Below you will find definitions for most of the commonly used terms you may come across when trying to locate a merchant account for your business.


In addition to these terms, immediately below we have provided links to definitions of terms that pertain specifically to merchant account and credit card fees.

Merchant Account Glossary
Transaction Fee Discount Rate Qualified Discount Rate
Mid-Qualified Discount Rate Non Qualified Discount Rate Keyed
Batch Processing Address Verification Service (AVS) Monthly Minimum
Statement Fee Chargeback Gateway Fee
Re-programming Fee Reserve Termination Fee
Application Fee Annual Fee Software / Hardware Fees


Describes the process whereby a credit card sales transaction is approved by the bank which issued the card. Authorization is usually followed by delivery to the merchant of a sales validation.


The person or company to whom the issuing bank issued a credit card – as well as any other person the issuing bank has authorized to use the credit card.

Currency conversion

The procedure in which the currency involved in the transaction is converted into the currency of the issuer or of settlement. For example, a website purchase of an item in Japanese Yen is converted into US Dollars, the currency of the bank which issued the credit card.

Debit card

A card utilized to withdraw funds from the cardholder’s bank account.

EFT (Electronic funds transfer)

An electronic funds transfer facilitated through transmission from a card terminal, a telephone or a computer.

Issuing Bank

The bank that issues a credit card to a customer. The Issuing Bank transmits funds to the vendor’s merchant account when the credit card is utilized by the customer to purchase a good or service, and debits the account of the cardholder in the amount of the purchase price.

Mail Order/Telephone Order (MOTO)

A term used to describe credit card transactions received from the customer via mail or telephone (as opposed through an in-person,card present retail purchase or a purchase from a website.


A retailer, professional or other individual or corporation that can accepts purchases using a credit card.

Merchant Account

A special bank account that is utilized to receive credit card transaction proceeds. The merchant bank debits the funds from the credit cardholder and deposits them into the merchant account for the merchant’s use.

Merchant Bank

The bank that provided the merchant account to a merchant, thereby giving the merchant the means to accept credit cards from his customers.

Merchant Provider

A company (as opposed to a bank) that facilitates the provision of merchant accounts. Merchant Providers have relationships with a number of issuing banks that offer merchant accounts.

Payment Processor

A company that provides the processing of credit card transactions. Payment Processors are to be distinguished from issuing banks which act as the recipient of the transaction proceeds.

Point of Sale Terminal (POS)

Equipment through which a merchant (usually a retailer) ‘swipes’ a credit card, the first step in credit card processing.

Real-Time Processing

Internet credit card processing completed during a customer’s visit to a website.

Secure Socket Layer (SSL)

A secure internet protocol which is designed to ensure the safe transmission of a cardholder’s information during credit card processing.