Merchant Account Processing
Merchant Account Processing
Merchant Account Processing
Whether you are opening up a storefront location or starting an ecommerce website, you will need to have the proper technology to be able to accept customer credit card transactions. The technology uses merchant account credit card processing through a merchant services provider. With a merchant service account, providers give businesses the processing machines, the software needed, and the support so that they are able to run customer credit cards to pay for the products or services received.
As you can imagine, there are costs associated with a merchant account. Services offered vary from merchant provider to merchant provider and the fees associated with the services vary just as often. When it comes time to decide on which provider to select, it is important to know what to look for.
Basics
Generally, there are six types of credit cards which customers will present to pay for their products or services. These include debit cards, check cards, qualified cards, mid-qualified cards, and non-qualified cards.
If the business accepts in person transactions, like in a retail store, they will swipe the cards through a machine to register payments. E-tail and Ecommerce websites do not use a physical card swiping machine. They have the processing software built into their online store platform so that internet shoppers can pay for services virtually.
Fees incurred depend on the type of card used and the way that it is processed. For instance, if the card owner does not enter the PIN number for the debit card function of their card, then the business pays the rate for the check card function being used. The check card rate is higher than the debit card rate, because the risk of a fraud is higher with a customer signature than with a secure PIN.
Fees Involved
Typical fees that businesses will see on their merchant services account are percentage fees for each transaction, statement fees, transaction fees, minimum balance fees, insurance fees, batch fees, and chargeback or retrieval fees.
Percentage fees- The merchant pays the provider a percentage of each sale. The rate is typically between 1.5 and 2.5 percent. This percentage changes depending on the type of card used, and if situations arise during processing like an addresses entered online not matching what the credit card company has listed.
Statement fees- This is a fee for receiving a paper itemized listing of all monthly transactions and the charges for each. It also lists the rate for each transaction, account number, and company issuing the statement.
Transaction fees- This is a predetermined flat rate that the merchant pays to the provider, usually ranging between 10 and 30 cents for each transaction.
Minimum Balance fees- Most accounts have a monthly minimum that merchants must maintain in order to keep their account. This fee occurs if the monthly volume falls below the monthly minimum. The merchant must make up the difference and pay the provider for the low volume of transactions.
Insurance fees- These fees are associated with the card swiping equipment borrowed from the provider. When leasing a card terminal a warranty can be purchases to cover any accidental damage which may occur to the machine. This cost is collected in a monthly fee.
Batch fees- The bank makes an accounting of all transactions and transfers them over to the merchant's bank account at the end of the day. This is considered a daily batch fee.
Chargeback and retrieval fees- This fee is charged by the credit card company when the customer returns a product and there is a dispute between the merchant and the customer. It is rare that a merchant prevails and for this reason, many merchants experience losses in profits.
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