While many business owners are not aware of the full spectrum of credit card processing costs, many are cognizant of the fact that each transaction will be assessed a merchant account discount rate – a percentage fee which will be taken out of the sale, kept by the merchant account provider or bank.

Alas, per transaction profit will be comprised by the costs incurred by credit card processing but overall profit should increase as customers tend to spend more and engage in greater impulse buying when paying by plastic.  Still, it is so vital to know one’s merchant account discount rate, and it’s perhaps the first question I am greeted with when I speak with a prospective client.  (I wish I had a dime for each time someone asked me, “What’s your discount rate?”)

It is important to note that the percentage rate that the merchant is assessed depends on how the payment is received.  For example, it always costs business folks less when they open a retail merchant account as opposed to a mail order telephone order (MOTO) account or an Internet account.  Indeed, swiped transactions are considered safer than keyed in ones – less prone to fraud – and such transactions are cheaper for merchant account vendors to process.  The savings are then passed on to merchants.  (Seeing the glass half empty, one can also assert that the additional cost for keyed in transactions will be passed on to merchants.)

A typical retail account merchant may be quoted a 1.79% merchant account discount rate.  If a $100 transaction is initiated, this means that the merchant account vendor will apportion $1.79 out of the $100 sale for processing.  (Of course, there are other applicable fees, such as the transaction cost or a per item fee – the number of cents that the merchant will be assessed per transaction.)

In contrast, a standard keyed in or Internet-based rate can be 2.39%.  Here, it costs the merchant $2.39 per $100 as a result of the discount rate.  As you can see, the retail merchant saves $.60 per $100 than his/her MOTO or Internet merchant account counterpart in the example above.  However, the merchant account discount rate needs to be further scrutinized.

A vast majority of merchant account providers charge a tiered model.  The discount percentage can easily increase, depending on several factors.  For example, if a merchant does not batch out within 24 hours or if the customer’s billing address/zip code does not match the one associated with the customer’s credit card, the discount rate will increase.  Moreover, if a customer uses a special rewards card, the merchant may easily be defraying the cost of the rewards in the form of a higher discount percentage.

Too many credit card processing companies only quote the lowest qualified discount rate and decide not to highlight their mid or non-qualified rates.  Indeed, there is not just one discount percentage rate but several tiers.   When researching companies, a more appropriate question should be posed: “What are your discount rates?” – plural, with an “s” at the end.

With the proliferation of rewards cards, more transactions are downgrading to the mid or non-qualified rates, or special category rate, so it important to know the surcharges for these downgrades.  Remember to add the surcharges to the qualified discount rate or ask the vendor what is your TOTAL mid-qualified rate and TOTAL non-qualified rate.

Other credit card processing companies may charge you based on an Interchange plus cost model.  Here, your merchant account rate will fluctuate, dependent on the type of credit card that you receive from your customer.  For example, rewards cards will be at a higher Interchange rate than debit cards.  However, merchants who receive Interchange pricing usually benefit from the price structure as long as the merchant account provider does not add too great a cost beyond Interchange.  (There are vendors who assess Interchange + .3%, and even lower – particularly for high volume merchants who do a large volume of credit card processing.)

In summary, it is necessary to perform your due diligence when evaluating competing offers.  Become familiar with all the relevant rates, and particularly hone in on ALL applicable merchant account discount rates.  

A few days ago, I received a call from a merchant who was thinking about switching to our merchant account program.  She was unhappy about her seemingly high rate structure, and just as upset about her confusing credit card processing statement.  Her complaint strikes a responsive chord within me because,  I ,  too, have a lot of difficulty figuring out the fees on the statements that I receive.  (I suppose that I should know about regulatory and administrative charges, and how they can increase my phone bill, for example.)  

People always say the only two things you can be guaranteed of in life are “death and taxes,” but you might as well add bills to that short list too.  We rarely get anything for free these days.

The problem with most bills is you need to be a descendant of Albert Einstein to decipher them as they come with numbers and various types of charges and hidden fees all over the place. I’m sure you’ve heard the saying, “It’s all Greek to me.”  Well that’s how bills appear to the average person.

When the credit card processing statement comes in the mail, or you read it online, you want to be able to understand exactly what you’re paying for.  This is especially true with the discount rate, which is the processing fee you must pay the credit card company for transferring funds.

1.-Check your rate

Most monthly credit card processing statements you receive will outline the daily total of credit card sales as well as the various fees charged to process them.  This will show you the amount it cost to process the sales.  For example, you may have been charged $5.50 for the processing of Visa card sales of $450 on August 3^rd.  This means you were charged a discount rate of 1.22 per cent.  This rate should match the one you were offered when you signed up with the processing company. If you find the rate you’re being charged is higher than promised, make sure to ask questions about it. The credit card processor uses this money to pay the fees they are in turn charged by the cardholding associations and banks.   Of course if there’s anything left over, it’s profit for the credit card processor.  Beware that not all credit card transactions cost the same though, as various types of rewards cards and online transactions come with higher interchange fees assessed by the likes of Visa and MasterCard, which translate into higher processing fees.

