Frequently Asked Questions - Merchant Processing 101
Selecting Credit Card Processing SoftwareMore and more merchants are taking advantage of the powerful credit card processing software products available to them. These are systems for virtually any type of processing environment from retail stores to websites. All have their advantages, but selecting the right credit card processing software for your business is very important. Before making a decision merchants should ask themselves a few questions:
Will you be accepting credit cards over the Internet?Selecting Credit Card Processing Software
More and more merchants are taking advantage of the powerful credit card processing software products available to them. These are systems for virtually any type of processing environment from retail stores to websites.
All have their advantages, but selecting the right credit card processing software for your business is very important. Before making a decision merchants should ask themselves a few questions:
Will you be accepting credit cards over the Internet?
- If so, merchants should lean towards using an online payment gateway in conjunction with their shopping cart. Payment gateways are a type of credit card processing software which is hosted by a third party on a server outside of your business. Your shopping cart, or other payment software, communicates with the payment gateway via the internet and it manages the actual transactions. Merchant Industry sells several payment gateways including: Authorize.net, VeriSign, and LinkPoint. We also offer our own product, MerchantWare Payment Gateway, which has all the features, flexibility and compatibility standard to these products.
How many credit card transactions will you need to handle at any one time?
- For most merchants the answer is usually only one, but some merchants who have more than one user or customer running transactions at the same time will need a more robust credit card processing software solution. If there are multiple internal users and they are on a network you can use PC Charge Pro. If the users are not on a network, then a merchant can use a virtual terminal such as the one offered by of Authorize.Net. This virtual terminal will allow users to log in using their web browsers and charge cards from anywhere they have Internet access. Transaction information is centrally located and can be accessed from anywhere.
Will you be charging the same customer’s cards on a regular basis?
- Merchants whose customers are frequently reordering or those who bill their customers on a monthly basis may wish to use credit card processing software that stores credit card information and can charge customers at specified intervals. PC Charge Pro has this feature built in and makes it easy to manage charging customers.
If you have any further questions regarding credit card processing software, please feel free to contact our sales team for information and advice on selecting software by calling the number at the top of your screen.
ATMAutomatic Teller Machine (Direct Connect sells only cash dispensing ATMs – they will not accept deposits.)
ATM / Debit CardAutomatic debit to consumer’s checking account when used. Extends no credit and can only be used if money is in the consumer’s account. Can be used at ATM machines and POS equipment with a pinpad – pin number required.
AuthorizationThe process of verifying the credit card has sufficient funds (credit) available to cover the amount of the transaction. An authorization is obtained for every sale. An approval response in the form of a code sent to a merchant’s POS equipment (usually a terminal) from a card issuing financial institution that verifies availability of credit or funds in the cardholder account to make the purchase.
Auto-CloseTerm used when credit card terminal automatically closes at a specified time at time and deposits transactions at the processor, enabling funds to be transferred into the merchants’ bank account. Most merchants set up on auto-close. Exception: merchants accepting tips.
Average TicketThe average dollar amount of a merchant’s typical sale. The average ticket amount is calculated by dividing the total sales volume by the total number of sales for the specified time period.
BatchThe accumulation of captured credit card transactions in the merchant’s terminal or POS awaiting settlement.
Charge BackTerm used when consumer unable to settle a return/refund on a credit card transaction with the merchant. Consumer calls credit card issuer to charge back the sale to the merchant and act as a mediator in resolving the dispute. A charge back fee is charged to the merchant if merchant is found at fault.
Mail Order / Telephone Order (MOTO)Credit card transactions initiated via mail, email or telephone. Also known as card-not-present transactions.
SettlementThe process of sending a merchant’s batch to the network for processing and payment. For non-bankcards, the issuer pays the merchant directly (less applicable fees) and then bills the cardholder. For bankcards, the acquirer pays the merchant (less applicable fees) with funds from Visa/MasterCard. The bankcard issuer then bills the cardholder for the amount of the sale.
Card TypesBelow are some of the credit and debit cards that you might come across.
General Card Types:
- Bankcards; Travel & Entertainment (T&E); Non-Bankcards
Specific Card Types:
How Payment Processing WorksSome form of the modern credit card has been in use since the late 19th century, mostly as department store charge cards representing lines of credit. Things have changed and today, the step a merchant needs to take in order to accept credit card payments is to establish a merchant account with a bank or third-party payment provider. Once your account is live, the transaction process generally works as follows:
- 1. A customer presents a credit card for payment.
- 2. By swiping the credit card through an electronic point-of-sale (POS) transaction terminal, typically provided by the bank or payment provider, an electronic request is submitted to the processing network for authorization.
- 3. The processing network receives your electronic request and determines if the cardholder’s account is valid and if the funds are available. If so, a response called an “authorization code” is transmitted, guaranteeing your access to the funds.
- 4. A receipt is then printed for the customer using the POS terminal or your computer. The customer then signs the receipt and, for their part, the transaction is complete.
- 5. At the end of the business day, a merchant will electronically submit a final request to the processing network to “capture the funds” for all authorized transactions in a given day. This process is referred to as settlement. Once approved, a response is generated to your electronic terminal or computer.
- 6. From there, the funds associated with the batch you settled are deposited electronically into your business bank account, usually within 48 to 72 hours. Typically, the rate and any fees paid to your merchant account provider are deducted from your account at the end of the month.
- 7. At the end of the month, your merchant account provider will send a statement to you, detailing the credit card activity for the month and the associated fees you’ve been charged.
Some Standard FeesNow that you know how processing works and what the available options are, you’re probably wondering how much all this will cost. While service fees and rates vary from provider to provider, “bundled” pricing is the most common type of agreement used in determining which per-transaction rate applies to which type of merchant. In the simplest terms, pricing is based on risk: the higher the risk involved in the transaction, the higher the rate the merchant will have to pay.
- Inquiry Fee – A fee that is assessed on the number of credit card transactions a merchant has.
- Monthly Minimum – The minimum that a processor dictates a merchant must incur on a monthly basis in Discount Fees and Inquiry Fees (in other words, a minimum usage fee for accepting credit cards).
- Statement Fee – Monthly statement reporting fee.
- Chargeback Fee – A flat fee charged to the Merchant in the event a chargeback is incurred.
- Transaction Fee – A flat fee charged to the Merchant every time a payment is processed.
- (Discount) Rate – A percentage of the purchase transaction charged to the Merchant every time a payment is processed based on card type, risk, and payment method (in person, over the phone, etc.).