This Merchant Account Glossary Makes It Simple.

This Merchant Account Glossary is not filled with all the terms, but is very helpful and simple. You can email me by returning to Contacts if there are other words and definitions you would like to see added.

Glossary

ACH or Automated Clearing House: Think of a network (ACH network) which carries electronic transactions to or from a customer/client. Although there are at least 6 participants involved in the transaction to make it happen, all you need to know is that a merchant can use the ACH process to extract money out of someone’s checking account. They can also refund into a checking account using the ACH network.

Acquirer: This is a bank or Merchant Service Provider (MSP) that handles credit card transactions for the merchant on a daily basis.

Acquiring Bank: This is the bank that acquires the merchant’s credit card processing. The bank holds an account in the merchant’s name. The account is then used to capture all the credit card processing revenues.

AVS: Address Verification Service: E-commerce merchants should use a system in the USA to match the credit card being used by the cardholder with the cardholder’s billing address. Using AVS keeps fees lower and fraud at a minimum.

Batch: The merchant makes the deposit from his terminal or e-commerce gateway.

Cardholder: If you spend money with a credit or debit card, you are a cardholder.

Cardholder Dispute: The cardholder says “ I didn’t authorize that charge” and makes a claim at their bank.

Card Present: The credit card is being used and it is physically present. Usually a retail merchant is involved.

Card Not Present: The card is not around. Usually a MOTO or Internet merchant.

Chargeback: It’s a return of funds after the cardholder wins a cardholder dispute.

Discount Fee: This is what the merchant has to cough up for the cost of accepting a credit card transaction.

Interchange: This is an electronic and organized process where all the entities involved in a credit card transaction manage the transaction. It includes accepting the transactions to settling (depositing) the transaction into the merchant’s account. It also distributes the fees between all the entities including the issuers and acquirers.

ISO: Independent Sales Organization: There are many levels of ISO’s including a sales organization only, a processor or an MSP (Merchant Service Provider).

Issuer: These banks issue credit cards. Hence, they are also known as Card Issuing Banks.

Level 2 Data: This is the information sent when a purchasing card is swiped through a machine. The data is usually separating out the purchase and the tax.

Level 3 Data: Extensive Data which gives more specific details about purchases.

Merchant: You or your business entity that sells products or services to cardholders.

Merchant Account: A merchant needs this bank account to accept credit cards. See your agent and he will gladly open it for you when he writes up the application.

Merchant Account Glossary: You are here

Merchant Service Provider (MSP): These are sales organizations or companies, which provide to merchants credit card transactions and other non-cash transactions. They also provide terminal solutions.

MID: Merchant Identification Number is assigned to a merchant by an acquiring bank or an ISO (Independent sales Organization) or other financial institution.

MOTO: A Mail Order or Telephone Order merchant

Payment Gateway: This virtual on-line terminal allows merchants to have their cardholder payments sent to the credit card networks. The merchant can either data enter the payments or have the payment originate from the cardholder.

Processors: These guys do it all in the credit card network world. They handle the authorizations through settling of all the credit card holders accounts as well as the deposits into merchant’s checking accounts. They may provide billing and reporting services for merchant/clients.

POS: This means “Point Of Sale” or where the electronic transaction is taking place. Touch screens, card swipe machines, wireless machines are all considered POS devices.

Refund: The merchant agrees to give money back for an earlier transaction. “Earlier transaction” means after a deposit has been made.

Risk Reserve: This is an account set up on the merchant’s behalf, which extracts a percentage of each transaction. The reserve is used against potential charge backs.

Settlement: For the merchant, this means that his transactions have been electronically sent resulting in a deposit into his bank account 24-48 hours later (usually).

Terminal: A card swiper machine such as what you find in a restaurant or retail location.

TID: This stands for Terminal ID Number and every terminal has one assigned by the merchant’s processor.

Transaction: An electronic exchange of information when a cardholder is buying goods and services. The exchange occurs because the cardholder has charged the transaction (money) and for that, the merchant is delivering good and services. Everyone gets theirs.

Verified by Visa: This is an amazing security system for merchants who accept VISA credit cards. Both Identity authentications for the customer/card holder and merchant protection from charge backs are at play. The merchant registers with VISA for this “risk minimizing” service.

Virtual Terminal: Here, merchants can key in transactions on line. Merchants may receive transactions via fax, hand imprint or receive a phone call order. The merchant simply logs in to the virtual terminal and fills in the fields. Then submits and completes the transaction. Deposits into the merchant’s bank are automatic.

Void: Here the merchant is wiping out a transaction before it gets deposited. It would be as though the transaction never occurred.