2. Beware billbacks

When some credit card processors are charged higher Interchange rates they use billbacks to cope with them.  In this case, the processor will charge a low discount rate on all of your transactions in a given month and then bill back surcharges on specific transactions the next month. These Billbacks will be coded on your credit card processing statement with a BB. This line of the statement will show a total number of transactions for the month that were charged higher Interchange fees.  Since it cost the processor more, it’s going to cost you more. The problem is you can’t see the actual rate you’re paying as you can only see the number of transactions and not their dollar amount.

 3. Calculate the markup

However, it’s not too difficult to figure out the actual rate you’re being charged.  You just have to take the average sales value and multiply it by the amount of transactions for a given billback. Next, divide the surcharge by that amount and you will know the rate you have been charged for these sales. For instance, if your average sales value is $50, multiply that by the amount of transactions, say 1,000, and you get $50,000. Then divide the billback surcharge, say $1,200 by that amount, and you end up with 0.024 or 2.4 per cent.  The difference between what the credit card processor is paying to the powers that be and what you’re being charged is again pocketed by the processor.

Make sure to ask your credit card processor for information on your billbacks as some of the transactions might not qualify for the discount rate you were quoted. If you find out you’re being charged steep billbacks, it might be a good idea to find a processor with better rates on billbacks to save yourself some money.   Better yet, find a merchant account provider that does not use a bilback pricing system which some experts claim will cost you a lot more to accept credit cards.

4. Qualified versus mid-qualified versus nonqualified

The credit card companies’ Interchange fees can be very confusing as transactions are often categorized as qualified, mid-qualified, and nonqualified and each category will have its own rate.

For example, if a customer pays with a generic Visa card, Visa will charge a set Interchange fee. The credit card processor will categorize that as a qualified transaction and will also charge a set discount rate, which is generally a little higher than the interchange fee.  But if a customer pays with a Visa rewards card, the Interchange fee will be higher. The processor may categorize this as a mid-qualified transaction and will also charge a higher fee. Each processing company sets its own levels of pricing, which means one type of transaction may be categorized as mid-qualified by one processor and qualified by another. Make sure you inquire how your processor categorizes the transactions.

5. No deal on debit

Most credit card companies such as Visa and MasterCard will charge the processor lower Interchange fees for debit card transactions as opposed to credit cards. However, the processors might not charge you a lower rate.  It’s a good idea to ask about the difference between debit and credit card rates and ask for the lower debit card fee.

6. Watch out for skimming

Some credit card processors will take a percentage of their fees when they settle your account at the conclusion of each business day.  This will show up on your credit card processing statement as "total card fees."  However, the figure isn’t a true total. To figure out your actual costs, you need to find a line on the statement called "less discount paid." This figure will show how much your processor has skimmed from your sales during the month. If you add this amount to your "total card fees" you will be able to see how high your fees really are.

7. Hidden fee No. 1

As with most bills these days, you will find there are some hidden fees. One of them on a credit card processing statement is AVS, which means address verification service.  Most merchant account providers will charge you 5 to 15 cents per transaction for AVS where your customer’s billing address and the address listed on the customer’s credit card is compared.  These extra cents can soon turn into dollars!   

Also, when you make a credit card sale online or on the phone the transaction is charged a lower Interchange if you key in the buyer’s address (at least the zip code and it matches). This rate is generally lower because most credit card companies consider AVS / matching address a proficient method to fight against fraud. Check with your processor to see if you can get a better rate on AVS fees.

8. Hidden fee No. 2

Some processors charge a set rate for each credit card sale, refund, and authorization which may be higher than the norm. For merchants that have only a few, high-priced transactions in a month, this fee won’t affect them too much. However, it can sure add up if you have a large amount of smaller transactions.

The easiest method to find out what your actual rates are is to divide the total fees by your total monthly credit card sales. You may be shocked to find out you’re paying quite a bit higher than the low discount rate you were quoted by the credit card processor. If this is the case, be sure to shop around for a less expensive processor.

If you’re able to understand credit card processing statements properly, you‘ll then be able to evaluate the true fees and make an educated decision regarding your processing company. You may be satisfied with them or it could be time for a change, like the merchant who first called me decided after she gave up translating her old credit card processing statement.  

To learn more about our merchant services, please see http://www.intelli-collect.com

In the process of opening a merchant account, you will need to consider whether to obtain a manual imprinter.  The following hypothetical question and answer session between a merchant and a credit card processor may prove instructive in determining whether to obtain one.

