Tuesday, November 15, 2011

Credit Card Processing

Ever given any thought to what happens during a credit card transaction immediately after you swipe your card? It’s not all smoke and mirrors, but rather a highly-secure, high-tech process that transpires in mere seconds. In a nutshell, Merchant Account® presents Credit Card Processing 1.0.

Credit Card Processing begins with a card swipe (or, alternatively, with the manual entry of data on a website payment page or a PIN pad) by the customer or merchant. The credit/debit card account number, sale total and merchant ID number are transmitted electronically and simultaneously over the merchant’s credit card processor’s network. Companies like Merchant Account® that provide credit card processing services are known by several names: credit card processors, merchant services providers, processors and acquirers.

Once the transaction clears the processor’s network, it’s sorted by card brand and routed to the proper credit card computer network — MasterCard® transactions to the MC network, Visa® to Visa, and so on. From there, the transaction is routed to the bank that issued the card, which is responsible for checking the account to make sure the customer has adequate credit to cover the transaction charges. If so, the bank authorizes the sale and notifies the merchant over the network. The merchant issues a receipt to the customer, who leaves with their merchandise. But the sale is not yet complete.

Each day at the close of business, the merchant must send all that day’s charges through the merchant services provider to the credit card processing network. This is known as batch processing. Individual transactions are sorted out by issuing bank and sent on to the banks, which debit the cardholders’ accounts and pay the processor through the Federal Reserve’s Automated Clearing House (ACH).

The credit card processor, in turn, credits the funds to the merchant’s account. This part of the process can take up to two days. The processor charges fees, typically on a monthly basis, to the merchant account, although sometimes this is done on a per-transaction basis. The fees encompass payments to the issuing banks, the credit card networks and the processor for services rendered.

All merchants who accept credit cards must first establish a merchant account, which is the basis for credit card processing. This account is strictly between the merchant and the credit card processor and is totally separate from any other bank accounts the merchant may own.

If you’re interested in adding credit card processing to your business, Merchant Account can help. Contact a sales representative today to get started.

Sunday, November 13, 2011

How To Save On Your Merchant Accounts Fees

With debit swipe fee reform now implemented, retailers nationwide are anticipating saving on the interchange portion of their merchant accounts fees.  Preliminary data indicates that millions of dollars in charges may be coming their way.

The Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 went into effect on October 1, 2011. Under it, the Federal Reserve capped the interchange fees banks can charge on debit card transactions at 21 cents, plus 0.05 percent of the transaction. Issuers are also allowed to charge an additional penny per debit transaction to offset their fraud prevention costs. The new average swipe fee for a debit card purchase is 23 cents, compared to the pre-Durbin average of 44 cents.

It’s important to note that the legislation applies only to Visa® and MasterCard® debit cards (not credit cards), and only to banks with more than $10 billion in assets. It caps the interchange fees that the banks charge, but does not apply to third-part processors, who can charge whatever they want to their merchant accounts customers.

“As an industry, we’re really pleased that the new rules have now taken effect,” Connecticut Retail Merchants Association President Timothy Phelan recently told the Hartford Business Journal. “We really won’t know the true benefit until the retailers get their statements.” Phelan added that he expects that merchants, in time, will pass along any savings they receive to their merchant accounts customers.

The business journal reported that Connecticut merchants could expect to save about $260 for every $100,000 in Visa and MasterCard debit charges they process.

In the months leading up to its enactment, the Durbin Amendment prompted an epic battle on Capitol Hill that pit credit card-issuing banks against merchants and their associations. The banks argued that they would lose billions of dollars in revenue from lower fees — income they threatened to recoup by charging debit card customers monthly fees to use their cards. Several major banks, including Bank of America, Wells Fargo and J.P. Morgan Chase, dropped that idea after cardholders rebelled and threatened to close their accounts.

For now, retailers are waiting for their first post-Durbin Amendment merchant accounts statements to arrive to see how they’ve fared under the new rules. If they have questions regarding their savings, they should discuss them with their merchant services provider representative.

Friday, November 11, 2011

Why It Pays To Accept Credit Cards


accept credit cardsOne of the biggest challenges for a small business is competing with larger businesses with greater resources. One proven strategy for leveling the playing field is to accept credit cards. After all, 78 percent of American consumers own a credit card, and 80 percent own a debit card.¹ That’s a huge market that no merchant can afford to ignore — especially small businesses who don’t plan on remaining small for long.

Small businesses that start to accept credit cards benefit in a variety of ways. Most obviously, they immediately become an option for patrons who prefer to pay with plastic. In their eyes, seeing the logos of the major credit cards in a merchant’s shop or on their e-Commerce website means that merchant is in the same league as much larger retailers. Since most small businesses strive to offer the superior customer service that the Big Boys often can’t or won’t, it’s a no brainer that they should expand their payment options to include the debit and credit cards consumers use so frequently.

Secondly, the convenience of credit cards cuts both ways. Consumers appreciate swiping their card and cutting the transaction time to just seconds so they can be on their way. But merchants benefit, too. Shorter transaction times mean they can serve more customers more efficiently. And, at the end of the day, merchants can send all their transactions in one batch to their credit card processor for electronic settlement, knowing that within days the proceeds will land in their account.

Credit card processing with a reputable merchant services provider like Merchant Account® is a very secure operation. State-of-the-art encryption technology keeps cardholder and account information safe, as does our PCI-compliant electronic payment gateway Transaction Express™. Whether a merchant accepts credit cards with a countertop terminal, an online virtual terminal or in the field with our mobile PayFox® service, the transaction is protected from fraudsters and identity thieves.

Merchants who accept credit cards also usually see an increase in sales. The reason is simple: Credit card shoppers tend to spend more than shoppers who pay with cash or a check. Impulse buying and upgrading to a higher level of merchandise are both possible when the shopper taps a line of credit instead of a wallet to pay.

Finally, there are savings to be realized from accepting credit cards. Merchants spend less time making bank runs and processing paper checks. New credit card processing options like wireless and mobile mean that merchants who deliver services or products to customers’ homes or businesses can collect right then and there, foregoing the time-consuming and expensive billing and collection process.

Today’s credit card processing is fast, convenient and safe, and the many options available give merchants the opportunity to work with a merchant services provider to design a package that meets all their requirements. For small business, being able to accept credit cards is the smart way to go and grow.

¹   Source: “The Survey of Consumer Payment Choice,” Federal Reserve Bank of Boston, January 201