Merchant Account Terminology: Understanding Key Words and Concepts

Merchant Account Terminology

Merchant Account Terminology: Understanding Key Words and Concepts

For new businesses seeking merchant services, navigating the terminology surrounding Independent Selling Organizations (ISO) and their offerings can initially appear daunting. Consequently, “Merchant Account Terminology” becomes a crucial aspect to understand. If you’re in the process of securing your first payment account and find the complex terminology overwhelming, the following definitions will provide clarity and aid in your decision-making process.

Key Merchant Account Terms

Acquiring Bank

A bank that “acquires” the transactions of the ISO it supports. When you have a merchant account, your account transactions will be processed by your ISO’s acquiring bank, which transfers payment to your business checking account.

Authorization Fee

A fee assessed when

  1. A merchant requests payment authorization or
  2. Sends a batch of credit transactions to an acquiring bank for processing.

ACH Transaction

A transaction that occurs through the Automated Clearing House (ACH) network—a collection of organizations that facilitate paperless debit and credit transactions.

Batch Processing

Additionally, merchants engage in “batch processing,” or “batching,” by submitting a “batch” of credit card transactions to an acquiring bank for payment processing. Consequently, this process may lead to the incurrence of “batching fees.”

Chargeback

A cardholder initiates an action to dispute a purchase, granting the merchant a ten-day window to contest it. If the merchant fails to successfully dispute the chargeback, they may incur a chargeback fee on their account. Furthermore, some ISOs permit merchants to keep a specific percentage of their transaction volume in chargeback fees without imposing financial penalties.

Discount Rate

A percentage of each transaction that satisfies a collection of fees, dues, and charges that result from using a credit merchant account.

EDC Terminal

An electronic device that reads credit and debit cards at a point of sale (POS), performs authorization functions, and captures the information necessary for batch processing. EDC stands for Electronic Data Capture.

Internet Processing

A method of payment processing that allows merchants to accept online payment using an Internet payment gateway.

Mail Order / Telephone Order Processing

A method of payment processing that allows merchants to process payment via mail, telephone, or fax using one or more of the following methods: a credit card terminal, touch-tone processing, POS software, or a virtual terminal. Mail Order / Telephone Order accounts are referred to as MOTO accounts.

Monthly Minimum Fee

A fee charged when a merchant fails to accrue a certain amount of monthly transaction fees. The fee is the difference between the amount of fees accrued and the required amount.

Payment Gateway

An ecommerce feature that allows merchants to accept payments through ecommerce websites. A payment gateway is the virtual equivalent of a POS terminal.

Retail Processing

A method of payment processing that allows merchants to process in store card payments using a credit card terminal.

Wireless Processing

A method of payment processing that allows merchants to process out of store card payments using a wireless card terminal.

AVPS Has the Account Solutions You Need

AVPS knows that first time merchants might feel overwhelmed by the technicalities of the merchant account process. This is why we offer account solutions that sync with a merchant’s business processes and simplify the payment process.

At AVPS, our account solutions make business transactions simpler, not more complex. To discover the best merchant account for your business, contact us today.

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