Merchant: What is a manual imprinter?

Credit Card Processor: A manual imprinter, A.K.A., “knuckle buster,” is a device that enables you to make a physical imprint of your customer’s credit card.  The imprint will reveal the customer’s name, card number, and other information on a sales slip.

Merchant: Will my business’s name appear on the sales slip?

Credit Card Processor: We offer an encryption plate that allows up to 4 lines of information.  Your business’s name, address, and phone number can be listed, and even your Visa/MasterCard merchant identification number may be indicated.

Merchant: How much does the unit cost?

Credit Card Processor: The device may be typically purchased anywhere from $20 to $50 – a one time expense.

Merchant: I’m a retail merchant and plan to use a physical credit card terminal.  Why would I need a knuckle buster? 

Credit Card Processor: Consider the scenario where the customer’s card cannot be swiped because the magnetic strip in the back is worn or demagnetized.  You’re going to need proof that the customer authorized the transaction should he/she attempt to dispute the charge at a later time.  Think of this device as a backup insurance policy against chargebacks.

Merchant: Do I have to use the knuckle buster if a customer’s card successfully swipes into the terminal?

Credit Card Processor: No, it’s not necessary.  A signed receipt by the customer should help to win any possible dispute pertaining to a given transaction’s authenticity.  Some merchants, however, still take an imprint of the customer’s card if the transaction amount is very large to have 2 pieces of documentation to defend against chargebacks.

Merchant: Should the customer also sign the sales slip?

Credit Card Processor: Yes, absolutely.  Taking an imprint of a customer’s card is only one step of a multi step process.  You should fill out the sales slip fields (e..g, the amount of the transaction and date) and get the customer to provide his/her John Hancock.

Merchant: My wife has an e-commerce business?  Does she need to obtain a manual imprinter?

Credit Card Processor: As she will not have face to face interaction with her customers, there is no reason for her to purchase the device.  In contrast, any business owner who sees customers at the point of sale should obtain a unit.  For example, we have merchants who participate in trade shows, and later input the customers’ credit card information into a virtual or physical terminal.  It is imperative for them to get this device as they must have some documentation that the customers authorized the sales.

Merchant: Can the knuckle buster replace a physical credit card terminal to process transactions?  It seems much cheaper than buying a terminal.

Credit Card Processor: No, unlike a physical credit card terminal, the manual imprinter cannot facilitate the transfer of funds into your account.  It just aids the merchant in keeping a paper trail about the transactions that have taken place, and serves to provide proper documentation to help merchants win chargebacks.

Merchant: Obviously, I need to keep sales slips in case of future chargebacks?  How long should I save the slips?

Credit Card Processor: The merchant typically has six months to dispute a charge a charge after a transaction has transpired.  It then seems imperative that you hold these slips for at least six months, and preferably up to a year.

Merchant: Thanks for providing this feedback on knuckle busters.  I’m going to order one as soon as possible.

Credit Card Processor: I’m happy to help.  I’m glad that I made an impression on you regarding the importance of the manual imprinter. 

 “I don’t need a manual imprinter,” our new client emphatically declared.  She continued, “I’m going to be using your dial pay system and collect funds that way.”  I explained that the credit card imprinter is not a device for accepting credit cards to transfer funds; it is merely a way to prove that a customer authorized a given transaction, and can be invaluable proof in helping to win a chargeback should a customer dispute the authenticity of a charge. 

Years ago, the manual imprinter was the ”It” machine – indispensable in the credit card processing process.  Merchants would ensure that a customer’s credit card number was valid, and then take an imprint of the card.  The slips would then be sent to a bank for eventual payment.

While the merchant account field continues to advance and evolve, the role of the manual imprinter has changed, but the good, old-fashioned knuckle buster retains importance. 

Consider a new merchant who needs a wireless merchant account.  The costs for such an account may be prohibitive because of the expense of the wireless terminal and/or high monthly fees.  A knuckle buster enables the merchant to get an imprint of the card, and then go back to the home office, and key the payment information into a cheaper stationary credit card terminal or virtual terminal.  It also serves the dual purpose of providing a receipt to the customer as he/she receives the imprinted sales slip.  

Of course, there is a risk that the credit card presented was stolen or the card was already “maxed out.”  Still, many merchants feel comfortable with their client base – especially those who sell relatively inexpensive items – and rely on manual imprinters to serve as a conduit towards payment.

All mobile merchants who have face-to-face contact with customers should consider using credit card imprinters – even those who already possess a physical credit card machine.  Although this may seem counterintuitive, think about Murphy’s Law.  Merchants may experience a problem with their terminals (which typically happens when the merchant is most busy), and knuckle busters may be used as a substitute device in an emergency situation.

