What kind of Merchant are YOU???
Get setup with the correct type of account
When set up properly, you may qualify for significantly lower rates.
If your customer purchase from you face to face you should have a card reader.
If your customer purchase by phone, mail or Internet, you should most likely be set up with a MO/TO account
If you bill customers regularly without seeing them in person, a Virtual Terminal is ideal.
If you are a dual-
Process batches with in 48 hours
The risk of fraudulent transactions increase as the period between authorization and settlement increases. Also your processing fees will increase after 48hours this is called a down-
Higher rates apply if transactions sit in your terminal for longer than 48 hours. After 72 hours the rates go up again.
Swipe credit cards whenever possible
If you need to key enter a transaction because the card is not present or the magnetic stripe is defective, it will cost you more.
Use Address Verification Service (AVS) on MO/TO and Internet Transactions
AVS checks to see that the billing address and zip code given by the customer matches the credit card.
(Note: AVS will not verify addresses outside of the US.)
All merchant accounts are setup with some form of rate structure. Most common is the Three Tier Pricing this is where the fees have been simplified to a group format.
First Tier -
Qualified rate is the percentage rate a merchant will be charged whenever they accept a regular consumer credit card and process it in a manner defined as "standard" by their merchant account provider using an approved credit card processing solution. This is usually the lowest rate a merchant will incur when accepting a credit card.
Second Tier -
Also known as a partially qualified rate, the mid-
A consumer credit card is keyed into a credit card terminal instead of being swiped
A special kind of credit card is used like a rewards card or business card
Third Tier -
A consumer credit card is keyed into a credit card terminal instead of being swiped and address verification is not performed
A special kind of credit card is used like a business card and all required fields are not entered
A merchant does not settle their daily batch within the allotted time frame, usually past 48 hours from time of authorization.
Interchange Plus Pricing
Some providers offer merchant account services priced on an "interchange plus" basis. These accounts are based on the "interchange" tables published by both Visa Interchange and MasterCard Interchange. This type of pricing creates a discount rate by adding interchange rates plus a percentage and authorization fees. This is a common pricing model for very low and very high average tickets.
Bill Back/ERR (Enhanced Recover Reduced)
A bill back/ERR is a variation on interchange plus pricing. It has some variations but the basic concept is that the merchant pays one set rate for qualified cards then is billed back for mid or non-
The chargeback is the largest risk that is presented to banks and providers. This is not to be confused with a refund, which is simply a merchant refunding a transaction. In the Visa, Discover, and Mastercard rules, the merchant's processing bank is 100% responsible for all the transactions that the merchant performs. This can leave the provider open to millions of dollars of potential losses if the merchant operates in an illegal or risky manner and generates many chargebacks. The providers pass this cost on to the merchant, but if the merchant is fraudulent or simply does not have the money, the provider must pay all the costs to make the card holder whole. The chargeback risk is the largest part taken into consideration during the contract application and underwriting process. Some banks are much more stringent than others when assessing a merchant's chargeback risk.
Currently both Visa and MasterCard require all merchants to maintain no more than 1% of dollar volume processed to be chargebacks. If the percentage goes above, there are fines starting at $5000 – $25,000 to the merchant's processing bank and ultimately passed on to the merchant.
In all cases, a chargeback will cost the merchant the chargeback fee, typically $15–$30, plus the cost of the transaction and the amount processed.
When you set up for a merchant account there are many terms that may be new to you or you don’t quite understand. Look through the list below to get an understanding of the merchant account industry terminology.
Knowing the terminology of the Merchant Services industry could save you money and time.
Automated Clearing House is an electronic funds transfer network which enables participating financial institutions to make debits and credits to and from each account.
The Annual fee can be charged by some providers to pay for costs of maintaining the merchant's accounts.
The Authorization fee (actually an authorization request fee) is charged each time a transaction is sent to the card-
Card issued by a bank for use in electronic payment transactions.
A batch fee can be charged to a merchant whenever the merchant "settles" their terminal. Settling a terminal, also known as "batching", is when a merchant sends their completed transactions for the day to their acquiring bank for payment. Some providers perform this automatically. It is important to close a batch every 24 hours or a higher rate will be assessed by Visa, Discover or MasterCard.
Customer Service Fee
The customer service fee (also known as a maintenance fee) can be charged by some providers to pay for the cost of customer service. Also referred to as a "merchant support fee", "customer support fee", or simply, "service fee" by some merchant providers.
Card issued by a bank that allows holder to withdraw and make payment from a checking account, this is not a credit card.
Dues and Assessments
The percentage rate and transaction fees paid to card networks.
The fee that a merchant’s bank pays a customer’s bank when a merchant accepts cards using Visa® or MasterCard® networks.
A gateway which allows a website or virtual terminal to connect to the payment card network to complete transactions via the internet.
Refers to the method of physically swiping a card’s magnetic strip through a card reader to transmit the card data to initiate a sales transaction.
Refers to the method of typing in a card’s 16-
Percentage of transaction amount that is charged to the merchant to use card networks.
Refers to the lowest rate to process a credit card because it meets all the standards to qualify for the best rate, this is the least risky card transaction type, and thus its fees are the lowest.
Refers to the second lowest rate to process a credit card, this is a slightly more risky transaction since it does not meet all the standards to achieve the qualified rate, this rate is higher than the qualified rate.
Refers to the highest rate to process a credit card, this is the most risky or costly transaction due to rewards or card-
Payment Card Industry. a council originally formed by American Express, Discover Financial Services, JCB, MasterCard Worldwide and Visa International, with the goal of managing the ongoing evolution of the Payment Card Industry this organization sets standards for the credit card processing industry.
Point Of Sale (POS) computer system with a touch screen monitor, cash drawer and card reader that enables cashiers to complete sales transactions.The point of sale often refers to the physical electronic cash register or dedicated POS hardware used for checkout.
Card issued by a bank that allows the holder to accumulate points or rewards on qualifying purchases. Points can be used for airline miles, products, cash-
The statement fee is a monthly fee associated with the monthly statement that is sent to the merchant at the end of each monthly processing cycle. This statement shows how much processing was done by the merchant during the month and what fees were incurred as a result.
Many times, the statement fee is not directly linked to "paper" statements but rather general overhead. This means that a provider would not waive this fee if a merchant chose to have a "paperless" statement.
The Transaction fee is charged when you accept your authorization. This fee only applies to an authorization that is accepted without error.