How astute are you when it comes to your merchant banking? This is the second in a three part series that deals with terms associated with merchant accounts and things you should be paying attention to in your business. In the first part, we covered the Discount Rate, Batching, Terminals, Virtual Terminals and the differences between Card Present and Card Not Present transactions. We decided to run these articles partially to educate new merchants, but more as a refresher to existing merchants. It’s always a good thing to revisit your banking solutions and better your position, that’s our goal.

We covered the differences between card present and card not present transactions, but when it comes to card not present transactions, there are several different types. The first is MOTO, which stands for mail order, telephone order. It really is self explanatory, as it refers to merchant processing that originates through the mail or over the telephone, and are usually considered high risk. The second is M-commerce (wireless); we all know that E-commerce is electronic commerce or usually purchasing a product or service over the internet. M-commerce is similar in that it involves a handheld device such as a PDA, cell phone or whatever new gadget can fit in the buyer’s pocket. This type of transaction can be dangerous for consumers because these devices are small and often misplaced or stolen. The fraud rate goes up tremendously when it comes to M-commerce. U-commerce stands for universal commerce; it means that the merchant with U-commerce status has universal processing status, and can accept a credit card in any form, any time meaning MOTO, E-commerce, M-commerce Card Present or Card Not Present. It is fairly rare, but these merchants are out there and a U-commerce account is a bit difficult to obtain.

After your daily business has been batched and sent to the bank, where does it go? It goes to the Acquiring Bank. The Acquiring Bank will transfer the pertinent customer information to Visa, Mastercard, Amex or whatever kind of card it is; they will send it to the bank that issued the customer the card, for payment to the merchant. I know, it sounds pretty complicated, but it isn’t. There’s a lot of routing of the same information; but if you look at how many different credit cards there are out there, it’ll make more sense. This is done pretty quickly too, in about a day. That bank that pays the merchant ultimately is the Issuing bank, which will bill the cardholder at the end of the month. Every week or month, depending on your needs and what your processor makes available to you, a statement called a Processing Statement will be sent to you. A Processing or Settlement Statement is an aggregate of all the credit card transactions for that particular billing period. It provides the cardholder information on each transaction, amounts, issuing banks and dates of transactions. Each transaction warrants a rate, interchange rate, discount rate or qualifying rate, they’re all the same thing. It’s the rate that the bank will charge you on a particular transaction. This rate is initially based on your initial qualifying rate from the bank when you opened your merchant account, but can fluctuate, depending the type of card being processed; for example, you will get a lower rate charged you for processing debit cards, versus a higher than usual rate for rewards cards. A rewards card is a credit card that rewards the cardholder with miles, points, money back or any other reward for using the card for purchases. Regular bank issued credit cards fall in the middle. In addition to all of your account activity, rates, dates and amounts; your Chargebacks, if you have any will be debited from your account prior to summing the total amount that will appear in your account in your next bank wire. Chargebacks can be returns, fraud, unfulfilled or cancelled orders or even a disputed charge with the issuing bank. Chargebacks are a pitfall and challenge for merchants. You want to avoid them, they do not go away, and can endanger your merchant account and business. Chargebacks will be the focus of our next article, look forward to it.

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