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.

Hypercom has been one of the world's top suppliers of electronic payment products since getting into the business in 1978. In 1987, the Australian company expanded to the USA and relocated to Phoenix, Arizona in 1990. Since then, the Hypercom Corporation has opened up shop in Latin America as well as Europe. They now have regional sales offices in China, Hungary, Brazil, Mexico, and the United Kingdom. 

The company offers a complete range of high security, end-to-end electronic payment solutions and services to a wide variety of customers including banks and large international and local financial institutions, electronic payment processors, popular retailers, independent sales organizations, and distributors.

Hypercom's experience and innovation allows businesses around the world to safely expand their revenues and profits. The company’s solutions include countertop and mobile card payment terminals, landline terminals, IP terminals, wireless terminals, unattended payment products, EMV and PCI-approved PIN Pads, network access controllers, gateway converters and transaction transport services.

Hypercom has been recognized globally as a top notch business by garnering various awards for its innovative technologies, high quality solutions, product quality, reliability, and functionality, and customer service and support.

Some of Hypercom's top products include the Hypercom:

Optimum T4210 

This countertop device has several high-end features including 24MB of memory, an ARM9 processor for fast transactions and also multi-application. It's also PCI PED approved to handle debit with and without an external PIN pad. It can also accept chip card transactions with the optional EMV-approved reader, making it ideal for magnetic stripe and chip card transactions. The 4210 is also MasterCard PTSP approved, Interac certified, and RoHS & China RoHS Compliant. It's an ideal product for retail and restaurants, small ticket sales, e-commerce, dynamic check conversion, check verification, and gift and loyalty cards, etc.

T7 Plus

This compact countertop POS terminal is ideal for those who are looking for a machine that takes all magnetic stripe cards and delivers authorizations very quickly. The unit offers bilingual screen displays as it can show Chinese and English at the same time. It is PED certified and EMV approved and is ideal for general retail, restaurants, pharmacies, and grocery stores, etc. The T7 comes in both 35 and 19-key configurations and can hold up to 20 unique merchant IDs in one terminal. The SureLoad thermal printer alerts cashiers when the paper is low and also eliminates paper jams. The terminal's multi-loader lets you download up to 12 terminals simultaneously.

ICE 5500

This compact, interactive POS terminal comes with an integrated printer and is designed to quickly process all kinds of credit, debit, and charge cards. The unit takes signature and receipt information to help cut down on chargebacks. The web-enabled machine features touch-screen graphics, electronic signature and receipt capture along with customer loyalty programs. It supports both smart card and traditional payment transactions. The ICE modem comes with the fastest dial-up capability available to help reduce transaction costs. The terminal also comes with 1 MB of memory and has 12 water-resistant keys.

ICE 5700

The 5700 terminal features electronic check reading and processing and provides web-based and e-commerce information via ePOS-infocommerce. The unit magnetically reads the MICR line at the bottom of checks for increased speed and accuracy. The 5700 has a high success rate of reading checks, even damaged ones. It gives you simultaneous card reader support for smart cards and magnetic stripe cards, electronic signature and receipt capture (ERC), virtual store hosting, e-mail, electronic bank statements, touch-screen graphic display, onscreen advertising, electronic couponing and loyalty programs. The modem has the fastest dial-up capability available (like its ICE 5500 counterpart) and the fast, removable thermal printer comes with an optional paper cutter to help stop paper jams.

P1300
  

This is a PCI-approved PIN entry device that is designed to meet the PCI PED security standards for PIN entry. The device gives clear instructions for easy transactions and comes with easily identifiable function keys. It is a compact unit that easily fits in your hand and allows users to hide their PIN entry with their body or hand. The P1300 also supports both DES and triple DES DUKPT encryption to help protect cardholder PIN information. It comes with a tamper-proof design that secures it from external attacks and meets new PCI PED security guidelines.

The aforementioned list only highlights only several of the myriad devices offered by the Hypercom Corporation.  While the company reported a net loss of almost 10 million in the first quarter of 2009, its fortunes will be on the rise as market conditions improve as its own brand of technology advances.  Long live Hypercom!

