A Comprehensive Glossary of Merchant-Related Terms
Annual Fee The amount a company pays on a yearly basis to keep his or her account open. This is not always part of the contract.
Application Fee The cost of applying for a merchant account and having one's credit checked in order to be accepted. Again, not all banks require this.
Card Present The lowest risk of all transactions, these take place using the actual plastic and a card swipe terminal, and the customer signs in person for any items bought.
Card Holder The person who has applied for an received a credit or debit card, or another person authorized to use it on his or her behalf.
Contingent Liability A risk issue, when a store or service provider is taking payments for items that have not yet exchanged hands. This applies to online shops, travel agencies, and other mail order situations in which the card is charged before the goods are sent.
Credit Card Terminal The machine or equipment used to swipe through and send relevant data so that a company can get paid for goods or services rendered.
Discount Rate The percentage of each transaction that is paid to the merchant bank. Your risk level and credit score will influence the rate that your company will pay.
Encryption The coding that is used to protect or secure information as it is sent through phone lines or an internet connection.
Gateway or Payment Gateway Regarding online transactions, the gateway is what connects the web site's shopping basket with the card processor.
Holdback The amount of revenue the merchant bank keeps in reserve, intended to cover any losses from disputed charges, chargebacks, or other expenses. Eventually, this money is released, but interest is usually not paid on it.
Imprinter A machine used to take a carbon paper print of a customer's card for their and the business' records. These are only used in special circumstances when it is impossible for the business to use a card reader.
Merchant Account The agreement between a business owner/operator and the bank that will be backing their credit card transactions. This allows the company to accept payments easily and efficiently.
Monthly Volume This is the dollar amount that passes through a merchant's account on a monthly basis. Visa and Master Card set maximum monthly volumes which limit how much a business is allowed to handle each month.
PIN Pad A rectangular device that allows customers to input their personal identification numbers when making debit card purchases. These are very valuable to card-present merchants because merchant banks charge a low, flat rate for all debit transactions, whereas they charge a percentage of the total amount when processing traditional credit cards. Make sure your terminal lease includes a PIN pad, or make sure to purchase one separately.
Recurring Transactions Depending on the type of operation you run, you may have customers that receive weekly, monthly, or yearly bills for a product or service that you are providing to them. These are called recurring transactions, and accepting credit card payments is an easy and convenient way for customers to make these payments. It is also a good way for you to retain these same customers!
Shopping Basket Also known as a shopping cart, this is a system traditionally used by online stores or service providers, allowing customers to set items aside for later review and purchase. If you are setting up an internet merchant account, you will typically be offered customizable basket or cart software as part of the account. People who are familiar with online shopping will expect your site to have it if you are selling something.
