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The Learning Center

Merchant Processing 101   

How Do I Choose a Merchant Account?

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.

What is the Industry Terminology?

ATM

Automatic Teller Machine (Direct Connect sells only cash dispensing ATMs - they will not accept deposits.)

ATM / Debit Card

Automatic 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.

Authorization

The 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-Close

Term 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 Ticket

The 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.

Batch

The accumulation of captured credit card transactions in the merchant's terminal or POS awaiting settlement.

Charge Back

Term 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.

Settlement

The 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.

How Does Credit Card Processing Work?

Thinking about adding electronic processing capabilities? Here are some statistics on the benefits of accepting credit and debit cards. We have also included some of the card types, how processing works, and some of the standard fees.

 

Thinking about adding electronic processing capabilities? There are countless reasons why a business should add credit card and electronic payment processing capabilities - transactional speed, convenience, increased customer satisfaction, improved cash flow, views into sales data; and more. But perhaps the most important consideration is the sheer volume of consumers who use non-cash methods as their primary form of payment. Here are some statistics on the benefits of accepting credit and debit cards. We have also included some of the card types, how processing works, and some of the standard fees. In 2007, Americans racked up slightly more than $2.2 trillion in purchases and cash advances on their major credit cards (Visa, MasterCard, American Express, & Discover) according to CardTrak.com. Ten years ago U.S. consumers ran about $885 billion through their general purpose credit cards. Approximately 51 percent of the U.S. population has at least two credit cards. (Source: Experian national score index study, February 2007) At the end of 2007, there were 420 million cards on the market, up 7.6% from a year earlier (Source: CNN/Money May 13, 2008). Fifty-six percent of undergraduates get their first card at age 18 and 91% of students have at least one credit card by their final year, Nellie Mae reported. By graduation, 56% of students carry four or more cards (Source: CNN/Money, July 14, 2008). "With credit cards, consumers spend 30% more (on purchases) than with cash," [Credit expert Howard] Dvorkin said (Source: CNN / Money, October 22, 2008). Certain sectors are experiencing growth in credit and debit payment usage. For example, U.S. consumers racked up nearly $63 billion worth of fast food on their personal credit and debit cards in 2007 according to CardTrak.com. The average QSR credit card ticket is about $12.65. Americans spend about $170 billion per year at quick service restaurants. After McDonald's began accepting credit and debit in 2004, diners who paid with plastic spent $7 a visit on average vs. $4.50 when they paid in cash. A 2003 survey of supermarket receipts found that credit-card shoppers rang up 30% bigger bills than and carted out twice as much in nonessentials as cash buyers did. (Source: CNN/Money, June 17, 2008). So while the reasons for adding payment processing are clear, understanding all your options and which are right for your business is far more complex.

Card Types

Below 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:

  • Visa & Off-line Debit Visa Check Cards
  • MasterCard & Off-line Debit MasterCard Check Cards
  • Diners / Carte Blanche
  • American Express / Optima True Grace Card
  • Discover/Novus
  • Japanese Credit Bank (JCB)
  • Co-Branded
  • Affinity Group
  • Debit
  • Smart Cards
  • Cash Cards
  • Corporate
  • Purchasing
  • Payroll Cards
  • Prepaid MasterCard

How Payment Processing Works

Some 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 Fees

Now 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.).

Again, these rates are used to determine the cost to the merchant on a per-transaction basis. There are additional costs associated with payment processing, including start- up fees, equipment costs, charge back fees and more.

What is a Merchant Account?

Merchant accounts provide businesses with the ability to accept credit card and debit cards for purchases. There are several different aspects to a merchant account, which we will describe below.

