ACH - A form of electronic payment. Automated Clearing House is typically used to process high volumes of relatively small-dollar payments for settlement within one or two business days. ACH transactions are settled in a manner similar to the way checks are settled: The clearinghouse takes all ACH files received daily from its member banks, sorts them by the originating bank (the bank where the check was cashed or deposited) and the paying bank (the bank against which the check was drawn), totals the accounts, and credits or debits appropriate accounts accordingly.

Address Verification Service (AVS) Fee - Allows you to run AVS on all transactions to check the billing information that was provided to the information on file with the credit card company. This helps to fight against charge backs and fraudulent orders. Depending on which merchant provider you choose, there might be an extra fee per transaction for this service.

Acquiring Bank- A financial institution that contracts with merchants to settle electronic transactions. The acquiring bank provides the merchant with its credit card processing account. This acquiring bank sends credit card and purchase information from transactions to a credit card association (such as Visa and MasterCard), which forwards it to the issuing bank.

Authorization - The process by which an issuing bank approves the availability of funds for a credit card transaction for a specific amount.

Bankcard Association - The Visa and MasterCard associations.

Batch - A collection of transactions that have been made in a single day. Most terminals and real-time processors will collect all of the transactions and then do a batch at the end of day, instead of batching them throughout the day. Capture - The submission of credit card transaction to be processed by the merchant provider or merchant account holder. This is used to check the funds availability on the credit card submitted.

Chargeback - A payment dispute initiated by the cardholder with their credit card issuing bank. The amount of the disputed transaction is immediately withdrawn from the merchant's bank account, and the merchant can dispute the chargeback with proof of purchase, signature, proof of delivery, etc. A chargeback fee is usually assessed to the merchant on top of the actual transaction. A chargeback is usually generated when a cardholder disputes a transaction because of one of the following criteria: non fulfillment of product or service, un-authorized purchase, product/service expectations not met. **When a chargeback is generated, the issuing and acquiring banks must research the facts to determine which party is responsible for the transaction. **

Discount Rate - This is the fee that is charged to a merchant by Visa, MasterCard, Discover and American Express, for processing their credit card transactions.

eCommerce - This pertains to doing business online and making transactions, sales, refunds and selling online. This pertains to any online sales, and the way businesses communicate and grow.

Gateway Processor - Most of the smaller merchant providers resell some other Gateway Processor, which is the company that does all the charging on your customer's accounts.

Interchange Rate - The rate that is set and charged by the bankcard association to the acquiring banks for the transaction. The interchange rate, which is actually a percentage of the transaction amount, also helps account for authorization costs, fraud and the general or average banks cost of funds.

I.S.O. - An Independent Sales organization is an organization that provides a variety of merchant functions (i.e. processing) on behalf of the acquirer. These functions can also include selling new merchant accounts or providing back room services. An I.S.O. can also be referred to as an M.S.P. (Merchant Service Provider). It is important that the acquirer must register all ISOs/MSPs with bankcard associations.

Issuing Bank - This is the bank that issues the customer the credit card and funds your account when you make a charge to one of their accounts. They will then bill their customers for the debit on their card.

Mail/Telephone/Internet Discount Rate - This is the discount percent fee for Internet/mail/telephone related business. This fee is the highest fee on the market due to the increased risk of fraudulent order submissions. It is much easier for a scamster to send a credit card number over the Internet than it is in person at a retail store. This is the same thing as Credit Card Fee (Discount Rate).

Merchant Provider - This is a company that will offer you a merchant account. They will usually have a relationship with their sponsored payment processor to give you a merchant account. If they do not own their own gateway system, they usually resell another company's system which will do the processing, while the bank does the charging and depositing.

Merchant Account - A merchant account is a relationship and trust you have with a bank that has agreed to allow you to charge people's credit cards. The bank is responsible for debiting the funds from the customer and depositing it into your account. There is usually a processor that is involved that processes the credit cards for the bank and lets them know the funds are available. When you are given a merchant account from a company, they are relying on you to uphold your promises to your customers by delivering the products and/or services to them in a timely manner. Merchant providers are taking a risk to allow you to take credit cards under their name.

Merchant Bank - A bank that works with businesses to give them the ability to offer merchant accounts. They take care of charging the customer and funding the merchant account holder.

Monthly Minimum - The majority of Merchant Providers have a monthly minimum. This is a fee that is imposed if your credit card charges (Discount Rate) doesn't add up to their monthly minimum. For example, your monthly minimum is $25 a month. If you only sold $100 worth or products for that particular month, then it would cost you say 2.39% for charging the card, 30 cent transaction which equals to $2.69. Now, that is $25 - $2.6 = $22.31, so you would be charged $22.31 for that particular month.

Merchant Processing - The settlement of electronic payment transactions for merchants. It is a separate and distinct business line from credit card issuing. Merchant processing involves gathering sales information from the merchant, collecting funds from the issuing bank, and payment to the merchant.

Merchant Underwriting - Merchant underwriting & approval policy helps control credit risk. The policy is effective in designating and targeting merchants who meet the acquiring banks processing criteria. The policy also acts as an agreement between the third party billing agent & the acquiring banks as to what information is needed from the merchants to measure the merchant against the acquiring desired list of criteria. The policy also outlines and lists what information is needed from the merchant, for the merchants agreement.

Merchant services provider - A bank, ISO, or other firm that provides services for processing financial transactions, usually credit card sales. Many MSPs provide merchant accounts, while others require their clients to establish merchant accounts on their own. Some MSPs claim that they do not require merchant accounts; this may indicate factoring, which is illegal in many areas.

MOTO discount rate (mail order / telephone order discount rate) - The discount rate charged by the merchant account provider for credit card transaction in which the actual credit card was not available to the merchant. MOTO discount rates are generally higher than swipe discount rates to account for the increased chance of fraud or nonpayment.

Point of Sale Terminal (POS) - An electronic device used for verifying and processing credit card transactions. Is a little device that allows you to slide the credit card through to make a charge. If the credit card is available,the merchant can swipe the card through the terminal. This is what most retail stores have. It is fast, easy and accurate to make a charge on a customer's credit card within seconds. It is also known as a terminal machine.

Real-time processing - The verification and processing of credit card transactions immediately following a purchase. Real-time verification on the Web usually takes less than five minutes. Real-time verification is especially important for web sites that sell products and services that consumers expect immediately, such as memberships to the site or software downloads.

Rolling Reserve (a.k.a. hold back) - A portion of the revenue from a merchant's credit card transactions, held in reserve by the merchant account provider to cover possible disputed charges, chargeback fees, and other expenses. After a predetermined time, holdbacks are turned over to the merchant. Note: Merchant account providers almost never pay interest on holdbacks.

Secure Socket Layer (SSL) - SSL is a secure web protocol that uses 128 bit or higher encryption technology to keep your customer's information completely safe through the entire ordering process.

Swipe Discount Rate - This is the discount rate for retail stores that use a POS terminal. This is for merchants that swipe the credit card, and run the credit card through the machine. This fee usually is about 1.7% and is lower than the Internet rates due to the decreased risk in fraudulent orders being placed. The likelihood of a scamster using a credit card in a retail store than online is much less because of the difficulty.

Settlement - The process by which funds less applicable fees for bona fide sales are sent to merchants.

Shopping cart program - A software package that runs as part of a Web site to collect and record purchasing decisions by a visitor. Shopping cart programs are stored on Web servers.

Transaction Fee - This is the fee that your processor, or your merchant provider charges for the transaction.

Third-party Organization - Any outside company with which the acquirer contracts to provide merchant processing services.