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Glossary of Commercial Card and Payment Terms and Definitions

Commercial Card and Payment Glossary

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Term

Acronym or
Abbreviation


Definition

1099 reporting

 

A U.S. federal tax law that obligates organizations (i.e., payors) to report certain payments. It is a means for the Internal Revenue Service (IRS) to ensure applicable suppliers are reporting income. A 1099 could be viewed as the equivalent to a supplier's W-2. In addition to federal requirements, states may impose 1099 reporting requirements as well.

accounts payable

A/P

  1. Money a business owes to others; current liabilities incurred in the normal course of business as an organization purchases goods or services with the understanding that payment is due at a later date.
  2. The department within an organization responsible for paying invoices on behalf of the organization.

acquirer

 

See merchant acquirer.

acquiring department

 

The department (business unit) within an organization that needs particular goods and/or services and, therefore, initiates purchases; may work with the procurement department or contact suppliers directly.

acquisition

 

A purchase (of goods and/or services).

association

 

See network.

ATM blocking

 

A common card control that prohibits cardholders from withdrawing cash from an automated teller machine (ATM).

audit

 

  1. An examination of one or more aspects of a card program, such as its procedures (and the related level of compliance), financial records, reporting and transaction documentation.
  2. The department within an organization responsible for conducting formal audits of the card program.

automated clearing house

ACH

An electronic payments system (outside the card networks) for clearing and settling transactions. Funds are electronically exchanged directly to/from participants' accounts. Frequently used by end-user organizations as the payment method by which to pay their issuer.

automated teller machine

ATM

An electronic banking machine that dispenses cash, accepts deposits and performs other services when a customer inserts a plastic card and follows the appropriate prompts.

bank identification number BIN The first six digits of a card number;

represents the card provider (bank) that issued the card, card type (e.g., P-Card) and card brand. 

benchmark

 
  1. Noun: A measurable metric or industry standard against which comparisons can be made.
  2. Verb: To compare metrics or standards between what other organizations or industries are doing versus your organization's goals or processes.
  3. Adjective: Resulting in a benchmark, such as a "benchmark study.”
"break-even" point When card acceptance costs/fees are basically equal to the benefits, providing no monetary advantage or disadvantage. It's the maximum transaction amount before card acceptance may no longer benefit the supplier, exceeding estimated cost savings, depending on the terms of the merchant agreement.

business case

 

A structured proposal for business improvement that offers a thorough cost/benefit analysis and the background for management to make a decision on the proposed project or solution.

Business Card

 

Credit and/or debit cards targeted for smaller businesses, as defined by each issuer, but generally organizations with less than 50 accounts; commonly used for a variety of expense types (e.g., goods, services and travel).

business-to-business

B2B

Commerce between businesses, as opposed to commerce between a consumer and a business.

buyer-initiated payment

BIP

See electronic payables.

card controls

 

See systemic controls.

cardholder

 

An employee to whom a Commercial Card is issued for the purpose of making designated business purchases/payments on behalf of their organization.

cardless accounts

 

Accounts that have no plastic card issued, only an account number to which the acquisitions of goods and services are charged.

cash flow

 

The pattern of company income and expenditures and resulting availability of cash.

central bill

 

The consolidated billing statement issued to an end-user organization by the issuer, reflecting the organization's card accounts (e.g., P‑Cards) and the posted totals during the billing period.

Certified Purchasing Card Professional

CPCP

Credential awarded to Purchasing Card professionals who have successfully passed the certification exam based on the body of knowledge necessary to administer a Purchasing Card program. To retain the credential, individuals must meet established ongoing requirements.

Commercial Card

 

Generic term for any card product used by organizations for the purpose of making payments for various goods, services and business expenses.

contingent liability   Cases of individual liability in which the end-user organization has not reimbursed the cardholder for bona fide business expenses and the cardholder, in turn, does not pay the issuer; allows the issuer to pursue the organization to obtain payment.