A Merchant Account Entails:

  • Processing Services: To set up a merchant account, a business owner, or “merchant” must apply through a merchant service provider (MSP) such as Merchant Warehouse. Approval of a merchant account depends on factors which include, but are not limited to:
    • Applicant and/or Personal Guarantor’s Credit Score
    • Business Type (Goods or Services Sold)
    • Card Acceptance Method (Merchant Type)
    • Monthly Volume & Average Sales Ticket
    • Business’ Financial Condition & Bank Account Type
    • Business Longevity
    • Return/Refund Policies
  • Processing Rates & Fees: There are various fees associated with having a merchant account. These could vary, depending on the type and company providing the service, but all merchant accounts have 2 main costs:
    • Discount Rates: With most merchant service providers, every processed sale is classified into 1 of 3 qualification levels (Qualified, Mid-Qualified, & Non-Qualified), and is charged a discounted percentage rate associated with that qualification. Each sale’s level and rate is determined by the type of card used, and/or how it is accepted and processed.
  • Transaction or Authorization Fee: This fee is charged for each electronic authorization request and transaction made, including all approved and declined sales, returns, voids, and batch settlements.
  • Processing Capability Systems: To process credit card payments, processing equipment or software is required to capture card information, make authorization requests, and close sales. Depending on business needs, equipment options include: 
    • Terminals: Wireless, Contactless, Stand-Alone and Terminal/Printer Combination units
    • PC Software: Stand-alone or integrated into other business systems
    • Internet Gateway Solutions: Virtual Terminal or eCommerce versions

To maintain customer satisfaction and increase sales and revenue, it is becoming essential for businesses to have merchant accounts and accept credit card payments. Fewer and fewer customers carry cash, checks involve significant risk, and sending your customers running to the ATM machine could lose you valuable business. For both your business’ and customers’ benefit,sign up for a merchant account today.

Merchant Account Services   

What is Interchange and Assessments?

Have you ever wondered how merchant service providers determine merchant account pricing, or why some credit card transactions cost more than others?

To better understand what you’re paying for, you need to know how merchant account pricing is established.

Simply put, there are two basic fees that collectively, make up the vast majority of the cost of a merchant account. In the credit card processing industry, these costs are referred to as“Interchange and Assessments,” and they are charged by bank card networks like Visa® and MasterCard® every time a merchant accepts one of their cards for purchases.

Essentially, the “Interchange” rate is a percentage that is deducted from each credit card transaction amount, and the “Assessment” fee is a flat transaction fee added to the cost of processing each credit card sale.

There are many components that influence the cost of processing a credit card, but the Assessment fee charged for a transaction is determined exclusively by the brand of the card accepted and is set by the bank card network that issued the card.

Interchange pricing is bit more complex, because each card and transaction type has a unique cost, creating an assortment of over 150 Interchange rate categories. As a result, the Interchange category any one transaction will fall under depends on various factors, including:

  • A business’ processing environment (retail, phone order, internet, etc.)
  • A business’ card acceptance method (swiped, keyed, online, etc.)
  • The information sent along with transaction (address verification, CVV2, tax amount, etc.)
  • The card brand and type accepted (debit, credit, rewards, corporate, etc.)

To lessen any confusion, merchant account providers typically compile all similar Interchange categories and bundle them into a few groupings such as qualified, mid-qualified and non-qualified. However, this is just one way merchant accounts can be priced. Some merchant account providers quote an “Interchange and Assessments, Plus” structure, which combines the actual cost of the transaction based on the Interchange category into which it falls, the applicable Assessment Fee, plus an additional specified value on top of each.

In the end, the bulk of a merchant’s credit card processing expenses and the root of all merchant account pricing structures derive from the combination of the Interchange and Assessment fees, regardless of the pricing structure.

For more information about this, or any other merchant account topic, please contact Customer Service.

What Are Credit Card Charge backs?

The definition of a chargeback is when a cardholder disputes a charge posted to their credit card account. Chargebacks can occur for various reasons, such as when a purchase was not authorized by the cardholder (fraud), or when goods or services are not provided as expected.

You should be able to avoid the vast majority of chargebacks by providing good customer service and ensuring that your products and/or services are advertised, and delivered, as promised.

For those chargebacks related to fraud, there are simple steps every business can take to help avoid any problems. It is up to every merchant account holder to be diligent in accepting charges, and to educate their staff about the precautions to take.

