Merchant account glossary of definitions, terms

Merchant account terms: Glossary, definitions

Business owners with merchant accounts must learn to speak a new language to understand what happens when they swipe a customer's credit card. Here is a glossary with definitions of the most commonly used merchant account terms.

Acquirer: An acquirer is a bank that processes and settles a merchant's credit card transactions with the help of a card issuer.

Authorization: In merchant accounts, authorization is the process that ensures the cardholder has sufficient funds available to cover a transaction.

Batch: A batch is a collection of credit card transactions stored on a merchant's processing equipment. Usually, they are sent together for processing right before a store closes.

Cardholder: The cardholder is the owner of a card that is used to make credit card purchases through your merchant account.

Card network: Card processing networks, the largest of which are Visa, MasterCard, American Express and Discover, act as an intermediary between an acquirer and an issuer to authorize credit card transactions.

Discount fee: A discount fee is a processing fee paid by merchants to acquirers to cover the cost of processing credit cards.

Interchange fee: Interchange fees are charges paid by merchants to a credit card issuer and a card network as a fee for their services in allowing you to accept credit cards. They generally range from 1 to 3 percent.

Issuer: An issuer is a financial institution, bank, credit union or company that issues or helps issue cards to cardholders.

Merchant account: A merchant account is an agreement between a bank or third-party provider and a business that allows the merchant to accept credit and debit cards.

Merchant account provider: A merchant account provider is a bank or other institution that provides merchant accounts to businesses that want to accept card-based payments.

Payment gateway: A payment gateway service is used by merchants that accept credit cards online. Usually a combination of hardware and software, the service uses encryption to securely send credit card data to a merchant account provider.

PCI standards: The credit card processing guidelines that every merchant and acquiring bank must comply with to ensure the safety of cardholders' data when completing a credit card transaction. PCI stands for Payment Card Industry, and the PCI Standards Council is a joint effort of Visa, AmEx, MasterCard, Discover and JCB International.

Updated: September 23,2023