Controlled Value Card

CVC

See Declining Balance Card.

controls

 

The internal, external and/or environmental policies, procedures and technological processes put in place to reduce the risk of card fraud and misuse.

convenience checks

 

A payment method for which the draft is against the available credit of a Purchasing Card account or program. Can be used in the event a payee does not accept card payments.

Corporate Card

 

A card used by organizations and their employees for travel and entertainment (T&E) expenses. Also referred to as a Travel Card.

corporate liability   The end-user organization is liable for the Commercial Card charges; this is the case for Purchasing Card programs and, sometimes, Corporate Card programs.

cost of funds

 

The interest rate associated with the use of money (i.e., borrowed funds).

data capture

 

Electronic transmission and retrieval of data associated with card transactions; typically, data passed from the supplier through the issuer to the end-user organization. See also levels of data (I, II and III).

Debit Card

 

A card product that functions as an alternative to cash or checks, allowing the user to "pay now” versus the "pay later” scenario associated with credit cards; card transaction amounts are deducted from a funded account, such as the user's bank account. See also Prepaid Card.

Declining Balance Card

 

Specialized P‑Card with a pre-set spend limit and expiration date that is typically non-replenishing. Also referred to as a Controlled Value Card.

deliverable

 

Products and/or services provided to one party by another according to predetermined terms and conditions agreed upon by the parties.

department

 

Functional business unit of an organization such as purchasing, accounting, human resources, etc.

department card

 

A card issued to a department rather than a specific cardholder within the end-user organization.

discount fee

 

See merchant discount fee.

documentation

 

Communicable material (e.g., receipts), whether paper-based or electronic, serving to record and support business expenses paid via a card.

down-select

 

A process of evaluation that leads to a reduction of the field of candidates, such as during a request for proposal (RFP) process.

Dynamic Ghost Account

 

An account number provided to a supplier for which the limits are tailored to specific orders or invoices and can be turned on and off. See also Ghost Account.

electronic data interchange

EDI

Systems and processes that enable the paperless exchange of documents, typically transmitted via special-purpose connections and providers.

electronic funds transfer

EFT

The movement of money between bank accounts via ACH or wire.

electronic payables  

A form of electronic payment, utilizing the card infrastructure, managed centrally within an organization, typically by A/P. Also known aselectronic accounts payable (EAP), automated payables, e-payables, push payments, straight through payments (STP), buyer initiated payments (BIP), single-use accounts and electronic invoice presentment and payment (EIPP). Each provider has a proprietary name for its particular solution; functionality and processes vary for each.

electronic signature

 

An electronic equivalent of a written signature that could be a code or a symbol.

end-user

 

An organization that uses Commercial Cards for the payments of business expenses. Less commonly, is considered the employee (i.e., cardholder) to whom the card is issued.

enterprise resource planning system

ERP system

Technology solution aiding multiple facets of an organization's business activities, such as inventory management, purchasing and receiving, sales, accounts payable, etc.

file transfer protocol

FTP

The protocol for electronically transferring or exchanging data (e.g., files) from one computer to another.

file turn

 

Speed of payment by an end-user organization to the card issuer; also considered the average collection period. Sometimes referred to as days receivables outstanding or client-held days.

Fleet Card

 

Specialized Commercial Card used to capture fleet-related expenses (e.g., fuel, vehicle maintenance, repair and service).

four-party payment system

 

Card payment system in which the network links the end-user/cardholder, issuer, supplier and merchant acquirer; includes the Visa and MasterCard models. See also three-party payment system.

fraud

 

Unauthorized use of a card, resulting in an acquisition whereby the end-user organization does not benefit. Can be committed by the cardholder, other employees of the end-user organization, individuals employed by the supplier or persons unknown to any of the parties involved in the transaction.

full-time equivalent

FTE

An employee who regularly works 35 to 40 hours per week.

general ledger

GL

An accounting record or ledger that lists all increases or decreases of liability, reserve, capital, income and expense accounts.

