WHAT IS A MERCHANT ACCOUNT?

The use of plastic money or credit cards is fast becoming the preferred mode of payment for all kinds of purchasing activities, not just in the developed world but also in emerging economies. Two key factors are contributing to this trend:

1. Convenience and Security: Credit cards mean that hard cash does not have to carried around in large quantities for high value purchases. Credit cards also carry the convenience of remote purchasing and instant payment delivery, unlike in the case of pay orders or banker’s cheques, which involve extra fees, delivery charges and the logistical time lag.

In addition, there is a security feature attached to credit cards, and generally speaking, a credit card loss does not always mean an immediate loss of money.

2. E-commerce: with the growing prevalence of electronic purchasing options such as online, TV and telephone and growing adoption of the convenience factor, credit cards are becoming the only practical choice for payments.

Merchant accounts are accounts which enable acceptance of payments through credit cards, cheque cards and debit cards. A retailer can obtain a merchant account with a bank or through an independent merchant account provider, who specializes in setting up and maintaining merchant accounts for miscellaneous business entities. The procedure for applying for and obtaining a merchant account is relatively simple and can be viewed http://stradafee.com/merchant-enrolment.php

There are different types of merchant accounts available depending on retailer needs and the nature of business. For instance, for an internet retailing business, an internet merchant account is used, whereas a swipe based physical terminal is used for a brick and mortar retail business. Most merchant accounts can however, be classified as:

1. Swipe based: These merchant accounts depend on a physical terminal connected to a phone line. The credit card needs to be swiped through this terminal to initiate, process and complete a payment transaction. In the case of check verification, there will be a check reader, acting as the swipe terminal.

A new innovation in the swipe based processing segment is the wireless merchant account terminal, in which instead of a regular phone line, is connected wirelessly using cell phone technology. The advantage of this technology is that a merchant or e-tailer will not be limited geographically for accepting payments. For instance, at a retail exhibition, a merchant can easily set up without wires, a payment system for walk-by clients to submit credit card payments.

2. Non swipe based: These include all those methods of payment which require credit card information but the credit card itself does not need to be swiped. This also includes merchant accounts for online check payments and clearance. Some of the common non-swipe merchant accounts include:

a. Internet Merchant Account: This type of account is used by internet based retailers. Credit card payments are processed after receiving electronic credit card information received through a web-based form and transmitting it through a payment gateway. This type of merchant account is a very popular merchant account, particularly due to the substantial growth of the e-commerce industry.

b. Online cheque acceptance (e-checks): This type of processing utilizes cheque payments without actually having to receive a cheque by mail. The customer can provide cheque information on the physical cheque, such as depositor name, account name, cheque number and so on, and the retailer can, using a cheque processing solution, verify and receive a cheque via online submission or phone/fax or email. Using the special software, the cheque can then be printed remotely and submitted by the retailer in physical form.

c. Telephone order merchant account: Using a touchtone telephone, this type of account receives information about the credit card using the telephone keypad. This account is suitable Telephone Order businesses which have a substantial business coming in through the telephone.

An important factor to remember with merchant accounts if fees; merchant accounts involve a number of fees to run and maintain, including setup, monthly/annual, statement fees (which are fixed) and a number of variable fees such as discount rate, rolling reserve, per transaction fees and address verification (AVS) charges. The actual cost of setting up, running and maintaining a merchant must be understood and compared to actual business requirements, such as volume and frequency of transactions, nature of business and track record. Selecting the right merchant account provider will be critical from the cost-feasibility point of view as well as smooth transaction processing of credit card payments.

Jennifer Loganathan is the CEO of Stradafee Limited an international merchant service provider. Stradafee is a retail and an electronic payments company specializing in global eCommerce and Internet merchant accounts. Merchant accounts make it possible for businesses to accept credit cards as form of payment for card present and card-not-present transactions. For more information on credit card processing visit http://www.stradafee.com.

What is Credit Card Processing?

If you were reading this article twenty, fifteen or even ten years ago, chances are you would be reading it in a magazine or an industry or trade publication and not on your computer, in your office (hopefully home office), but probably on your laptop in an airport, because your flight was delayed, again. It’s a simple concept that has been around since the inception of credit cards and that is, credit card processing.

We’re going to get back to the definition later, but for now, let’s concentrate on how credit card processing can help you, the merchant. Most importantly, the ability to process credit cards is hopefully something you’re doing now, but maybe you’re unsure if you’re getting the best deal or have had issues with your current processor, bank or merchant service provider. Some of you don’t take credit cards at all; for whatever reasons they’re not good enough and you’re losing business every day that you do not. And finally, some of you had one, lost it or gave it up and realize that it is again necessary, but want to do it properly and through the proper channels. All of these circumstances my readers may be in can be answered easily; you should be dealing with a merchant service provider. The simple answer is that merchant service providers can tailor programs and services specifically to your credit card processing needs.

Whether you take cards in person and swipe them through a terminal or you receive card information via the internet or telephone, you’re looking at a minimum three day process to receive your money. At the end of the first day you’re going to close your batch of sales and submit them (this is done automatically). On the second day, probably before you wake up, the file you sent settles with the bank. By the end of day two, that settlement file is delivered to the bank. At the beginning if day three, your account is funded. This is a basic funding flow, if you process checks online as well that is a separate file and can take longer. As every business and industry has its own set of needs; merchant service providers are a great way of selecting extra services that can enhance your userability and ease of daily fund processing and tracking. Some of these services include ACH check processing, help obtaining a credit card terminal, online reporting tools, virtual terminal for card-not-present transactions, gateway for your internet business, fraud scrubbing for your internet transactions, third-party verification services, and multi-currency processing.

3 Different Credit Card Pricing Methods

There are three pricing methods that you should be aware of, so you know which one may be the best fit for you.

The first is Pass Through, which gives the merchant a choice of per item, per auth, or per basis points. It also has an interchange rate plus per item, dues as well as assessment all passed through to the merchant. There is a monthly fee for this method.

The second is the Tiered method which is for both per item and standard bumps. A 2-tier (for both credit cards and check cards), it has two rates, Qual and Non-Qual; and 3-Tier (for both credit cards and check cards), has three rates, Qual, Mid-Qual, and Non-Qual.

Lastly Bill back, which gives the merchant a choice of a blended per item fee. Merchants that choose this method get a Targeted Discount Rate (2 target rates, one for credit, one for check card) and downgraded transactions are charged by bill back.

In closing, this article doesn’t even come close to actually defining credit card processing, it would be like defining business, because it changes as fast as its customers do. You, the merchant have many choices when it comes to who and how your credit card customers’ money reaches your bank account. Spend the time to contact a merchant service provider to see what services are right for you.

Jennifer Loganathan is the President and CEO of Stradafee Limited an international merchant service provider. Stradafee is a retail and an electronic payments company specializing in global eCommerce and Internet merchant accounts. Merchant accounts make it possible for businesses to provide credit card processing for card present and card-not-present transactions. For more information on credit card processing visit http://http://www.stradafee.com/