The two basic types of merchant
accounts are "card present"
and "card-not-present". Each
basic type of account has
subcategories that are defined by
business type or how a credit card
transaction is processed.
A card-present merchant account is
any merchant account where the credit
card and the customer are present
during the transaction, and the
merchant is able to swipe the
customer's credit card through a
magnetic card reader to perform an
electronic data capture. Retail
Merchant Account - A retail merchant
account is a card-present account
where the majority of credit card
transactions are processed by swiping
the card through a credit card machine
or magnetic strip reader that is
connected to a physical phone line.
Retail merchant accounts are
considered low risk and are granted
the lowest merchant
account fees and rates. When a
credit card transaction is manually
entered under a retail merchant
account the transaction will usually
downgrade to the non-qualified
discount rate.
Any retail business that expects to
process a significant amount of
keyed-in transactions should strongly
consider opening both a retail
merchant account and a mail order
merchant account (card-not-present) so
that they are able to obtain the
lowest discount fee possible for both
types of transactions. This is
especially true for retail stores that
also have a website or mail order
catalog.
A wireless merchant account is a
card-present account where credit card
transactions are swiped through a
portable credit card machine or
magnetic swipe reader to obtain a
real-time authorization and an
electronic data capture is performed.
Wireless merchant accounts are usually
given the same low rates and fees as a
retail merchant account but typically
have higher monthly fees and initial
equipment costs.
If your business requires you to
accept credit cards while on the run,
you should make sure that the cost of
a wireless account is justified by the
increase in sales that card-acceptance
generates. There are also other
portable processing options that may
be a more economical fit for your
business.
Store-and-Forward Merchant
Account - A store and forward
merchant account has more to do with
the equipment being used than the
merchant account itself and it is
usually granted the same low rates and
fees as a retail merchant account
while providing the portability of a
wireless merchant account. The main
difference between a store and forward
account and a wireless account is that
store and forward does not provide a
real time authorization. A store and
forward account functions much like
the name implies. In order to use a
store and forward merchant account
your credit card processing equipment
must be capable of performing the
task.
A store and forward terminal is
like a wireless terminal in the way
that it is battery powered and does
not require a physical phone line in
order to process transactions. This
makes them ideal for businesses that
would like to process credit cards on
the go. When a merchant swipes a
customer's credit card through a store
and forward terminal the transaction
information is saved in the terminal's
memory.
Once the merchant has access to a
phone line, they can plug the terminal
in and it will forward the transaction
information to the processor. A store
and forward merchant account is ideal
for business types that require
portability, but may not have the
budget for a wireless merchant
account. Store and forward is also an
ideal solution for businesses that
have small average tickets or those
that don't expect a lot of declined
credit cards.
Grocery Merchant Account - A
grocery merchant account is a
card-present account that is utilized
by retail businesses selling primarily
grocery and food products. In order to
qualify for a grocery merchant account
the majority of product that you sell
must be considered perishable and you
can't sell gasoline. Your business
does not have to be a large grocery
store to qualify for a grocery
merchant account. Grocery merchant
accounts are considered very low risk
accounts and they are usually given
even lower processing rates and fees
than those given to a standard retail
merchant account.
Lodging merchant accounts are for
use by businesses that operate in the
lodging industry such as hotels,
motels, and bed and breakfasts.
Lodging merchant accounts are afforded
lower rates than card-not-present
merchant accounts but they are not
given rates as low as retail or other
card present accounts.
Restaurant Merchant Account
Restaurant merchant accounts are
utilized by food service businesses
that authorize a credit card and then
go back at a later time and adjust the
final total to include gratuity. If
you will be applying for, or already
have a restaurant merchant account,
ask your merchant service provider to
go over the details of the account
with you carefully and pay special
attention to how tips are charged.
Restaurant merchant accounts can get a
little tricky when it comes to adding
the tips into the final bill.
VISA and MasterCard mandate that an
entire transaction must downgrade if
the tip amount is more than 20% of the
total bill. This means that the waiter
or waitress will be getting cash from
the drawer for the total amount of
their tip, but the restaurant will be
paying a mid or non-qualified fee that
may be upwards of 5%. Depending on the
profit margin of the restaurant, this
may cause the business to lose money
frequently on non-qualified
transactions due to high tip amounts.
A card-not-present merchant account
refers to any merchant account where
the credit card and the customer are
not present when a transaction takes
place. The only way to prove to a
processor that the card and the
customer were present when a
transaction takes place is to swipe a
credit card and perform an electronic
data capture.
Any account where this is not
possible the majority of the time is
considered to be a card-not present
merchant account. Card-not-present
merchant accounts are considered to be
higher risk by acquiring banks and are
therefore charged higher processing
rates and fees. When reviewing merchant
account quotes you should not
expect a card-not-present merchant
account to have the same rates and
fees as a card present merchant
account. The rates and fees will
always be higher for a
card-not-present merchant account than
they are for a card present merchant
account.
An Internet merchant account is a
card-not-present account that is used
by online businesses to transactions
through an electronic payment
processing gateway. These accounts are
set up under the assumption that the
Internet is the business's store front
and that the majority of sales will be
generated from their online presence
or website. Most payment processing
gateways are multi-functional in the
way that they are able to perform
real-time transactions without human
intervention as well as manual
transactions. This means that the
gateway is able to collect a
customer's order and payment
information from a shopping cart and
then communicate with the processor to
authorize the transaction without any
human intervention. However, the
gateway also allows a person to log
into a secure control panel to
manually enter credit card numbers
that are the result of phone or
product catalog orders. When
processing online it's just as vital
to get a good payment processing
gateway as it is to get a good
merchant account provider.
A mail order merchant account is
the most common form of
card-not-present accounts. A mail
order merchant account is set up under
the assumption that the business will
not have the customer or the card
present when processing a transaction
and that most transaction will be
manually entered into a credit card
machine or other form of processing
equipment. The term "mail
order" does not mean that every
business that uses this type of
account is selling products from a
catalog. It simply implies that the
business operates on the basic
card-not-present scenario. Mail order
merchant accounts are given the lowest
processing rates and fees of all
card-not-present account types.
Touchtone Telephone Merchant
Account
A touchtone telephone merchant
account is just as it sounds. No
credit card equipment is needed to
process transactions using a touchtone
account. The only thing equipment
required is a touchtone telephone such
as a cellular phone. Touchtone
telephone processing is a good
alternative to wireless processing for
businesses that require real-time
authorizations while on the go but
cannot afford the initial up-front
investment that is required for
wireless processing terminals.
Touchtone telephone processing
operates using a verbal prompt system
that a merchant calls to complete
credit card transactions. The merchant
simply enters a customer's credit card
and transaction information when
prompted using the keypad on their
touchtone phone. The system will
process the information and verbally
read back a decline or authorization
number that should be copied onto a
hard copy receipt that the customer
will sign. Manual credit card
imprinters are a must-have for any
merchant that will be processing
credit cards using a telephone
authorization system like touchtone.
Touchtone processing usually has
significantly higher rates and fees
than other card-not-present accounts.
Reason being, there is usually another
company aside from the merchant
service provider that supplies the
touchtone system necessary to process
transactions. This company charges a
fee for their services making the
total cost to the merchant that much
higher. Even with the higher rates and
fees the initial cost of a touchtone
merchant account is usually very
reasonable.