Ghost Account

 

A type of card account whereby an account number is issued or provided to a specific supplier or supplier type for the payment of purchases made by an organization's employees. Also referred to as Ghost Card. May function like a Purchasing Card, having a monthly/cycle limit, or as a Dynamic Ghost Account, having specific limits that can be turned on and off (see also Dynamic Ghost Account).

implementation

 

The process of putting all card program functions and activities into place.

Incentive Card

 

A type of Prepaid Card used to reward employees or customers; also referred to
as a Gift Card.

individual liability   The cardholder (versus the end-user organization) is liable for the charges; this is a common arrangement for Corporate Card programs.

information technology

IT

  1. The development, installation and implementation of computer systems and applications.
  2. The department within an organization that is responsible for the development, installation and implementation of computer system and applications.

interchange fee

 

In a four-party payment system, a fee paid by a merchant acquirer to the issuing bank ("card issuer”). The fee compensates the issuer for the time after settlement with the acquiring bank/merchant bank and before it recoups the settlement value from the end-user.

interface

 

A process or electronic file designed to communicate information from one application or system to another.

invoice

 

An itemized bill for goods sold or services provided, containing details such as individual prices, the total charge and payment terms.

issuer

 

The financial institution issuing a Commercial Card or account. Also referred to as a card issuer, card provider or bank.

joint and several liability

  Both the end-user organization and the cardholder are liable for the Commercial Card charges, which allows the card issuer to pursue payment from one or both, as necessary.
large-ticket interchange

Typically a lower interchange fee for transactions exceeding a "high dollar” amount (e.g., $10,000) and, as applicable, meeting other requirements (e.g., Level III data); specifics are defined by the respective networks and may change over time.

Level I data

 

Standard transaction data including date, supplier and total purchase amount. Also written as "level 1" data.

Level II data

 

Enhanced transaction data including Level I data plus a customer-defined reference number, such as a purchase order number, and separate sales tax amount. Also written as "level 2" data.

Level III data

 

Detailed transaction data including Level II data plus line-item detail, such as the item purchased. Sometimes referred to as simply "line-item detail." Also written as "level 3" data.

liability

 

Money owed; debts or financial obligations. See also: contingent liability, corporate liability, individual liability, joint and several liability, and split liability.

line-item detail

 

Transaction data reflecting what was purchased. See also Level III data.

line of credit

 

The maximum amount of credit to be extended to a customer.

low-value transactions

 

Transactions for which the total is less than a particular small dollar amount (e.g., $2,500), as defined differently by each organization.

maintenance, repair and operating goods

MRO

Items supporting the production and/or delivery process of other goods or services; for example, oil.

mapper

 

The electronic file of transaction data originating from the issuer and interfaced with an organization's financial management system. Also referred to as the statement billing file (SBF) or interface file.

mapping

 

Process of downloading transaction data (i.e., mapper file) from the issuer and importing it into an organization's financial management system for the purpose of allocating card transactions to the assigned accounting codes.

merchant

 

See supplier.

merchant acquirer

 

A financial institution or other entity that enrolls merchants (i.e., suppliers) to accept card payments; provides related technology and services to the merchant; and facilitates payment flow, such as payment to the merchant. Also referred to as an acquirer or a supplier's bank.

merchant category codes

MCC (singular);

MCCs (plural)

A system of four-digit codes, maintained by the networks, used to identify a merchant's principal trade, profession or line of business; an MCC is assigned to a merchant by the merchant or merchant acquirer

merchant discount fee

 

The fee paid by a merchant to its merchant acquirer/bank or other contracted party for services related to the processing of the merchant's card transactions; in a four-party payment system, includes interchange. Also referred to simply as discount fee.

metrics

 

Quantified, relative statistics used to rate card program performance.

misuse

 

Unauthorized purchasing activity by the employee to whom a card is issued. Includes a wide range of violations, varying in the degree of severity, from buying a higher quality good than what is deemed appropriate to using non-preferred suppliers.