In addition, consider this “What if”: You’re not able to swipe a customer’s card because the magnetic strip in the back is worn or demagnetized.  While you can key in the customer’s information into the physical credit card terminal, you’re still going to need to protect yourself if the customer later disputes the transaction.  What better way to prove that the credit card was present at the time of sale and that the customer authorized the transaction than by providing the imprinted credit card slip.  Conversely, if you’re unable to share such a slip, you may lose the chargeback even if you’re “in the right.”

Recently, a retail client called and shared her chargeback victory over a customer whose card she had to key into the terminal.  She was very thankful that she purchased and used her knuckle buster – a decision that saved her over $200.  The handy-dandy, affordable knuckle buster (most cost between $20 and $40) can easily save merchants hundreds, if not thousands, of dollars.

Obviously, if you’re an e-commerce or Internet merchant, imprinters are a needless expense.  After all, you don’t have the customer’s card in hand.  But for practically all other merchants, I cannot impress enough the benefits that may be derived from a manual imprinter.  

You’ve performed an exhaustive amount of research, performed your due diligence, and  …. drum roll please … selected the vendor to provide you with a credit card merchant account.  The question then naturally arises, “Just how do I obtain credit card processing capability?”  While the process may slightly differ among merchant account providers, there are common steps to take before a business owner can declare, “We accept credit cards.”

The first task in obtaining a credit card merchant account is to complete an application.  All credit card processing companies require the business owner to sign a contract or an application where the rates should be fully delineated.  It cannot be overemphasized that it behooves you to check that the fee structure quoted is accurately reflected on the form.  There is ample room for error so you must use your attention to detail skills.

The application should not take much time to fill out – less than an hour, assuming your children, if applicable, are not in the same room.  You will provide basic information about yourself and your business.  Most of the fields are self-explanatory although you will have to provide a little more self-disclosure than your name, rank, and serial number.  Specifically, the following information is typically requested: Your name and address, telephone and fax numbers, federal tax id and/or social security number, banking information, etc.

You will also complete a brief business profile, indicating the nature of your business, the number of years that you’ve been in business, the time frame in which your customer will be billed, when you intend to provide the product and/or service, trade references, and other business-related information.

Perhaps the most challenging question posed on the application relates to your intended monthly volume, average ticket, and highest ticket.  The figures that your write may be based on pure conjecture but it is always better to overestimate these amounts than underestimate them.  You should think of the processing volume fields as limits, and in order to prevent funds from being held on a given transaction, you should not exceed the specified amounts/limits.

You’ve now successfully completed the form (you should not have writer’s cramp), and you wonder what’s next in opening a credit card merchant account.  It’s time to gather the supporting documents.  You have to substantiate that you are … well, you … and that you own this business entity.   

You form a small search party to locate your Doing Business As (DBA) certificate or Articles of Incorporation.  This document always seems to be one of the most difficult to uncover.  Sole proprietors may not be required to obtain a business license, and may simply submit any of the following instead: Utility bill in the business name,   sellers permit, copy of the lease, or bank statements showing the DBA/legal name and address.

You’re getting closer to establishing a credit card merchant account but you have to remember that the funds from the transactions have to go somewhere – typically, your local bank.  If you have not done so already, you must open a business check account (or already have an accessible savings account, if you’re a sole proprietor).  Credit card companies will only deposit funds into US-based banks.  Some providers mandate that you have to open a bank account at their acquiring bank.

You’re “to do” list is just about complete.  You then fax, scan or mail the application with the supporting documents to the underwriting department for review.  As competition in the over saturated merchant account field continues to increase, the time it takes to assess an application continues to decrease.  It should only take one or two days before you declare, “I have a credit card merchant account!”

Of course, it’s not a sure bet that your application will be approved.  The underwriters will evaluate the nature of your business, your expected processing amounts, how you plan to accept credit cards (online or offline), and, most importantly, your credit score.  Assuming that your credit rating is favorable and that you run a business that is not on the prohibitive list (e..g, debt collection, telemarketing, etc.), it is highly likely that you will be granted credit card processing capability.

Thinking optimistically, you receive the good news that your application has been approved.  The technical support department then builds the necessary files, and subsequently, you will receive the mechanism in which to accept credit cards, such as a physical credit card machine, Authorize.net gateway, etc.

You’re now a full fledged, proud recipient of a new credit card merchant account.        

I’m fielding more phone calls lately about the Magtek swipe reader.  Consequently, I thought it would be instructive to briefly broach the subject of credit card readers, and focus attention on some of the Magtek readers that are commercially available. 