One of the most popular questions that I am asked by prospective clients is: “What is the difference between a qualified, mid-qualified, and non-qualified fee.”  First, I am impressed that the merchant is revealing an awareness of the components of a tiered rate structure.  Next, I forewarn the merchant that there are several conditions associated with each type of fee and that at the end of our discussion, a test will be given. 

Of course, I’m just joking but this blog entry / article may serve as a “cheat sheet” when gaining insight on the topic (i.e., becoming acquainted with the differences between the qualified, mid-qualified, and non-qualified rates).

Perhaps the best way to explore the subject is through an exchange between merchant and merchant account provider (MAP).  The first scenario is a dialogue between a retail merchant (RM) and MAP:

RM: I am just opening a small car dealership and plan to swipe just about all my customers’ cards.  I heard that it is cheaper to swipe cards than key them into the terminal.  I suppose then that all my transactions will be considered “qualified?”

MAP: Unfortunately, not all your transactions will be at the lower qualified rate.  It is likely that most of the cards you process will be in the qualified category, assuming that a given credit card’s magnetic strip is properly read by the terminal at the time of transaction and the customer’s signature is obtained.

RM: I anticipate very few problems where a credit card will not be able to be successfully swiped.  Assuming I encounter no difficulty with swiping cards, are there still certain credit cards that won’t be considered qualified?

MAP: Yes, typically rewards cards will be assessed a mid-qualified rate when one has a retail account.  Some rewards cards can downgrade to the non-qualified rate, too where you will incur the highest fee.  Corporate and International cards may also fall to the non-qualified rate.

RM: What if I swipe for an authorization?  Can I still receive the lowest cost when finalizing the sale?

MAP: As long as the authorized amount equals the deposit amount, and the transaction is batch transmitted electronically within a day of the authorization, you can still receive the lowest cost.  The transaction has to be authorized electronically as well (not called in, for example).

RM: What if I key in the transaction?  How does that affect my rate?

MAP: Generally, a keyed in transaction will be categorized as a mid-qualified transaction or non-qualified transaction, depending on several factors.  Again, the type of card you receive is all-important.  Check cards and standard cards will prevent the transaction from downgrading to the non-qualified rate.  Also, be sure to use an Address Verification Service (AVS) and key in the customer’s address because if there is an AVS mismatch where the customer’s billing address does not match the address listed on the card, the transaction will downgrade.

RM: How can I avoid the non-qualified fee?

MAP: As a reminder, try to swipe credit cards whenever feasible.  Use the AVS system and batch out within 24 hours after a card has been authorized.  While you won’t have total control over which credit cards your customers will use, remember to take advantage of “level 2 processing.”  Here, you would input additional information into the terminal when you accept commercial or corporate cards, including customer’s reference number, tax amount, and destination zip code.

RM: Thanks for explaining how qualified, mid-qualified, and non-qualified transactions are determined.  I’m going to hand the phone to a friend who plans to open an E-commerce Internet- based business as he may have additional questions on the subject.  Here he (IM) is:

IM: I just overheard about trying to contain the cost of corporate cards by using level 2 processing.  Can I use that system, too?

MAP: Yes, our payment gateway, Authorize.net, enables you to use level 2 processing.  As an Internet merchant, if you don’t employ level 2 processing, corporate cards will be valued at a non-qualified rate.

IM: As an Internet merchant, how can I avoid the non-qualified transaction category?

MAP: Similar to a retail merchant, ensure that you use AVS and batch out the same day, if possible, after card authorization.  Please note that the transaction amount has to be equal to the authorized amount, and the transaction shipping date should be within seven days of the authorization date.  Again, use level 2 processing for commercial or corporate cards.

IM: What about rewards cards and International cards?  Will they go to the non-qualified transaction bucket?

MAP: Typically, they would.  Some rewards cards may go to the mid-qualified category, but most would tend to fall to non-qualified status.  The better the rewards card, the more likely it is to fall to the non-qualified bucket.

IM: Can I get the same qualified rate as my friend (RM)?

MAP: Unfortunately, no, as your friend is swiping the card and you or your customer are keying in the information for your business.  All merchant account providers charge less for swiped transactions than keyed in transactions.

IM: So I can’t ever get a qualified rate?