National Association of Purchasing Card Professionals

NAPCP

A membership-based professional association committed to advancing Commercial Card and payment professionals and industry practices worldwide. Provides continuing education and peer networking through its Annual Conference, Regional Forums, webinars, website, newsletter and regular communication.

network

 

Entity that facilitates the movement of transactional data between the issuer and acquirer and sets merchant rules for card acceptance. Organizations in this role include Visa, MasterCard and American Express.

nexus

 

Legal term describing a supplier's presence within a particular state that allows the state to require the supplier to collect the state's sales tax.

North American Industry Classification System

NAICS

A set of numbers denoting various industries; a particular organization selects the number representing the industry to which it belongs. Replaced Standard Industry Classification (SIC) codes in 1997.

One Card

 

A type of hybrid card in which a single card is issued to an employee for more than one category of expenses (e.g., goods/services and travel expenses), eliminating the need to carry two separate cards.

One Card plus Fleet

 

A single card used for purchasing, travel and fleet-related expenses (fuel, vehicle maintenance, etc.). Combines the functionality of a P‑Card, Corporate Card and Fleet Card.

organization

 

A company, government agency or other entity either implementing or managing a card program. Also referred to as the end-user.

organization limit

 

The credit limit assigned by the issuer to the end-user organization's card program.

Payment Card

 

Term used by the Internal Revenue Service (IRS), as well as other organizations, when referring to Commercial Cards.

Payment Card Industry Data Security Standard

PCI DSS

Comprehensive set of security requirements applicable to all card-accepting merchants, designed to protect cardholder and account data (https://www.pcisecuritystandards.org/).

payment terms

 

Stipulations, typically negotiated between the supplier and end-user organization, regarding settlement of an invoice. In a card program, usually refers to the requirements associated with the organization's payment of the central bill to the issuer.

Payroll Card

 

A type of Prepaid Card funded with an employee's earned wages, allowing cash withdrawal from an automated teller machine and payments for purchases in a retail environment. Replaces a payroll check or direct deposit payroll process.

petty cash

 

A small amount of cash kept on hand by an organization for incidental expenses, such as reimbursement to employees for small, out-of-pocket business expenses.

pilot program

 

Test or trial activities in advance of a full card program rollout.

plastic card

 

A physical card issued to a cardholder and used for the payment of goods, services and other business expenses (e.g., travel).

point of sale

POS

The location or technology system for which card payments for goods and services are initiated.

Prepaid Card

 

A debit-based card in which card transaction amounts are deducted from a funded account; can be reloadable or non-reloadable. Also referred to as a Stored Value Card.

processor

 

Provider of back-office services on behalf of the merchant acquirer or issuer, including authorization of card transactions and data delivery.

procurement

 
  1. The process of obtaining or acquiring goods and services.
  2. The department within an organization that is usually responsible for the development of requests for proposals (RFPs), proposal analysis, supplier market research, negotiations, buying activities, contract administration, inventory control, etc. Also referred to as purchasing, sourcing or similar term.

procure-to-pay (P2P) process

 

The entire cycle of requisitioning, acquiring and paying suppliers for goods or services.

program administrator

PA

A common role responsible for various administrative tasks (i.e., ongoing operations) in a typical P‑Card program, including card issuance, account maintenance, card cancellation and reporting.

program manager

PM

A common role responsible for various strategic tasks in a P‑Card program, including championing the program, ensuring the program's long-term acceptance and success and identifying improvement opportunities.

provider

 

A supplier of card-related goods and/or services; could include issuers, technology vendors, consultants, etc.

purchase order

PO

Written authorization for a supplier to deliver products and/or services at a specified price according to specified terms and conditions, becoming a legally binding agreement upon supplier acceptance.

Purchasing Card

P‑Card

A charge card (payment method) used for business purchases of goods and services.