In environments where the business is accepting and swiping cards at the time of the transaction, there are several simple steps which can be taken:

  • Always compare the signature on the receipt with the signature on the back of the card.
  • Always examine the card to ensure it is not altered or suspicious looking.
  • Request identification such as a license or some other picture ID.

In situations where the business is taking credit card without the customer present (over the phone or Internet, for example), the chance of fraud-based chargebacks is much greater. It is very important for these businesses to put systems in place to help determine legitimate charge activity.

  • If appropriate, call customers to confirm their order if the billing and shipping or contact addresses do not match.
  • Ask for the code number on the back of the card (or front with American Express®) to confirm that the card is in the customer’s possession.
  • If you receive questionable orders, call to confirm the order with the cardholder.

If you have reason to believe that a card is fraudulent or otherwise questionable, always call the card issuing company for a voice authorization.

What Should I Expect in Your Monthly Merchant Account Statement?

Merchant account statements can sometimes be confusing, especially for new merchants. Generally, questions and concerns pertain to the charging of monthly fees and the timing of account statements, so we hope that this article will help to explain some of these confusing aspects.

As with any credit card processing company, merchant accounts typically becomes active within one business day of the account approval date. Once your merchant account is live, you are able to process credit card transactions and are also responsible for any fees assessed starting on that date. Therefore, any monthly fees will be charged, in full, for every month the account is open, regardless of your processing volume.

Monthly fees are posted to your bank account generally within the first week of the month following your merchant account activation, and continue each month that your account remains live. A statement reflecting the charges for your previous month’s processing activity is then issued and should follow mid-month. If you do not receive your processing statement by the third week of the following month, you should contact customer service to confirm that we have the correct mailing address as specified on your merchant application.

Please contact a customer service representative if you have any questions or concerns about your monthly merchant account fees or credit card processing statement.

How Do I Avoid Downgrades?

Whether you are currently accepting credit cards, or plan on doing so, it is important to know how to save money by avoiding downgrades whenever possible.

A downgrade simply means that you are being charged a rate increase because the type of card your customer is using has a higher processing cost or because a transaction was processed incorrectly by you, the merchant.

You can’t always prevent downgrades from happening, but this article will show you what you can do to keep your transaction costs as low as possible.

As an example, for a Retail or “Swiped” Account where the customer is handing over their card for processinga transaction will get the Qualified Discount Rate (lowest rate possible) only if the card is swiped, the cardholder is present, and the card is a standard consumer credit card. If any of these criteria are changed, the account will “downgrade” to either the “Mid” or “Non” qualified level. These levels are each associated with a greater cost of processing.

Here is a more detailed description of what can be done to avoid many downgrades, and also what happens if certain criteria are not met.

Retail/Card Swiped Accounts

Qualified Rate

The Qualified Discount Rate is charged when all of the following occur:

  • Standard consumer credit card is used
  • Card is swiped accurately and data properly obtained
  • The customer’s signature is captured
  • The transaction is “Batched” or “Settled” within 24 hours

Mid-Qualified

The Partial/Mid Qualified rate will be applied when any of the following occur:

  • The card info is manually entered, or “keyed” & all AVS info is entered
  • The consumer uses a Rewards card
  • Transactions are not settled/batched within 24 hours

Non-Qualified

If any of the following situations occur, a Non-Qualified rate will be applied to the transaction.

  • Card is manually entered with no AVS info entered
  • The consumer uses a Corporate, Government or International card
  • Authorization code is manually keyed in to your processing terminal.
  • Transactions are not settled/batched within 48 hours

Keyed “MOTO” or Internet Accounts

For these types of accounts, the merchant manually enters credit card information into a credit card terminal or software after the order is placed or is collected through an online payment gateway.

Qualified Rate

The Qualified Discount Rate is charged when all of the following occur:

  • Standard consumer credit cards are used
  • All required Credit Card information is entered including AVS (address verification) for VISA® transactions.
  • The transactions are “Batched” or “Settled” within 24 hours
  • The order/invoice Number entered

Mid-Qualified

For MOTO/Internet Accounts, rates usually fall directly to Non-Qualified, not mid-qualify, but these are the possible reasons why a merchant may be charged a Mid-Qualified Rate

  • AVS information is not entered
  • Transaction/Batch is not settled within 24 hours
  • Card is a Rewards or Business card

Non-Qualified

If any of the following situations occur, a Non-Qualified rate will be applied to the transaction.

