Chargebacks Glossary of Terms

The payments industry is packed with jargon and confusing terminology. Not understanding the keys to the industry language can have severe and often negative consequences. The information you need is available and it’s important to research, ask questions, and learn what you need to know about all aspects of chargebacks and how they relate to your business.

We’ve provided this short glossary of chargeback terminology as a tool to increase your knowledge and understanding of what it takes to protect your business from fraud and the dispute process. If you don’t see a term listed or have more questions, contact us and we’ll be happy to help.

We haven’t included every known term in this chargebacks glossary—frankly the list would simply be too long and too cumbersome to read in one stop. Instead, we’ve focused on the key terminology, and we suggest that you refer to the documentation provided by issuing banks and your acquiring bank or payment processor for case-specific terminology.

The financial institution that the merchant works with to accept and manage credit card transactions.

Address Verification Service (AVS)
Used to verify the address of the cardholder when the credit card is not swiped. Typically, the cardholder’s Zip Code is used to confirm the address. For example, this can be used on gas pumps, online transactions, or during phone orders.

This is the process that authorizes the transaction. The transaction is either approved or denied for the specific transaction amount for the specific credit card.

This stands for Business to Business, which is in reference to one business communicating with or conducting transactions with another business.

This stands for Business to Consumer and represents the relationship between a business and consumer.

Back-End Protection
This brings chargeback protection full circle and allows you to be proactive when fighting chargebacks. Use back-end protection to collect the data you need to build your chargeback defense, recover lost revenue, and protect your bottom line.

The person who is authorized to use the issued credit card. The cardholder’s name should be clearly displayed on the front of the card and validated with a signature on the back of the card.

Card Issuer
The financial institution that issues the credit card. Often the issuer name is displayed on the front of the credit card.

Card Present
A sale that occurs when both the cardholder and credit card are present. For example, an in-store purchase.

Card Not Present
Often referred to as CNP, this indicates a transaction that occurs when the cardholder is not present. For example, an online purchase, phone purchase, or mail-in purchase.

Card Verification Value
This is typically referred to as CVV, which is a unique three-digit number on the back of Visa, MasterCard, or Discover cards, and a four-digit number on the front of American Express cards. This is used to identify the card as being used by the authorized cardholder. Typically, online payment programs will ask users to manually enter the CVV; this value is not stored in the merchant’s website memory.

A chargeback occurs when a cardholder contacts their credit card company to request a reversal of a charge. This was introduced as a type of consumer protection against credit card fraud, but now we’re seeing savvy fraudsters taking advantage of the chargeback process to cheat merchants out of valid sales and revenue.

Chargeback Fraud
This occurs when a customer files a fraudulent request for a refund on a purchase. These are made by savvy customers who have learned that, depending on the payment solutions in place, the merchant can be easily taken advantage of.

Chargeback Ratio
This is the number of chargebacks-to-transactions that you have. The higher your chargeback ratio, the more difficult it is to remain profitable and keep issuer fees at a minimum.

Credit Receipt or Credit Transaction Receipt
This is the proof of the refund provided by the merchant to the cardholder’s account. Having access to this receipt can be valuable when disputing credit card chargebacks.

There are various levels of encryption that can be used to securely scramble and protect the cardholder’s identity, card number, address, and location.

Front-End Protection
This is your first line of defense, providing you with immediate notification that a chargeback has been initiated. This gives you the opportunity to act fast to resolve the case before it becomes a chargeback.

Any financial institution (bank, credit union) that issues credit cards to consumers and businesses.

The individual, company, or business that is selling products or services. Typically, the merchant has a relationship with an acquirer to accept credit card and debit card payments.

The Personal Identification Number (PIN) is entered into a payment terminal by the cardholder to validate and authenticate the credit or debit card transaction. This is typically a four-digit number.

Processing Fees
These are the fees that represent the cost of processing credit card and debit card transactions. This term can also be used to refer to the fees that the merchant pays to the issuer and acquirer when chargebacks occur.

Reason Code
This code represents the underlying reason for a chargeback. Each credit card company has its own distinct list of reason codes, descriptions, and numbers. It’s imperative that as a merchant you’re familiar with and understand the reason codes that are applied to each transaction that may be disputed.

The process whereby you decide to dispute or fight a chargeback. To effectively represent your case, you must have access to the information provided to you by a proven end-to-end solution.

Learning More about Chargebacks
This is a high-level glossary of terms that we hope will provide you with a foundation for your understanding of common chargeback terminology. We suggest you review our Resources and FAQs to learn more about chargebacks and protecting your bottom line.