Qualified Payment Card Agent

QPCA

An Internal Revenue Service (IRS) designation, which never became operational, authorizing Payment Card organizations (i.e., networks) to obtain and validate merchant Tax Identification Numbers (TINs) on behalf of payors/end-users.

reconcile or reconciliation

 

Process of reviewing and comparing card transactions to internal records of orders/payments and receipts, including resolving discrepancies and validating or allocating transactions to appropriate accounting codes.

request for proposal

RFP

A formal and systematic process used by organizations to provide requirements to and request information from potential suppliers, leading to the selection of one or more suppliers for particular goods and/or services.

requestor

 

The person or organization initiating the order for goods or services.

requisition

 

A formal, documented request for goods or services the organization needs.

revenue sharing

 

The splitting of operating profits between the issuer and the end-user organization.

rollout

 

A staged series of activities conducted during card program implementation.

Sarbanes-Oxley Act

SOX

U.S. legislation, signed into law in 2002 and primarily affecting publicly traded American companies, serving to close loopholes to prevent corporate accounting scandals, boost investor confidence and hold management accountable for activities occurring within their organizations.

sales tax

 

A tax imposed on the sale of taxable items, calculated as a set percentage of the sales price.

site coordinator

SC

A role typically residing in a field office of a large, geographically dispersed P‑Card program, responsible for many administrative duties and having an indirect alignment to the program manager.

spend

 

The total of all purchases through the card program during a specified reporting period.

split liability   Liability for Commercial Card charges is split between the cardholder and end-user organization, based on merchant category codes; for example, the cardholder might be liable for travel and entertainment (T&E) expenses, while the organization is liable for the other transactions.

split transaction

 

See transaction splitting

Standard Industry Classification code

SIC code

See North American Industry Classification System.

statement

 

A document reflecting account details for the billing period including debits, credits, transaction detail and balance due.

statement billing file

SBF

See mapper.

Stored Value Card

 

See Prepaid Card.

straight-through payment

STP

An electronic payment to a supplier, utilizing the card infrastructure, that typically occurs as a direct deposit into the supplier's merchant account; is one form of electronic payables.

subject-matter expert

SME

One who has demonstrated competency and mastery in a particular subject or topic.

supplier

 

Merchant/vendor with whom the organization does business.

surcharge

 

A fee that a supplier adds to a card transaction, but does not add to a non-card payment; in the U.S., merchant rules generally prohibit this practice.

systemic controls  

An automated means for controlling the purchases made with a card (e.g., spend and velocity limits, MCC restrictions, etc.). Also referred to as card controls.

taxpayer identification number

TIN

An identification number used by the Internal Revenue Service (IRS) in the administration of tax laws. For individuals, the Social Security number (SSN); for businesses, the Employer Identification number (EIN).

three-party payment system

 

Card payment system in which the network also functions as the issuer and merchant acquirer, working directly with end-users and suppliers; includes the traditional American Express model. See also four-party payment system.

trading partner agreement

TPA

An agreement related to the exchange of information in electronic transactions; specifies acceptable protocols between operating systems and defines responsibilities regarding system failures or data corruption.

transaction splitting

 

A practice whereby cardholders or suppliers split a purchase's total into two or more transactions to circumvent single transaction limits; is generally prohibited within policies

Travel Card

 

See Corporate Card.

United Nations Standard Products and Services Code®

UNSPSC®

An open, global multi-sector standard for efficient, accurate classification of products and services (http://www.unspsc.org/).

use tax

 

A tax paid by the purchaser when taxable property or services are used in the state and a state tax has not been paid.

validate

 

To substantiate, authenticate or verify transactions. See also reconcile.

value proposition

 

The unique added worth a card program affords an organization; can be measured in cost savings, efficiency or intangible benefits such as improved service.

vendor

 

See supplier.

W-2

 

Internal Revenue Service (IRS) form that reports income paid and taxes withheld by an employer for a particular employee during a calendar year.

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