Merchant Services & POS Glossary: The Terms You’ll See on Statements, Contracts, and Support Calls

Why learning the lingo helps
Understanding the most common terms in payments reduces surprises on statements, helps you negotiate pricing, and makes troubleshooting faster when things go wrong.

Below are concise, practical definitions and what each term means for your business.

Acquirer (Acquiring Bank)

The bank or financial institution that maintains the merchant account and receives the funds from card transactions before settlement to your business bank account. Acquirers are responsible for onboarding merchants and handling settlement. For details, see payment network glossaries. Visa Developer

Interchange (Interchange Fee)

A fee paid between the acquiring bank and the issuing bank (the cardholder’s bank) that varies by card type, transaction type, and merchant category. Interchange is the largest component of card processing cost and is set by card networks (Visa, Mastercard). Processors pass interchange through in many pricing models. Visa+1

Merchant Identification Number (MID)

Your unique merchant ID assigned by an acquirer. It identifies your business (and sometimes each location) in the card networks and on statements. Keep your MID info handy when reconciling statements or troubleshooting settlements. cis.visa.com

Payment Processor vs Payment Gateway vs Merchant Account

• Payment Gateway: The software that securely captures customer card details (especially for online transactions) and transmits them to the processor.

• Payment Processor: The network/technology that routes the transaction to the card networks and issuing banks for authorization and settlement.

• Merchant Account: The bank account (or virtual account) that temporarily holds funds before settlement to your business bank account.

Chargeback

A reversal of a transaction initiated by the cardholder’s issuing bank after a dispute. Chargebacks cost merchants money (lost sale + merchandise + chargeback fee) and can escalate into fines or higher rates if frequent. Preventing chargebacks requires clear refund policies, accurate descriptors, and good customer service. Industry guides note chargeback fees commonly range from about $20–$100 per case and can cause major merchant headaches. Investopedia+1

AVS, CVV (CVC), and Fraud Controls

• AVS (Address Verification System): Compares billing address to the cardholder’s address to detect mismatches.

• CVV/CVC: The 3- or 4-digit code not stored on merchant systems and used to confirm the card is present during card-not-present transactions.
  Advanced processors also offer AI fraud scoring, velocity checks, and device fingerprinting. Investopedia+1

EMV (Chip) & NFC Contactless

EMV is the global standard for chip cards (and contactless/NFC payments) that dramatically reduces counterfeit fraud compared to magstripe. EMV adoption is a baseline for modern in-store security. EMVCo

Tokenization & Encryption

• Tokenization: Replaces a PAN (primary account number) with a token that is useless if stolen; reduces PCI scope for merchants who never store real PANs.

• Encryption: Encodes card data during transmission so it cannot be read if intercepted. Tokenization and encryption are complementary. Industry guidance from PCI and payment vendors explains when each is appropriate. PCI Security Standards Council+1

Batch Settlement / Settlement Time

The process by which captured transactions are finalized and funds are transmitted. Typical settlement windows are 24–48 hours, though timing can vary by processor and merchant type. Stripe

Where to go next

If you want a printable glossary or a PDF to share with staff, Bay State Merchant Services can provide a customized glossary and help you interpret your statement. For a practical guide on choosing a processor, see our in-depth page: The Best Credit Card Processing Company for Small Businesses. Stripe

Small Business

Education & Inspiration