Merchant Services

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.

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.

An account set up with a credit card processing bank, usually through an ISO/MSP (Independent Service Organization/Merchant Service Provider), for the intention of processing credit cards.

The rate charged on all credit card transactions by the credit card processing company to handle the transaction for you. It is a percentage charged on the total dollar amount of a transaction.

This is the most unreported gotcha. All processors have some sort of issue for this fee. It can be frequently labeled watts fee, item fee, transaction fee or POS watts fee or all the above. If your processor is not charging a Transaction Fee, they could be putting it in their qualified discount rate, giving them the ability to say “we don’t charge a transaction fee”. This usually means higher processing rates.

Everybody gets them, few understand them and fewer still do anything about it. This is the built-in fudge factor. Usually, Merchants don’t even get quoted on it. What is it? The credit card industry and it rates are based on risk. This risk is usually a surcharge rate added above the qualified discount rate. There is no getting around it. All processors are charged it and they, in turn, pass it through to the Merchant with a mark-up. Since the Merchant usually does not even get quoted this rate, when they understand it, the Merchant accepts and continues doing business with it. Once you’ve signed, you are normally stuck with it. Be aware while looking for your next processor, make sure you get these surcharges quoted. How do they work?

  • 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.

Comes in two forms. Off-line and On-Line. Both forms require a VISA, Master Card or Discover logo on the debit or check card.

  • 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 sale, 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 merchant’s processor. In other words, for the PIN pad to be encrypted and secure, the processor has to physically encrypt it.

Interchange is the clearing process that card associations such as Visa®, MasterCard® and Discover use to settle transactions between banks that issue credit cards and banks or service providers that process card transactions for merchants.
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.

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A chargeback is a processed credit card transaction that is reversed (charged back) to a merchant because the customer or customer’s bank finds something wrong with the transaction.
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

Back in 2003, Visa and Master began requiring all new programming in point of sale terminals and software to truncate the credit card numbers. This move was apparently made to expedite this security procedure, since it is taking too long for states to enact their own regulations. This is another effort to reduce credit card fraud.

Visa and MasterCard issue special cards to companies and government entities. These cards are called Corporate, Business, and Purchasing (or just “P”) cards. These cards offer low or even no cost enhancements to the cardholding companies. Typically, these cards will cost merchants from .75%-1.5% above the regular swiped rate. This surcharge can be reduced or eliminated if you are specifically setup for them. The setup involves your processor downloading your terminal with a program that asks for additional information anytime one of these cards is swiped or keyed-in. If you accept many of these cards, your costs may be much higher than necessary. Check with your processor for details. If they don’t support it, find another processor!

EMV Euro, MasterCard, Visa is a technical standard for smart payment cards and for payment terminals and automated teller machines that can accept them. EMV cards are smart cards (also called chip cards or IC cards) which store their data on integrated circuits rather than magnetic stripes, although many EMV cards also have stripes for backward compatibility. They can be contact cards that must be physically inserted (or “dipped”) into a reader, or contactless cards that can be read over a short distance using radio-frequency identification (RFID) technology. Payment cards that comply with the EMV standard are often called chip-and-PIN or chip-and-signature cards, depending on the exact authentication methods required to use them.