The best way to introduce the topic is to have you take your credit card in hand and look at the back.  Do you notice the magnetic strip that runs across it?  Many merchants and customers don’t realize that there is a wealth of information encoded in the strip.  Indeed, the strip may contain three tracks of information, including the individual’s name, primary account number, a country code, the card’s expiration date, and other discretionary data.

As a book must be read for it to be meaningful, a credit card’s magnetic strip must be read for the information it contains to be useful and applied.  A credit card swipe reader accomplishes this task.     

If you’ve ever paid for something in person with your credit card it’s almost a certainty the card was swiped through a credit card reader for authorization (and for eventual settlement) by the merchant. The device is used to read the magnetic strip on credit and debit cards and is also known as a magnetic strip(e) or swipe reader. However, a magnetic strip reader is able to read several types of cards that come with a magnetic strip on them, such as certain types of ID cards, and driver’s licenses, etc.

Credit card readers can be connected in several ways such as a keyboard wedge, a serial port (rs-232) or a USB connection. A typical credit card reader will be set up to read tracks one and two, or track two only. PC-connected, keyboard, and portable readers are also commonly used by merchants.

When it comes to credit card readers, one company generally stands out above the rest, and that is Magtek.   The Magtek Company is based in Seal Beach, California, and has been one of the leaders in the electronic payment business since opening its doors in 1972.

Magtek swipe readers are popular among the business world because they are designed to help merchants complete their transactions effectively, easily and securely. They are also compatible with most software applications and PC computers. Moreover, they allow several possible interface configurations to handle the transfer of card information into your system.

Some of their most popular credit card readers include:

Mini Swipe Reader

These economical and compact magnetic card swipe readers are designed to conform to and read ISO (International Organization for Standardization) and AAMVA (American Association of Motor Vehicle Administrators) card formats.  Yes, International credit cards and even driver’s licenses may be read.

The readers are available in various interface options including USB, RS232, Wedge, and TTL and don’t require any external power (except TTLs) to be operated with multiple track configurations. The reader itself doesn’t take up much room at all as it is just a little bit longer than a credit card. It is also very easy to mount as you can fasten it with adhesive strips or by securing it with the embedded threaded mounting hardware.

This Magtek swipe reader can be used with POS software including PC Charge Express and PC Charge Pro. Swiping customer credit cards is simpler and quicker than keying in the data and your transactions will also be eligible for the lower “card present” or “swiped’ discount rates.

MagTek Mini USB Stripe Reader

The Mini USB reader is designed to work with existing software applications developed for keyboard interface. The device is powered by USB which means no external power supply is needed. This compact Magtek swipe reader can work with any computer or terminal that has a USB interface. It also possesses dual and three track capability.

The information is sent as if it was a USB keyboard. Read data can be viewed in various applications such as Windows Notepad without the need for additional drivers and application programming.

This product also comes with a Human Interface Device (HID) Software Interface but a developed or modified application is needed to communicate with this reader. Here, unlike the reader that uses keyboard emulation software interface, data will not be viewable in applications such as Windows Notepad.

Full Size Readers

If you have the room, a full-size reader may be more convenient for all types of card reading applications as the cards can be swiped in the machine both forwards and backwards. These readers are compatible with both the standard RS-232 interface and the traditional keyboard wedge interface. The Magtek full size swipe readers can work easily with PCs and terminals, with up to three tracks of data from magstripe in the extended path to ensure accurate reads.

SureSwipe Reader

The Magtek SureSwipe Reader comes with a USB interface in both HID and Keyboard Emulation modes and can also be reconfigured in the field. The SureSwipe reader has two magnetic heads, one on each side, and is designed to gather three tracks of data from all types of ISO and AAMVA encoded magnetic stripe cards. The reader also comes with a green/red LED indicator that provides you with status of the reader operations.

Authorize.net Compatible Magtek Readers

Authorize.net’s virtual point of sale (VPOS) continues to grow in popularity.  Here, the merchant uses the virtual terminal in conjunction with a card reader to swipe customers’ credit cards.

At present, there are four models of Magtek readers that are compatible with Authorize.net, listed as follows:

Reader 21040101 (mini USB stripe reader)

Reader 21040102 (mini USB stripe reader)

Reader 21040146 (SureSwipe reader)

Reader 21040104 (Sureswipe reader)

As merchants’ credit card processing needs are diverse, it is always important to get the right Magtek swipe reader.     

If you make your living by selling services and/or merchandise over the Internet, you really need a dependable payment gateway, such as Authorize.net, to help your business complete transactions as smoothly as possible.  Consequently, you may be galvanized to find an Authorize.net reseller – one that can provide the gateway to you in the most cost-effective manner.  The purpose of this article/blog entry is to better acquaint you with one of the most prominent gateways available and its related fees so that you can best decide which Authorize.net reseller to use.