  • Any of the required card or transaction information is not entered
  • The consumer uses a Corporate, Government or International card
  • Authorization code is manually keyed in to your processing terminal.
  • Transactions are not settled/batched within 48 hours

As you can see, there are many factors involved in determining which rates are assessed to your transactions. Follow the tips above, and you will keep your processing rates as low as possible. A Merchant Industry representative is always available to answer any questions or concerns you may have.

What Are The Visa® & MasterCard® Rules and Regulations?
As a merchant accepting MasterCard® and Visa®, there are basic card acceptance rules that you must follow. By adhering to these rules, you can increase customer satisfaction and ensure that you do not run into compliance issues, which may put your continued ability to accept credit cards at risk. The following are some of the rules outlined in the Visa and MasterCard manuals:

Card Logos & Acceptance: You must display the appropriate card logos for any card types that you accept and advise your customers of their payment options. You must honor all categories of cards (credit, debit, rewards etc.) within each card type that you accept.

Dollar Minimums and Maximums: You may not impose a minimum or maximum amount for any transactions. If you do not accept a customer charge, which is below a certain amount that you specify, the customer can notify Visa and/or MasterCard, who will take the appropriate steps to see that you understand and adhere to the card acceptance rules and regulations.

Surcharges: All credit card transactions must be treated like any other transactions. You may not impose any surcharge on a transaction because your customer is using a credit card. However, you may offer a discount to your customers for paying in cash provided the offer is clearly disclosed to your customers and the cash price is a discount from the standard price charged for any other type of payment.

Laundering: You may only process transactions for your own business. Processing transactions for a business that does not have a valid merchant agreement is called laundering and is considered a form of fraud.

To learn more about the rules and regulations of accepting Visa and MasterCard cards, please contact us or see the Visa and MasterCard guides available through the Visa and MasterCard websites.

What is Debit Card Processing?

While most merchants know they should accept debit cards, it is not always easy to understand how to take full advantage of debit card processing. Merchants can do debit card processing in one of the following two ways:

Offline Debit Card Processing
The most common way to accept debit cards is an "offline debit transaction." In this type of sale the merchant accepts a debit card the same way in which they would accept a normal credit card. The card is swiped through the terminal and the customer signs the receipt. As far as the merchant is concerned, there is no difference in the way a credit card or an off-line debit card is processed. The one thing merchants must remember is that the debit card must have a VISA® or MasterCard® logo on it. Cards that do not bear the Visa or MasterCard logo can not be processed off-line and will not be approved.

Online Debit Card Processing
A potentially cheaper and more secure, method for accepting debit cards at the point-of-sale is called an "on-line debit transaction." In this type of sale the card must be swiped through the terminal and external or internal PIN Pad is used to enter the merchant’s four digit PIN. The terminal will pass the encrypted number to the bank for verification. The merchant will then be paid for the transaction in the same manner and time frame that they would be paid on a credit card sale. The cost of this type of transaction is potentially lower due to the way in which the merchant is charged by the processing companies. Rather than paying a flat fee and a discount rate, or percentage of the transaction, as with a credit card or offline debit transaction, there is only a slightly higher flat fee.

What is Online Debit Card Processing?

Not all debit card transactions are the same! For those merchants able to use a PINPad along with a credit card terminal, online debit card processing can offer a big savings. The difference between “online” and “offline” debit card transactions is that “online” requires the merchant to input their 4 digit PIN number and have their card swiped while “offline” functions exactly the same as any credit card transaction.

So why is does online debit card processing have such potential savings? Consider the bank’s perspective. When a customer presents their card for payment and then enters a PIN number manually, the chances of fraud are extremely small. Because if this, the costs for pin based, transactions, or online debit card processing, can be much lower.

