Ecommerce Terms Explained

If you are starting an online business and launching an ecommerce website, the road to ecommerce on the web can be a long and twisty road, strewn with acronyms the size of mountains. Our ecommerce guide below is setup to hep demystify these ecommerce terms and help you make an informed decision without the geek speak.

What is Ecommerce?

Electronic Commerce or ecommerce is the term used to define the electronic transactions that take place on the internet. Ecommerce transactions are typically for products, goods or services that are located on the World Wide Web. A perfect example would be the buying and selling of books on or bidding on your favorite product on eBay.

If your a business owner who has a product and would like to reach a wider market, ecommerce may be the perfect tool to put your goods or services at the fingertips of millions of computer users on the Internet.

What is a Discount Rate?

Credit cards typically charge a percentage of the sale for use, this amount is referred to as a discount rate. The rate paid by the merchant may vary depending on the monthly sales volume, the average sale size, and whether a transaction is processed manually or electronically. Other factors involved include qualified and non-qualified purchases.

Certain conditions must be met for an Internet transaction to Qualify for a discount rate. If a transaction doesn’t Qualify, it may become a mid-qulified rate or a Non-Qualified rate transaction, causing the discount rate to increase due to increased RISK. Depending on your choice of CC processor, these conditions will differ as well as the rates you will pay, but typically are between .40% all the way to 1% or more per transaction. Be aware when choosing your merchant account provider that although their qualified rates may be really low, a high mid or non-qualified rate will negate the cost savings quickly.

What is a Transaction Fee?

A transaction fee is applied by the transaction processor to cover the costs of receiving and processing the transaction. While a discount rate is a contribution for the convenience of accepting credit card payments, a transaction fee pays for the use of the infrastructure to receive payment information, request authorization from the customer’s bank, transmit the authorization information to the merchant, and to facilitate payment of the merchant.

What is a Chargeback?

A chargeback is a reversal of a sales transaction by the customer’s credit card issuer. Chargebacks most often occur when a cardholder disputes a transaction and you, the merchant, cannot provide adequate proof that the transaction made to a cardholder’s account is valid. A chargeback can also result from processing errors, authorization issues, and/or any other transaction irregularities.

Chargebacks can be expensive, resulting in fees from both your payment gateway (Express Checkout,, etc) and the customer’s credit card company. Many credit card processors provide services to dispute the chargeback where evidence exists that the customer received the goods or service, each have different policies regarding chargebacks, and is important to understand your terms.

How to Avoid Chargebacks?

Most problems occur when customer expectations are not met due to misinterpretation of your products or services as well as your policies such as you Refund, Exchange, Warranty or Cancellation policies.

If these ecommerce policies are missing, unclear or unreasonable you may be open to potential chargebacks. In addition if the quantity or qualities of products and/or services delivered are not exactly as described on your Web site or in other marketing materials, a cardholder will be allowed to chargeback the purchase. Burden falls upon you, as well as the responsibility to prevent chargebacks before they happen. You can do this by planning and thinking ahead during your transition or implementation of an ecommerce system.

What is a Gateway?

A third-party service such as Express Checkout,, VeriSign, etc that securely transmits ecommerce transactions to a payment processor for authorization. A Payment Gateway is something that is required to start accepting credit cards through your ecommerce website along with an SSL certificate to help encrypt and protect your customer’s credit card info.

Dan LaBate

Dan is director of Search Engine Strategies at Engines of Creation Web Design & SEO. With 10+ years experience working in SEO/SEM, Dan helps businesses grow revenue and transform their websites into highly effective sales, marketing and lead capturing tools.

Pin It on Pinterest

Share This

Share this post with your friends!