A payment gateway is an e-commerce application or Internet-based mechanism that allows you to conduct business transactions online. The gateway basically gathers all of the information sent to you by the customer and then makes sure their credit card is able to cover the costs. Once this information is confirmed, the payment gateway ensures the authorized funds are deposited into your bank account.

While there are numerous payment gateway companies out there, one of the most popular and largest is Authorize.net. They are one of the most experienced gateway providers in the business as they’ve been around since 1996 and have an exemplary reputation as one of the leaders when it comes to Internet payment services. CyberSource Corporation, another quality Internet business, purchased Authorize.net in 2007 for $565 million.

The gateway system is quite easy to use with ecommerce web sites and it offers several free customer support options, including live chat, just in case you have any trouble using the application. It’s also an ideal tool for call centers, offline retail sites, mobile devices, mail orders and telephone orders. Another bonus of Authorize.net is its scalability, which allows businesses to scale up or down with relative ease.

Authorize.net is generally sold through a wide variety of companies which are known as Authorize.net resellers. This means you can buy their services from any one of the resellers you choose. This will allow you to shop around to find the reseller who can offer the best deal as their prices will vary.

While each Authorize.net reseller is an independent business, there are several fees that all of the companies will charge for the service and some optional ones. As a business person, your job is to compare them and try to find the best fees out there, but to also make sure you buy the service from a reputable seller and not a fly-by-night company that won’t be around to help you when you need it.

Set up fee

On old forums, some merchants have pointed out that that a gateway set up fee reminds them of death and taxes as there’s no real way to avoid it.  This is no longer true as many vendors now waive the start up or set up fee.  However, most Authorize.net resellers charge about $150, but if you look hard enough, you might be able to get it done for as low as $100, and of course if you look in the wrong places, you might be asked to fork out as much as $200 for the set up.

Monthly gateway fee

Just about every reseller will charge you a monthly fee. The cost typically depends on the type of services you include in the package and the reseller. The cost is generally between $10 and $50 each month.

Transaction fee

Again, this will vary from with each Authorize.net reseller, but you can expect to be hit between five and 20 cents for each transaction you complete.  Some companies waive any gateway transaction fee, and others stipulate that it is free up to a certain number of transactions (typically 250 transactions).

Fraud Detection Suite

The Authorize.net payment gateway offers a few fraud prevention tools at no cost, but you have the option of upgrading to the suite for about $5 a month if you choose.

Automated recurring billing

This service is helpful when it comes to collecting regular payments, such as subscriptions for example. It usually costs $10 a month.

Virtual terminal

A virtual terminal will let you accept phone, email, mail, and fax orders and will then use your computer access to manually process the transactions.  Some merchant account providers offer a virtual terminal at no additional expense; others may increase their set up and/or monthly fees by providing a virtual terminal in conjunction with the payment gateway.

eCheck.net

This service will let a customer designate an electronic check from their checking account. It usually costs a merchant between $10 and $30 each month for this service. Be aware that you might be charged a start up fee if you want to accept echecks.  (The processing rate to process an echeck should be less than that to process a credit card.)

Customer Information Manager

This service allows you to securely store important customer information in a database for $20 a month.

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Typically, a vendor who offers Auth.net has liberty to change the set up, monthly, and transaction fees.  (The others rates fall under the domain of Auth.net.)

While there are a myriad of companies that may provide Authoriz.net, by contrasting the aforementioned rates, you’ll be able to locate the best Authorize.net reseller.  

If your business is accepting credit cards for its transactions, you need to try and find the discount merchant account that will offer you the best services for the most competitive price. You need to take into account all of the various fees, not just the qualified discount percentage. While the discount rate is important, make sure you don’t overlook all of the other “incidental fees” while searching for the best deal to match your needs and budget.

Below are some of the other fees you should be looking at when you’re searching for a good discount merchant account. If you’re not careful you could be nickel and dimed to death.

Authorization/Transaction Fees

The authorization fee is charged when you log onto the merchant account network through a phone line or the Internet to verify that a credit card is valid and has enough credit available on it. There shouldn’t be any charge by your phone company for these calls as most terminals use local or toll free numbers. However, make sure you verify this before signing up or you could end up with an astronomical phone bill at the end of the month.

A transaction rate for retail accounts is usually anywhere from 20 to 40 cents. Remember, the transaction fee will be added on to the discount rate. However, some merchant service companies will combine the discount and transaction rates as one fee. This is generally known as a bundled rate.

Batch Fee

This is typically a small fee which is charged every day to batch or close out all of your transactions for that 24-hour period. These fees usually cost the same as your transaction fee. It is also known as a batch header fee.  Remember, if no transactions take place on a given day, you will not be accessed a batch fee for that day.