When conducting pin based transactions, merchants are charged a flat fee for each order instead of a percentage rate (discount rate) plus transaction a fee. Assuming a merchant takes 100 debit cards over the course of a month (about 3 per day) and averages $85 per sale, a conservative cost analysis shows that a merchant could save over $100 a month, or $1,200 a year.

Merchant Account Technology   

Does Your Business Need a Wireless Credit Card Terminal?

Is your business suffering because you’re unable to accept credit cards while on the road? Or worse, are you losing sales to declined credit cards processed off-location, without the customer or card present? If so, your business may need a wireless credit card terminal.

For mobile businesses (i.e. Transportation and Towing services, Contractors, Delivery services, Direct Sales, Trade Show and Flea Market merchants, etc.), a wireless credit card terminal enhances business mobility and efficiency, simplifies the billing and payment process, and increases sales and revenue.

Wireless terminals allow mobile merchants to:

Accept payments from anyone, anywhere, anytime:

  • Wireless terminals offer mobile businesses a solution for accepting credit card payments in real time and on-location.
  • With connections to multiple cell phone networks, wireless coverage is provided throughout the country.
  • To enable continued operation in low-coverage areas, wireless terminals have a Store and Forward” security feature that provides an offline capture of transactions.

Enjoy efficiency and convenience:

  • Wireless terminals deliver a rapid check-out process, with verified transactions received in 2-3 seconds.
  • Wireless terminals are compact, and easy to deploy and use.

Reduce the risk of financial losses:

  • By accepting payments real-time, you can avoid losing sales from declined credit cards processed off-site.
  • By accepting credit cards on-site, you can reduce the risk of carrying large sums of cash or receiving bad checks.

Operate with low processing costs:

  • Wireless processing is an affordable solution for mobile merchants; since swiping a credit card with the customer present involves less risk, processing costs are lower compared to manually key-entering card information at a later time.

Wireless credit card terminals offer mobile merchants a simple and dependable payment solution from a handy device. So take advantage of the many benefits and capabilities supplied by a wireless credit card terminal, and start processing mobile credit card transactions today!

How Does the Credit Card Authorisation Process Work?

Ever wonder how credit card authorization really works? Where does the credit card information go once you enter it into a credit card terminal or POS?

When a credit card is swiped and a credit card authorization process is initiated, the information is sent directly to a credit card processor. From there, the information is transmitted to the card-issuing bank through a bankcard association, where the transaction is either approved or declined. Finally, the bankcard association transmits the approval or decline back to the terminal or POS device.

During the credit card authorization process, a card may decline if it is expired or has insufficient funds. The transaction may also be declined if the card has been reported missing or if there has been suspicious activity on it. To further protect your business, banks now require credit card authorization for all paper-based transactions.

In order to process credit cards and initiate a credit card authorization, a business must sign apply for, and receive, a merchant account. Once a merchant account is set up, credit card authorization may take place through the use of an equipment terminal/POS.

Credit Card Software or Terminal?

Deciding on whether you want to use a credit card terminal or some form of payment processing software to handle card transactions should is usually fairly straightforward. The answer generally depends on the physical environment in which you will be accepting the charges.

Most simply put, the decision usually boils down to whether or not you will have easy access to a computer when you need to charge cards and what kind of transactions systems you already have in place.

If a computer is readily available payment processing software often provides numerous benefits over traditional credit card terminals. Most users love the reporting features available to them and find it helpful to go back and look up a previous transaction. Payment processing software is also usually less expensive and more user friendly than most new credit card terminals.

There are logical reasons why many businesses may be better off with a terminal however. To start with, many businesses already have invested in some sort of cash register or POS system. While some of these can be integrated with payment processing software, many can not. In these cases, it is usually simpler to use a credit card machine rather than cluttering your valuable counter space.

Another circumstance when a terminal may be preferable is when your computer may not always be on or may be in an inconvenient location. If you need to take payments in real-time and can’t be inconvenienced with accessing your PC, then you may be better off with a credit card terminal.

How Do I Select an Online Payment Gateway?

While many online payment gateway options are feature rich you still want to spend some time comparing them. This article explains how to go about determining the best online payment gateway option for your business.

