Learn the Basics
Merchant Services is a processing solution that enables your business to accept credit cards, debit cards, electronic checks, gift cards, and other payment options. When a customer pays for products or services with a credit card, the card information is recorded manually (imprinter) or electronically through a credit card terminal and then verified for payment. The process takes 4 stages for completion.
- Authorization: The card holder pay for goods or services with a credit card. The Merchant submits the transaction to their processor who immediately verify’s the card is good and provides an approval code for sale.
- Batching: (Usually happens at the end of day) After the above transactions is accepted it is stored in a batch the merchant sends to the Processor
- Clearing and Settlement: The processor sends each transaction in the batch to the issuer of the credit card holder. The issuer in turn pays the processor for the transaction.
- Funding: Once the processor has been paid, the merchant is paid less their discount for the cost of accepting credit card. This happens daily or monthly and the merchants account is the debited.
The entire process from Authorization to Funding, usually takes between 24 to 48 hours.
Frequently Asked Questions
We want you to be educated to Merchant Processing. We feel the best way to do that is to give you a set of frequently asked questions. If your question is not provided, please feel free to give us a call.
- Mid-Qualified Surcharge: Set up for Retail Merchant Accounts under swipe rates – Key entering a credit card. Did you know that keying in a credit card when set up under swipe conditions you get surcharged if you don’t answer the AVS questions asked from the terminal? What questions? Street Address, Zip code, & CVv2/CID code. Each processor has the ability to program your machine to ask these questions when they arise. You don’t get these questions? Surcharged.
- Non-Qualified Surcharge: Set up for Retail, Mail Order/Telephone order (MOTO), internet accounts – Most all Corporate credit cards, purchasing cards, business standard credit cards, and not answering VAS questions on MOTO and Internet accounts gets this surcharge. Businesses can come and go everyday with no risk of liability to pass on, therefore the risk of a Merchant doing transactions with companies, consumers over the phone or on the internet is higher.
- Off-Line Debit card Processing: Most common way to accept debit/check cards is handling it as a normal credit card. Did you know that off-line debit card rates start 30 to 40 basis points lower than the standard qualified discount rate. Industry standards say 60% of all transactions today are from debit/check cards. You mean your processor does not have a different rate for your off-line debit card processing? Whose getting all that money? Be sure you get this rate quoted. Some processors try to average your industry and don’t offer a lower off-line debit card rate. This is not good most of the time, because you don’t know what percentage of credit cards taken are debit cards.
- On-Line Debit Card Processing: Pending your average ticket, this method of accepting debit/check card is the cheapest and most secure method available. In this type of transaction, the card must be swiped through the machine and a PIN number entered by the consumer. This PIN number is encrypted and sent to the processor and then the consumers bank for verification of PIN and the amount of the transaction. Processors are getting pretty sneaky with this one but the best we have seen is so much cents a transaction, period. Example On-line debit card is $0.65 a transaction, your Off-line debit card rate is 1.30% Discount + $0.25 a transaction. On a $100.00 sales your cost for online is $0.65 while Off-line is $1.30. However if your sale is $10.00 your cost for On-line is $0.65 and Off-line is $0.38. On-line debit card processing requires the use of a PIN pad. It can be internal to your credit card machine or external through a cable attached to the machine. Either way, ALL PIN pads must be encrypted by the merchants processor. Another words, for the PIN pad to be encrypted and secure, the processor has to physically encrypt it.
The interchange process makes it possible for customers with credit cards from hundreds of different banks to make purchases at thousands of merchant locations. As part of the interchange process, card associations charge banks or service providers that process card transactions an interchange fee for each transaction.
This fee goes to the cardholder’s bank, known as the issuer, as compensation for expenses incurred in providing lines of credit to cardholders. Interchange fees make up a part of your merchant discount rate. The other part of your discount rate-the processing fee-compensates the bank that provides authorization, deposit, and settlement services for your transactions.
For more information click the links below:
There are several reasons a transaction can be reversed:
Authorization error-a transaction was allowed even though the authorization was declined
Processing error-incorrect calculation on the sales draft, invalid account number, or expired card
Customer disputes-the customer denies taking part in the transaction, claims purchased merchandise or services were never received and an attempt was already made to resolve the dispute, mail order merchandise was defective, or a promised credit was never processed