Monthly Fee (Statement Fee)

This fee is will usually run you anywhere from $5 to $20. The charge is used to supply you with a monthly statement that summarizes, breaks down and shows each one of your credit card transactions over that time period. The statements will be automatically sent to you at the end of each month. Make sure you look it over very carefully just in case it doesn’t match up with your records. If you’re lucky, your discount merchant account provider will offer you online transaction reporting. This allows you to view up to the minute information regarding your merchant account.

Be aware that some companies may charge other monthly fees, such as the gateway fee, applicable if you conduct Internet/e-commerce sales.  It’s best to find out what the total monthly fee as you compare vendors.   

Monthly Minimum Fee 

This fee comes into effect only when your monthly sales are very low or you didn’t sell anything at all. The merchant account provider will calculate the charge by multiplying your total sales for the time period by your discount rate and then adding on your transaction fees. It may sound a little more complicated than it actually is. But for example, if your minimum monthly fee is $25 and your discount and transaction fees only add up to $20, then you will have to pay the $5 difference to reach the agreed upon $25 minimum. Therefore if you didn’t sell anything at all for the month, you would have to pay the whole $25 to keep the provider happy. Needless to say, a discount merchant account should have a low monthly minimum fee or even choose to waive it.

 Return Fee

A return occurs when a customer who has already paid for their purchase by credit card wants to return the goods. This means the transaction will be reversed on their monthly credit card statement and the money will appear as a credit. Most merchant account providers will charge you a return fee and a transaction fee when this happens.

You need to pay close attention to how your provider handles returns. Unless you don't pay a separate return fee on your merchant account, you have to add the transaction fee to the return fee to see how much you’re being charged to credit card returns.

Address Verification Service (AVS) Fees

 Most credit card processors will offer the address verification service (AVS). This will match up the cardholder's billing address (zip code and/or street address) with the information encoded on the cardholder’s credit card.

 There are various AVS codes that are used to show partial or complete matches. If the credit card address doesn’t match up with the customer’s billing address, you should verify everything with the customer before shipping the goods out to make sure they are headed to the right place. In fact, you should always verify this anyway. The AVS can be very helpful to you in these circumstances, especially if you’re selling goods or services over the phone or Internet. It’s also a useful tool to help detect fraud. At the moment AVS primarily works with American-issued cards, but can also be a functional tool for the United Kingdom and parts of Canada.  

 Termination Fee

 This is also known as a cancellation fee. And yes, in today’s world you even have to pay a fee to cancel your working contract with a merchant account provider when you want to switch to a different provider or opt to go out of business. Be aware of this and make sure you inquire about any potential termination fee before you sign on as you may be surprised how high it can go. In general, the longer you have been with the provider, the lower the fee.  Many vendors waive cancellation fees, providing reassurance to merchants who don’t want to get locked into a contract.

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In these difficult economic times, business owners need to find bargains – and that includes discovering lower fees for credit card processing.  It is very possible to gain big savings by knowing the little fees that exist in the merchant account field in your quest to find a true discount merchant account.

“Do you provide a high risk merchant account?” a gentleman anxiously inquired yesterday.  He seemed puzzled that he would have difficultly gaining credit card processing capability for his collection agency.

It’s just a fact of life that some people and their businesses are considered to be a higher risk when it comes to trying to obtaining services such as insurance and loans. Well, you can also add merchant account to that list as some vendors have a hard time obtaining a provider because of various factors that categorize them as a high risk.  (Merchants who are deemed a high risk need to open a high risk merchant account.)  

Some examples of high risk businesses include internet marketing, the travel industry, membership clubs, telemarketing, and debt collection. However, being considered high risk doesn’t mean you can’t set up a merchant account, but it will probably be a little more difficult because the providers are taking a chance on you as it could lead to financial losses for them.

What makes these businesses high risk in the first place is the fact that statistically they often have a lot of chargebacks and are sometimes susceptible to fraud and criminal activity. High risk accounts are usually necessary for vendors who can’t get a standard merchant account because of their type of business, monthly volume, and target markets.

Most merchant account companies and banks will look at your business carefully before signing you on and weigh the following information: previous merchant accounts, your credit history and how long you’ve been in business. They may also want to see items such as your business license, current processing statements, bank statements, and current profit-loss statements.

The amount of time you’ve been in business is important to merchant account providers as they like to know that you understand how the system works, especially relevant if you’ve previously accepted credit cards. This means you are able to identify and solve possible risks such as fraud and can manage credit card transactions with few problems.

If you’re familiar with merchant accounts it will be in your favor but any previously-terminated accounts will definitely show up on your file, which could scare prospective providers away – especially if the merchant account provider initiated closure of the account.  

A credit report tells the account providers if you pay your bills and if you pay them on time. It will also show if there have been any judgments, liens, or bankruptcies filed against you. Of course, a good credit report will definitely help you out if you’re opening a high risk merchant account.

