Master the Language of Merchant Accounts

There are people with Web-based business that want to add credit card processing but are intimidated by the process.

They have looked through some of the merchant accounts provider’s Web sites and it seems like there is a whole new language that has to be learned. It can feel like they were dropped into a foreign country where they don’t know enough to speak the local jargon, and get intimidated into indecision.

But with a little self-education, it can quickly become a lot less onerous. Indeed, most e-retailers are surprised at how quickly they can start to feel like and expert by breaking down the process into smaller parts that can be mastered more easily.

So let’s start with the very basic terms that may seem glaringly obvious to some, but still need to be covered.

A great place to begin is with the customer – heck, without customers there would be no reason to go through the rest of these terms. The customer, and some business people pay them the courtesy of referring to them as guests, in the world of merchant services is referred to as the "cardholder." The term not only recognizes their status as customers, but as customers holding a credit card – hence the need for card processing services.

The Web store goes by many names, but for the sake of this process it is the "merchant."

The cardholder has a card via the "issuer," which is the financial institution or other organization that issued the card.

Hand in hand with the issuer is the "acquirer" or the financial institution or other business entity that provides card processing services to the merchant.

So at this point there is a merchant, who has goods and/or services they want to sell to a cardholder. The cardholder is called that because an issuer made the decision that they were a good credit risk, and issued them a credit card. When the cardholder uses their card with the merchant, the acquirer provides the card processing service to the merchant.

Everybody caught up and good to go forward?

Now we bring in the "credit card association." A card association is a network like VISA or MasterCard (among others) that acts as a gateway between the cardholder and the issuer for authorizing and funding transactions.

It should not be confused with the "credit card authorization," which shares the same initials, but stands for the process that insures the person charging a certain amount on their card has the available credit. In this same step billing information is also verified.

The gateway, also called a "payment gateway," is a service that allows the card purchases to be made safely and securely.

At this point the "processor" comes into the game. The processor refers to a huge data center that processes credit card transactions and settles funds to merchants. The processor is connected with a merchant’s Web site on behalf of the acquiring bank through the payment gateway.

Now comes the term that all merchants love – and that would be "settlement." The settlement is the method by which transactions that have been authorized are sent to the processor for the merchant to receive their payment. This is the final step in the process.

And the truly amazing thing is that from the time a cardholder’s information is submitted and starts winding its way through the process, the whole transaction takes, on average, less than 15 seconds.