A Glossary of Merchant Service Terms

While business owners should familiarize themselves with a variety of industries in order to facilitate success and company growth, understanding the ins and outs of the merchant services sector can be particularly important. This is the case for several reasons, including the fact that they offer a wide range of financial services that can help businesses function optimally. Although the world of merchant services may seem complex, familiarizing yourself with a few of the key terms that are used within the industry can help you gain a basic understanding of how this sector operates. Here are several merchant service terms that you should learn:

ABA Routing Number

The ABA routing number is responsible for directing electronic ACH deposits to the appropriate bank. The ABA routing number is also called the transit routing number.

ACH (Automated Clearing House)

ACH is a paperless funds transfer system that the Federal Reserve or other entities maintain. These entities maintain networks for the exchange of electronic funds.

Adjustment

An adjustment is a credit or debit to a seller or cardholder account for the purpose of correcting errors in transaction.

Bankcard

A bankcard is a card issued through a card-issuing business or card association which is offered for cash advances or as payment for services and goods.

Card Association

A card association is an entity with employees (or members) that issue debit or credit cards to customers.

Cardholder

A cardholder is an individual, business, or entity that obtains a debit or credit account that is accessed via card use.

Discount Rate

The discount rate is the fee resulting from the approving, assessing, collecting, settling, and processing of one or several credit card transactions.

Fees

Fees are costs the cardholder pays for the screening and processing of payments. Some fees include those for holding a monthly account, obtaining a discount rate, and per item costs for electronic check transactions and credit cards.

Issuer

The issuer is the entity responsible for establishing and maintaining the customer credit lines accessed via card. Some examples of issuers include Discover, Visa, American Express, and MasterCard.

Payment Gateway

The payment gateway is the internet-based service which transfers credit card data from a website or computer terminal to a processor from which it is verified.

Retrieval Request

A retrieval request is one in which a customer makes a request to get more information regarding a transaction from her or his statement.

Seller or Online Seller

The seller or online seller is an individual or company which sells services or products and has the ability to accept payment for those services and products through use of a seller account.

Settlement

A settlement is the process in which an individual or business transfers funds for credits and sales between issuers and acquirers.

Transaction

A transaction is an act between a cardholder and seller which results in either an electronic or paper representation of a cardholder's consent to pay for services and goods received.