If you are involved in a high risk business, there are a few strategies that you can employ to help your cause, however it’s still no guarantee that you’ll get an account without any problems.

Again, the most important task is to make sure you have a good credit rating. It’s pretty easy to get hold of your credit report by speaking to a credit reporting bureau or a business that supplies merged credit reports from major agencies. It’s best to check out your report before applying for a merchant account. This way, you can see exactly what’s on it and if it’s good enough to use when applying. If it’s not too flattering, see if it’s possible to get rid of any negative items such as past bankruptcies, late payments, or liens against you.

No matter what your business is, a good credit rating could go a long way when you’re trying to secure a merchant account. Make sure you’re always honest when it comes to your credit report, and past merchant accounts, as you can’t hide anything. In addition, if you encountered difficulties in the past and overcame them, it will improve your credibility.

Be aware that high risk businesses often have to pay higher fees and/or follow special account requirements. So if this is the case, you will have to agree to the terms or forfeit the opportunity to secure a high risk merchant account. Even if you have to dole out a bit more cash to the provider, it will benefit you as it means you’re able to offer customers other options instead of just cash or check. This should help your sales due to higher purchases and impulse buying.  (Of course, as you look for reputable vendors, still scrutinize the complete spectrum of credit card processing rates.)

If you have a sketchy credit report but manage to find a provider, you may also have to set up a reserve account to protect them from possible losses. A reserve account is typically calculated as a percentage of your sales, and the funds are held in your name by the bank for a period of time.

So if you’re running a high risk business, it’s not all doom and gloom out there, but prepare to pay a little bit more money and possibly follow some stricter rules that are laid down by the merchant account provider. In the long run, it should be well worth opening a high risk merchant account. 

Here is a typical question that a new business owner asks: Should I accept American Express?  Let’s briefly explore the issue.

It’s a dog eat dog business world out there today, especially with the present state of the economy. The last thing you want to do is lose sales because you don’t wish to pay a few extra dollars on your monthly bills. It could actually cost you big time in the long run.

A prime example of this is the American Express credit card. You may be debating over whether or not you should accept American Express because the credit card processing costs are higher – particularly compared with the rates assessed when you accept credit cards with Visa or MasterCard logos.

However, you should do a little research before making a decision. Keep in mind that American Express is used by a lot of business professionals, so if you’re dealing with these types of customers or selling business-related items it’s a good idea to accept the card, especially since American Express transactions are generally 30 to 50 per cent higher than others.  In other words, customers tend to spend more when using an American Express card.

But if you’re running a comic book store or something more in the lines of “blue collar” items or services, then you may not need to take American Express. But just remember, you may ultimately be losing a customer, and with all of the competition today, such a potential customer will certainly find somebody else who will take their form of payment.

If you’d like to take Amex cards, you will need to set up an American Express merchant account. To be considered for an account you must be a registered business and/or licensed in your state as a partnership, corporation or proprietorship. You will also need to have a good merchant credit rating. If you run a travel agency, you need to supply a valid ARC/IATA number.

American Express offers two main plans to merchants and you should make sure to take the one that best suits your needs and budget.

There is a discount-rate plan that assesses a percentage of every transaction. There are no monthly fees and annual fees with this option and you are encouraged to manage your account online.

There is also a flat monthly fee plan ($5.95 per month) which is aimed at small businesses that usually process less than $5,000 in American Express sales per year

If you’d like to take American Express, but don’t want any monthly fees, the discount rate plan could be the one for you, as you don’t have to pay anything unless you take an American Express card for a transaction. It’s always there just in case you need it and it won’t cost you anything if it isn’t being used.

However, before making your final decision as to whether to accept American Express, be aware that many online vendors don’t accept Amex because of the company’s perceived chargeback policy. When a chargeback occurs, many merchants believe the company often sides with the customer. A customer-friendly (merchant unfriendly) chargeback policy can often lead to fraud, as many consumers buy online products and charge them back. This means the merchant is basically out of luck and out of pocket on the transaction.  Still, many business owners assert that Amex chargebacks are winnable so there is definitely a perspective divide as it relates to Amex’s chargeback policy. 

Therefore, before getting an American Express merchant account, you should make sure you fully understand the company’s chargeback policy and have it in writing.

All factors considered, it still appears worthwhile to become an Amex merchant.  You can expand your customer base, take in more money for these transactions, and possibly be able to satisfy some of your business’s needs.  Indeed, accepting American Express cards can help you develop relationships with other businesses as the company has its own network of companies that may be able to help you simplify your supply chain, or get access to various types of professional services.

The pros seem to outweigh the cons so I am giving a lukewarm endorsement to accept American Express.