It’s common for people to associate online credit card processing merchant accounts with ecommerce websites.  These websites are often money-making sites with profit in mind. The speedy funding process that has been facilitating online business today should, by all means, benefit nonprofit organizations as well.  If nonprofit organizations can look beyond the “work” that is entailed in opening a merchant account, they would eventually make it possible for donors to contribute to the various fund collection and donation drives that they organize – enhancing their agency’s cash flow.

Speedier and more convenient collection of funds with a nonprofit organization merchant account 

Believe it or not, a lot of people would love to contribute to a worthy cause – even in today’s uncertain
economic climate. The biggest obstacle standing in their way is usually the fact that making a donation is cumbersome.  For instance, donors are sometimes required to write a check, drive to the post office and mail it.  Either that or they have to be at a certain place at a certain time to contribute to a particular cause.

If you looked at it from the donor’s point of view, it almost seems to be too much effort. In the modern, busy world that we live in today, nonprofit organizations will have problems convincing busy donors to go to such lengths to contribute to their funds. To avoid such a situation and loss, nonprofit organizations should consider the convenience of plastic. 

Why donors love plastic

There has got to be a reason why people love to use their plastic, online or offline, more than they like to use their cash. For one, finance companies and banks are crafty with their incentive packages. Each dollar used equals points and these points are redeemable, and may materialize into a trip to the Bahamas or a $2,000 shopping voucher.  Therefore, not only is it more convenient for donors to contribute using their credit card, it benefits them as well.

Moreover, through the use of credit cards, donors do not have to immediately pay their card-issuing banks for their largesse.  They have at least that monthly window of time to meet the financial responsibilities incurred by philanthropic activity.  Indeed, parting with cash, with its sense of immediacy and finality, can be much more threatening to donors than contributing via plastic.  As one might predict then, the amount of each contribution is greater (if not the number of donations) when credit cards, as opposed to cash or checks, is used as the source of payment.          

In light of the win-win benefits that are derived from credit card donations, what type of merchant account should nonprofit organizations apply for?  Simple. The type of merchant account the nonprofit organization applies for should correspond to the most likely method they use to collect funds.

Is it a monthly transaction or one-off? Do you anticipate that your donors will contribute funds via a website or woud staff members be physically processing the donation on the phone? For some nonprofit organizations, "road shows” are common. During these road shows, donations could be collected via a wireless physical terminal whereby staff can swipe the donors’ cards on the spot.

The first type of credit card processing merchant account available to nonprofit organizations would be an online merchant account where a payment gateway can be integrated with the organization’s donation link.  This type of Internet merchant account can offer an added advantage: A shopping cart may be employed where the nonprofit organization can sell items to expand their source of funding.

In addition, many providers offer a virtual terminal with their Internet merchant account.  A virtual terminal is a simple web-based interface where staff members can input donors’ payment information when received via the phone, email, mail, or the fax.  

The virtual terminal can often suffice for a basic transaction.  For example, whenever a donor contacts the organization and offers a contribution, staff can log onto a “payment website,” type in their own unique username and password, and enter the information for the donation to be processed.

I understand that some nonprofit organizations are not so keen on using the Internet but it’s not the end of the road for them either. These organizations can apply for a dial pay or touch tone merchant account, call a 1-800 number, and facilitate easy transfer of funds from the donors’ bank account to their own by simply inputting payment information using the phone’s keypad.

Other agencies may have face-to-face contact with donors, and as such, need to purchase credit card terminals.  Organizations that can collect funds at their locale only need to buy stationary credit card terminals.  Those that can only receive contributions by moving from place to place must look into acquiring wireless terminals.  (A wireless merchant account always necessitates greater expenditure of funds than a standard swiped merchant account.)   

Whichever type of merchant account that the nonprofit organization chooses to go with, the fact remains that having a credit card processing account will make it easier, and thus more likely, for donors to contribute.  Even in a recession, organizations must reach their target contribution levels, and setting up a merchant account is a smart means to this end.

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To learn more about our merchant account services, please visit us at  http://www.intelli-collect.com.

Out of a given 100 calls that I receive regarding our credit card processing service, only one person is likely to inquire about the potential for level 2 or level 3 processing.  This is surprising as there is a proliferation of merchants who accept credit cards where such levels of processing would actually lower their costs.

However, like many facets of the merchant account field, levels 2 and 3 processing remain unknown entities, and not typically broached in a discussion when one is investigating merchant account providers.  But the topic is apropos for those business owners who accept government, business, and/or corporate cards.  Simply by providing more “levels of information” during the payment input process, such companies will benefit from a reduction in credit card processing expenses.

Consider a California-based steel firm that is under contract with the United States government.  I spoke with their CFO earlier in the week.  As the business accepts government GSA or purchase cards (p-cards), they qualify for level 2 or level 3 processing – a fortuitous happenstance as the CFO contends that her current merchant account provider’s rates are “too high.”

Now in order to process levels 2 or 3 data, you must have a system that allows you to input the additional required information entries.  Payment gateways or specialized computer software may serve in this capacity.

Almost all payment gateways, including Authorize.net, generally restrict business owners to level 2 processing.  (They are not compatible with level 3 processing.)  To meet the requirements for level 2 processing, the merchant must collect and submit the tax amount to Visa/Mastercard.  While no longer required, it is also advisable for the merchant to input the customer code and even the invoice number.  Of course, the merchant also inputs the standard credit card information, including the number of the card, expiration date, billing address, etc.

