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InterchangeFees.com by Harley Financial Services,
wants you to be educated to Merchant Processing. We feel the best
way to do that is to give you the most common set of frequently asked
questions. If your question is not provided, please feel free to give
us a call. |
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What is a Merchant Account?
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What does qualified discount rate,
processing discount or processing rate mean?
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What is a transaction fee? |
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Surcharges,
mid-qualified & non-qualified? |
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What is Debit Card Processing? |
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What is interchange?
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What is a chargeback? |
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What is Receipt
Truncation? |
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What is "P"
Cards - Corporate, Business, Purchasing? |
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What is PCI Ped Compliancy? |
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What is a Merchant Account? |
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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. |
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What does qualified discount rate, processing discount
or processing rate mean? |
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Rate charged on all credit card transactions that the
credit card processing company charges to handle the transaction for
you. It is a percentage charged on the total dollar amount of a transaction.
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What is a transaction fee? |
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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 in their qualified discount rate giving them the ability to
say "we don't charge a transaction fee". This usually means
higher processing rates |
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Surcharges, mid-qualified & non-qualified? |
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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 intern 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 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.
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What is Debit Card Processing? |
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Comes in two forms. Off-line and On-Line. Both forms require a
VISA or Master Card 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 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.
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What is interchange? |
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Interchange is the clearing process that card associations
such as Visa® and MasterCard® facilitate 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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What is a chargeback? |
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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
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What is Receipt Truncation? |
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Effective July 1, 2003, Visa and Master are 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. Most processors are being proactive as
well and implementing the new truncation requirements ahead of the
July 1, 2003 deadline.
Many states are now banning the printing of full credit card numbers
on printed receipts. This is another effort to reduce credit card
fraud.
By limiting the printed credit card number to the last 4 digits,
your discarded credit card receipts can't be used to make fraudulent
purchases.
At this time, truncation has been moving from state to state. It
probably won't be long before there is a federal mandate requiring
truncation nationwide.
No need to worry, you don't need to run right out and upgrade your
terminal and printer. Over time, all terminals, printers, and software
will only print the last four digits. Your equipment should be grand
fathered as long as you don't have to replace any of it and don't
require a new download for your terminal.
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What is "P" Cards - Corporate, Business,
Purchasing? |
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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! |
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What is PCI Ped Compliancy?
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What is it?
Currently this only applies to PIN pads and internal PIN Pads on
terminals. According to new Visa rules, any new processing application
that uses PIN DEBIT (where customer enters their 4 digit number)
for debit cards, must use equipment that is PCI PED compliant. Replacement
of existing terminals and PIN pads is acceptable but frowned upon
and it is at the discretion of the processor. If you do not intend
to use or use PIN DEBIT, PCI compliancy does not apply to you.
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