Some may prove better in different environments and the reasons can sometimes be quite technical. Take the time to read up on the specs and compatibilities of the different online payment gateway packages. If there is any confusion, or you aren’t certain what might be the best product for you, be sure to call and ask your salesperson questions. Any experienced sales person should be able to fit you with the correct product and describe the pros and cons.

If you already have an ecommerce website and a shopping cart, simply mention this to your sales person when you call. Most off-the-shelf shopping cart packages are compatible with all major online payment gateway products. If your company has built its own shopping cart and database systems you may want to consider having your technical person review the documentation for the gateway you choose.

Merchant Industry carries all of the major online payment gateways on the market today. You can browse through all of them in our section for payment gateways.

How Do I Select The Correct 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 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.

How Do I Select The Correct Credit Card Equipment?

With so many different types of credit card equipment on the market these days, choosing the correct type for your business can be a confusing task. In order to help guide you towards the correct choices, here are some questions you should ask yourself when shopping for credit card equipment.

Will customers be using their credit or debit cards at my physical business location or will I be collecting the card information through another means?

  • If you will be swiping cards directly from your customers, your best option for credit card equipment is probably some sort of credit card terminal and printer combination. If you will not be swiping the cards manually, many merchants will want credit card equipment that is more suited to their specific needs. Software packages are available if there is a PC at the business location or a standard terminal and credit card printer may work just fine.

Is a contactless payment solution the right choice for my business?

  • Merchants who have "quick service" retail operations, and whose average ticket is $25 or less, may benefit from Contactless Payment credit card equipment. The "tap and pay" technology has proven to be most valuable for convenience stores, fast food restaurants, pharmacies, movie theaters and other merchants who rely on faster transaction times and shorter wait times for customers. Merchants can also upgrade their existing credit card equipment to a contactless payment reader without disrupting their operations.

Is there a phone line or broadband internet access available at the business location?

  • Most businesses have at least one phone line at their business location and, these days, most have some sort of “always on” internet connection. For these businesses, there are many choices for credit card equipment. Most credit card equipment can share a phone line with a fax, or even the main phone if calls are infrequent and some of the newer terminals can utilize broadband internet for even faster transactions. If no phone or intent is available, such as at a trade-show or for delivery companies, etc, merchants should consider either a battery powered credit card terminal or wireless credit card machines that work over the cell phone networks.

Will you be accepting PIN-based debit card transactions?

  • For those merchants that think they will be accepting debit cards they should consider adding credit card equipment like a PIN Pad to give their customers additional payment options. As described in this article about debit card processing, accepting PIN based transactions may save you money and add value to your customer’s experience.

How many merchant accounts will you need for your business?

  • For almost all businesses the answer is one. There are examples however where multiple merchant accounts are either desirable or a necessity. These merchants will want a piece of credit card equipment that can handle more than one merchant account. There are inexpensive terminals which handle two accounts and more robust units which can handle up to 99. A qualified merchant account sales person should be able to recommend the correct credit card equipment for your specific situation.

Which terminal brands should I consider?

  • Since most of the major credit card equipment manufacturers are producing high quality and feature rich products these days, you really can’t go wrong whatever brand you choose. That said, some of the processors may work better with a particular brand of credit card equipment and some newer pieces of equipment are not certified at every processor immediately upon their release. Again, this is a situation where it is best to let your merchant account sales representative guide you as to the best options given your particular processor and needs.

If you have any further questions regarding credit card machines, please feel free to contact our sales team for information and advice on purchasing equipment by calling the number at the top of your screen.

What Are Contact less Payment Terminals?

Contactless payment terminals have become the present and future of credit card transactions. Also known as "tap and pay," contactless payment provides benefits to retailers and consumers alike, particularly in the areas of speed and convenience.

Contactless payments are simply transactions that do not require physical connection between your customers' credit card and the terminal. Smart chip technology, otherwise known as RFID, is supported by a secure controller, internal memory, and a small built-in antenna that transmits information to a reader through radio frequency.