While some merchant account providers resell or offer their own proprietary computer software to facilitate level 3 processing, business owners need to understand that such software must be PCI-compliant as to ensure customer privacy.  Unfortunately, many potential options do not safely secure sensitive data, and thus, do not meet regulation standards.

One company, 3Delta Systems, has built a rewarding niche that accommodates level 3 processing, and concomitantly, meets all PCI standards through its EC-Zone product.  Their demo is a must-see for business owners who need secure level 3 processing, highlighting the line items of information that must be included.  The merchant should input the following fields after the standard information is keyed in: Item ID, product/service description, quantity, item amount, unit of measure, customer code, order number, invoice number, freight amount, duty amount, and sales tax. 

Yes, it will be a more time-consuming exercise to key in the required level 3 processing information, but here, time IS money – less money.  EC-Zone points out that a merchant can save as much as 1.3% employing level 3 processing.  On a $5,000 transaction amount (the CFO of the steel company told me that she may easily process a single transaction for this amount), the savings is $65.  An extra $65 for a couple of minutes of work is certainly worth it!

The merchant who uses EC-Zone’s virtual point of sale system should gain reassurance that the customers’ payment information is not stored locally.  The layout of their system is also user-friendly and easy to navigate.  But the cost for this type of gateway must also be weighed as it is an additional expense on top of the assessed merchant account fees.  At present, their fee structure is as follows: Set up fee is about $200, the monthly fee is $15, and the transaction fee is 15 cents.  (Of course, their rates are subject to change.) 

If you decide to purchase EC-Zone separately, ensure that your merchant account provider is compatible with this gateway.  Click here for a list of certified merchant networks. 

Level 3 processing was launched with government purchase cards but may now be used in conjunction with any type of purchase card.  As it expands in scope, it would be foolish for merchants to ignore its cost-reduction benefits. 

Moreover, level 3 processing offers line-item detail on statements just like on a standard invoice.  Customers benefit, too, as transactions are more secure and payment reconciliation is easier.

In the merchant account field, level 2 processing and level 3 processing maybe a savior to your business.  Do I hear level 4 coming over the horizon?  

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Please take a quick two-question quiz:

1. Which is more popular in terms of consumer payment – credit cards or debit cards?
2. Which is more frequently employed – signature-based debit payments or pin based debit?

The exercise is not just meant to help you accrue points in Trivial Pursuit.  The aforementioned questions are important – at least for any merchant who has face-to-face contact with customers – because it underscores consumer payment preferences.  Merchants need to accommodate customers whenever possible – before and after a sale – including how payment will be made.

Increasingly, in answer to question 1, debit cards are the cards of choice when viewing the American public’s payment habits.  Sure credit cards offer a greater protection to consumers (i.e., customers can call their card-issuing bank and initiate a chargeback or dispute) and provide the means to spend beyond one’s budget (a necessary evil at times) due to the inherent float before remitting payment for purchases.  Credit cards also absolve the card issuer from financial restitution in the event of fraudulent purchases.

But for the huddled masses who continue to see burgeoning debt and yearn to breathe free of collectors, debit cards serve as a safety valve.  Since funds are directly withdrawn from the card holders’ account at the time of a debit card transaction, there is less likelihood for the customer to overspend – even with the existence of overdraft protection.  Indeed, debit card holders are compelled to exercise financial responsibility and due diligence because they don’t want to incur non-sufficient funds penalties.

Debit cards not only foster financial discipline but also provide relief to the cost-conscious consumer.  Most financial institutions do not assess any charge to the card holder for debit card processing capability and levy no percentage cost.  Paying with this plastic can be cheap and mandates that one be frugal with its use.

It also requires attention to detail.  If a debit card holder discovers that his/her card is missing or finds out about unauthorized purchases, he/she must notify the bank immediately.  Reporting time is of the essence because of the following breakdown in liability: $50 if a report is issued to the bank within two days of the given transactions; $500 if a bank is notified before 60 days elapses; full payment (translation: tough luck) if a report is made after two months.

Despite its greater liability (many cardholders are unaware of debit card liability rules), the annual use of debit cards has increased by about 15-20 billion payments in the last three years.  Retail merchants should be privy to that statistic!

Moreover, educated merchants must be cognizant of the fact that (in answer to question 2), more customers embrace the idea of using their pin pad passwords than simply signing a receipt to officially authenticate a transaction.  Recently, I witnessed a store customer who was taken aback when she wanted to process her debit card via a pin pad.  She seemed miffed when the cashier told her that a pin pad was not available.  (Of course, this presented a sales opportunity for me later on.)  While the merchant did not end up losing a sale, there was the potential that the customer would simply abandon her purchase because her payment preference could not be honored.

The savvy retail merchant who wants to capitalize on consumer buying patterns should be aware that a pin pad may serve as an indispensable device.  Of course, any pin pad must comply with the Payment Card Industry (PCI) security requirements.  Those merchants who have older devices will seek compliant replacement units no later than 2010, according to current stipulations.  Please note that many terminals on sale now come equipped with built-in pin pads and already comply with regulations.

In an ever-increasing competitive market, retail business owners who do not want to lose any sales must accommodate the payment needs of the buying public.  Profit margins may be maximized with the realization that debit card processing is booming, and that the too-often ignored pin pad is an integral part of the debit card processing revolution.

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To learn more about our merchant account services, please visit us at  http://www.intelli-collect.com.