, for the merchant agreement.

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Merchant services provider: A bank, ISO, or other firm that provides services for processing financial
transactions, usually credit card sales. Many MSPs provide merchant accounts, while others require
their clients to establish merchant accounts on their own. Some MSPs claim that they do not require
merchant accounts; this may indicate factoring, which is illegal in many areas.

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MOTO discount rate (mail order / telephone order discount rate): The discount rate charged by the
merchant account provider for credit card transaction in which the actual credit card was not available
to the merchant. MOTO discount rates are generally higher than swipe discount rates to account for
the increased chance of fraud or nonpayment.

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Point of Sale Terminal (POS) - An electronic device used for verifying and processing credit card
transactions. Is a little device that allows you to slide the credit card through to make a charge. If
the credit card is available, the merchant can swipe the card through the terminal. This is what most
retail stores have. It is fast, easy and accurate to make a charge on a customer's credit card within
seconds. It is also known as a terminal machine.

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Real-time processing - The verification and processing of credit card transactions immediately following
a purchase. Real-time verification on the Web usually takes less than five minutes. Real-time verification
is especially important for web sites that sell products and services that consumers expect immediately,
such as memberships to the site or software downloads.
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Rolling Reserve (a.k.a. hold back) - A portion of the revenue from a merchant's credit card transactions,
held in reserve by the merchant account provider to cover possible disputed charges, chargeback fees,
and other expenses. After a predetermined time, holdbacks are turned over to the merchant. Note:
Merchant account providers almost never pay interest on holdbacks.
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Secure Socket Layer (SSL) - SSL is a secure web protocol that uses 128 bit or higher encryption
technology to keep your customer's information completely safe through the entire ordering process.
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Swipe Discount Rate - This is the discount rate for retail stores that use a POS terminal. This is for
merchants that swipe the credit card, and run the credit card through the machine. This fee usually is
about 1.7% and is lower than the Internet rates due to the decreased risk in fraudulent orders being
placed. The likelihood of a scamster using a credit card in a retail store than online is much less
because of the difficulty. =======================================================================================

Settlement: The process by which funds less applicable fees for bona fide sales are sent to merchants. =======================================================================================

Shopping cart program: A software package that runs as part of a Web site to collect and record
purchasing decisions by a visitor. Shopping cart programs are stored on Web servers.
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Transaction Fee - This is the fee that your processor, or your merchant provider charges for the
transaction. This fee ranges from $0.20 to about $1. This fee covers the costs of the computers
and network required to accomplish the task. =======================================================================================

Third-party Organization: Any outside company with which the acquirer contracts to provide merchant
processing services.

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