The primary advantages of a contactless payment reader over traditional swipe cards are speed and convenience. Consumers can just tap the contactless payment terminal, eliminating the need for a transfer of hands with a credit card and a receipt signature. In turn, check-out lines become shorter as transaction times become faster.

Contactless payments are best suited for quick-service retailers, such as convenience stores, fast-food restaurants, movie theaters, pharmacy / drug stores, and gas stations and for those whose average ticket is $25 or less.

Retailers with major POS terminal providers can easily upgrade their existing system with a plug-and-play contactless payment device.

IRS Reporting 6050W   

What is a Federal “TIN” or Tax Identification Number?
 

A Federal Tax Identification Number (TIN) is an identification number used by the IRS in the administration of tax laws. In most cases the TIN is either a Social Security Number (SSN) or Employer Identification Number (EIN), also known as a federal tax identification number.

How is “Legal Name” defined?

For-purposes of complying with the new law, a merchant's "legal name" is typically the name the merchant uses to file its federal tax returns, or the legal name the merchant provided to the IRS filed on Form SS-4. This should match what is on file with your payment processor.

What is the definition of a “payment card”?

“A payment card” generally means a credit card, debit card, transit card, governmentally-issued electronic benefit transaction (EBT) card, or any other card which is accepted as payment by a network of persons unrelated to the issuer of the card and to the other merchants who accept the card as payment.

How is the “gross” amount defined?

Under proposed regulations, "gross amount" is defined as the total dollar amount-of aggregated transactions in which a payment card is accepted as payment for each merchant without regard to any adjustments for credits, cash equivalents, discount amounts, fees refunded amounts, or any other amounts. This is for communication purposes only and is not intended to provide any legal or tax advice. Please visit the IRS Website at www.IRS.Gov for additional information on the 6050W requirements.

What is a “merchant acquiring entity”?

A "merchant acquiring entity" is defined as the bank or other organization contractually obligated to make payment to merchants in settlement of payment card transactions.

What is a “payment settlement entity”?

A “payment settlement entity” is, in the case of a payment card transaction, a merchant acquiring entity; or, in the case of a third-party network transaction, the third party settlement organization.

What does this requirement mean for merchants?

As your payment processor, we will report your gross receipts for all electronic payment transactions to the IRS. A Form 1099-K will be provided to you on or before January 31st of the year following the year for which the return is required.

Why is the IRS requiring this reporting of merchants?

According to the IRS, this provision is designed to improve voluntary tax compliance by business taxpayers and assist the IRS in determining the tax returns are correct and accurate.

What does a merchant need to do in order to comply?

As a merchant, you must ensure that your payment processor has the correct TIN and legal name on file. Accurate tax information matching your IRS tax records will help to prevent possible IRS backup withholding.

Do all merchants have to comply with these requirements or does it only apply to merchants who process a certain amount of transactions / volume?

Yes, all merchants must comply with these requirements.
Professionals in the payment industry “requested” that the IRS set a de minimus threshold, (more than 200 transactions aggregating more than $20,000 per calendar year for a given payee), for all payment card transactions in order to be required for reporting. Final IRS regulations did not adopt this recommendation for merchant acquiring entities or banks.
(Business owners are encouraged to discuss with their individual tax consultant regarding rules and explanations related to their tax status.)

Why didn’t the IRS contact me directly?

The new IRS requirements were made available throughout the payment processing industry and through various IRS publications. Taxpayers may find additional information on the IRS’ website atwww.IRS.Gov or by consulting with their tax professional.

What if my TIN or Legal Name is different than what the IRS has on file?

If the payment processor does not have a merchant's correct Federal Tax Identification Number and Legal Name (as reported to the IRS), the merchant may be subject to backup withholding of a minimum of 28% from any future payments made, adhering to IRS guidelines. This is for communication purposes only and is not intended to provide any legal or tax advice. Please visit the IRS Website at www.IRS.Govfor additional information on the 6050W requirements.

Does the payment processor keep any portion of the 28% withheld from my payment?

No, the IRS requires that backup withholding is directly transmitted to the IRS.

How do I update my tax records?

