Before setting up a merchant account for your e-commerce business, it is imperative that you understand the working of merchant accounts and credit card processing inside out. The first step in acquiring that understanding is to become familiar with Merchant Account Terminology. Following are a few common phrases and words used by merchant account providers:

Settlement Time
The term "Settlement time" defines the time lapse between the moment you charge a credit card at the sale of a product or service, and the time when you actually receive the payment in your business account. The time period for the completion of the entire payment procedure may vary. It may happen almost instantly or may take as many as three months, the latter being the case with high-risk businesses or poor quality merchant account providers. Most good quality merchant Service providers conduct transactions within two or three days, whereas, a third party credit card processing company will take a day or two more to transfer your dues.
Settlement time may further be determined by the format of payment. Your dues may be either directly transferred to your bank account or you may receive a check. The first option, though costlier, saves on time that is usually consumed in check clearance. Settlement time is crucial in the context, that the sooner you have your money in hand, the sooner you can utilize it or invest it!

Discount Rate
A discount Rate is the percentage of each credit card payment that is deducted by the merchant account provider as fee. This may fluctuate from 2% for a merchant account to over 10% in case of a third party service. And these charges will never be displayed in black and white. You may have to look deeply and evaluate. For instance, if the discount rate is higher but you have services such as a shopping cart and digital delivery software incorporated free of cost, it is a better deal than paying a lesser amount and paying separately for all the other desirable services.

Monthly Fees
Merchant Accounts, more often than not, charge a monthly amount for the maintenance of your account and for additional services such as technical support, shopping cart and payment gateway fees etc. You of course need to pay for the services you receive, but what needs to be determined is whether you are getting value for your money or not. 
Third party service providers do not usually charge a maintenance fee. Instead their Discount rates are higher. Also remember that a monthly fee has to be paid not considering whether you have made any sale or not. On the other hand, if your sales are good, paying a monthly fee along with low discount rates, means you take home more profits.

Reserve Funds
Reserve Fund denotes an endowment or "insurance" amount provided to the merchant account provider. This amount is to remain as security of the provider in case there are more refunds than sales in a month's business. This fund may be created by either providing a lump sum upfront, as soon as your merchant account application is accepted by the service provider, or you may pay a smaller amount each month. Before making any payment for the reserve fund, you need to investigate into the return policy of your service provider. Establish beforehand the time it will take to get your money back, if at all. A smaller sum paid monthly and returned fast is what you're looking for.

Processing Limit
Processing Limit refers to the maximum money that your merchant account provider can process for you. It is dependent on the monthly turnover and may affect the ticket price of your products. A processing Limit is a cause for concern for merchants selling high priced items like jewelry etc, while a small business is unlikely to worry about a processing limit.

Charge-back fee
Charge backs are common on the internet. High-fraud businesses can suffer miserably. A charge-back involves a customer claiming the amount charged on his credit card, for not having received the product that he paid for. Sometimes, customers do this on purpose to save their money and sometimes it could be a criminal who fraudulently uses another person's credit card to make a purchase. Thus, it is a good policy to remind every customer by email about their purchase and the billing of their credit cards.

In addition to the above details, there may be additional charges that you need to check out. These costs will vary from one service provider to another.