If you receive notification from your merchant processor that your information needs to be updated, please visit https://npc.my1099k.comto provide corrected data as soon as possible. For any other questions or changes merchants may contact the number on their merchant processing statement.

What if my company has several divisions? Will the payment processor report a 1099-K form for each division or subsidiary?

Under the proposed rules, acquirers are not required to split or differentiate the reporting. Payment processors are required to report the total volume paid to US legal entities.

How does this law affect franchise merchants?

Under the IRS regulations, if a merchant is a franchise of a larger organization but not owned by that larger organization, then the franchise's "reportable payment transactions" would be reported to the IRS at the ownership level and would be separate from the larger organization. However, if the merchant location is owned by a larger organization this merchant's "reportable payment transactions" would be included in the totals for the larger organization.

How do I know that you have everything required and will not withhold payments next year?

Merchants with non-matching IRS information will continue to receive communication along with the necessary actions to take in order to prevent backup withholding in 2012.

Fraud and Protection   

  • Follow The Merchant Rules
  • Authorization
  • Address Verification System (AVS)
  • Card Verification Methods (CVM)
  • Payer Authentication Programs
  • Real-Time Authorization
  • Bin Check
  • Calling the Card-Issuing Bank
  • Different Bill and Ship to Addresses
  • Negative Historical File
  • Shared Negative Historical File
  • Positive Database File
  • Credit Service Database
  • Customizable Merchant Rules
  • Fraud Scoring Systems
  • Pattern Detection
  • Alternate Thank You Page
  • Custom Built Software
  • Free Email Accounts
  • Anonymous & Open Proxy IP Addresses
  • Checking Telephone Numbers
  • FAX Orders
  • Calling the Customer
  • Web Site Information
  • Use Temporary Activation Codes
  • Anti Fraud Groups & Information

Breach Protection   

  • Is Your Credit Card Processing Terminal Out of Regulatory Compliance?
  • Are You At Risk For A Data Security Breach?
  • What Devices Need to Be In Compliance?

Merchant Account Glossary of Terms   

  • ABA Routing Number
  • ACH / Automated Clearing House
  • Acquiring Bank
  • ATM Debit Card
  • Authorization
  • Authorization Code
  • Authorization Fee
  • Authorization Only Transaction
  • Authorization Response
  • Average Ticket Size
  • AVS / Address Verification Service
  • Basis Points
  • Batch or Batch Processing
  • Business Type
  • Debit Card
  • Average Transaction Amount
  • Capture
  • Chargeback
  • Electronic Deposit
  • Electronic Draft Capture
  • Encrypted Transaction
  • Application Fee
  • Chargeback Fee
  • Discount Rate
  • Monthly Minimum
  • Monthly Statement Fee
  • Transaction Fee
  • Verbal Authorization Fee
  • IP Address
  • Internet Software
  • Issuing Bank
  • Manual Imprinter
  • Keyed Transaction
  • Member Alert To Control High-Risk Merchants (MATCH)
  • Merchant Identification Number (MID)
  • Monthly Volume (MV)
  • Personal Identification Number (PIN)
  • Pinpads
  • Point of Sale (POS)
  • Purchase Cards
  • Qualified Discount Rate
  • Refund Policy
  • Shopping Cart
  • Standard Industry Code/Merchant Category Code (SIC/MCC Code)
  • Reserve Account
  • Settle Batch
  • Terminal ID
  • Transaction
  • Underwriting

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Testimonials

"We found out about MSWCard through Google. When I called in for information I was told that I'd be receiving all of our deposits within 12 hours after batching out for no additional cost. It was hard to wrap our hands around the idea that switching processors could benefit our bottom line so much!"...
--Steve Johnson

Contact US

  • MSW CARD LLC ® is a registered ISO of the following Banks:
  • Wells Fargo Bank, N.A., Walnut Creek, CA
  • Esquire Bank N.A., Jericho, NY
  • American Express may require separate approval.
  • All Rights Reserved, Reproduction without the written consent of MSW CARD ® is prohibited.
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  support@mswcard.com
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