MAP: You have to be careful with terminology.  Your “qualified rate” is tantamount to a retail merchant’s “mid-qualified rate.”  If your business is run via the mail, telephone, or Internet, and transactions are made without the credit/debit card being present, then there are different merchant processing terms used.

IM: Thanks for explaining the differences between these categories.  I now understand these tiers.

MAP: I’m so glad to be of service.  It’s so important to understand the nuances between the qualified, mid-qualified, and non-qualified transaction buckets and their associated rates.          

A prospective retail merchant called me earlier in the week to ask me whether it was worth it to purchase a pin pad so that she could facilitate debit card processing.  This blog entry is dedicated to her. 

With the economy the way it is at the moment, a lot of people are wary about going into debt, or going deeper into debt.  Consequently, many people have cut up their credit cards or have hidden them away for the time being, and prefer to pay with cash.

However, you can still technically pay for items and services by cash without having to actually carry the money around with you. The simplest way is to pay by a debit card. A debit card is just as easy to use as a credit card as it can be swiped through a terminal, but the funds are taken directly out of your bank account instead of being added up on a monthly statement.

This way you can’t get carried away on a shopping spree and pay for things you can’t afford, as you need enough money in the account to cover the bill. I guess the simplest way to describe a debit card would be by calling it a plastic check, but without the aggravation of actually having to write one out. In fact, debit card processing is becoming the fastest growing method customers are using to pay for orders.

Debit cards are a lot more convenient than carrying around cash or checks and are also secure as a PIN number is needed to use the card to pay for a transaction. If you happen to lose a $100 bill, you’re out of luck, but if you misplace your debit card, it can easily be replaced and can’t be used without the proper PIN number. In addition, statements are itemized with the location and time of the debit card transaction.  Check cards are also available from companies such as Visa and MasterCard and they are similar to debit cards, but you don’t have to use a PIN number with them.

Because so many shoppers are using debit cards to pay for purchases, it goes without saying that businesses should be equipped to handle debit card processing. By accepting debit cards with a PIN pad, you can also save quite a bit of money on processing costs.. 

If you process debit/check cards as a regular credit card transaction you may end up paying twice the amount for processing. If you use a PIN pad for debit card processing, you only pay a per-transaction-fee and no discount rate of any kind.

But you need to make sure your customers input their PIN number during the transaction, if not, the per-transaction and discount rate will be charged for people using check cards who don’t enter their PIN numbers. Since entering a PIN number with a check card is optional for shoppers, it’s a good idea to encourage them to do so.  

If you run your business over the Internet, you typically have to pay the same fees for debit card processing as you do with credit card processing.  (Some merchant account providers provide a discount for the online use of debit cards.)  However, you can also save money by using an electronic checks system for your website sales.

Because the costs are so low using the debit card processing method using a PIN pad, (usually 50-95 cents) per transaction, you can save a substantial amount of money per order.

There are also several other benefits to using debit card processing, including the following: 1) There are no charge backs; 2) You have the option to offer cash-back to customers; 3) Your revenues will increase; 4) Sales are deposited into your account quickly; 5) All transactions appear on your statements; and 6) There’s no risk of accepting a bad check.

While it’s easy to see that using a PIN pad will save you money in debit card processing, you need to decide whether to use an internal or external pad. An internal pad is ideal if you want an all-in-one unit and it will also save you space. With an external PIN pad, it’s usually easier for the customer to access and enter their number on a hand held unit and there’s less strain put on electrical cables.

If you’d like to make money and save money at the same time, set up a system where you can accept pin-based debit cards.  The only caveat is if your average ticket is less than about $20-30.  In that scenario, the average credit card processing rate should be less than the flat debit card processing rate.

Retail merchants with higher tickets would be pennywise to employ debit card processing.

It’s pretty hard to run a business these days without a credit card terminal. In fact, it’s almost impossible. If you’re selling goods and/or services, it’s important that you’re able to process credit and debit cards proficiently and safely.

Credit card terminals don’t cost that much in the grand scheme of things, but are very important when it comes to keeping your business running smoothly.

You need to make sure your equipment is up to date and reading cards properly as merchant account providers generally charge slightly more for keyed-in transactions than for swiped ones.   Remember, any credit card machine can be used with any merchant account as long as it’s programmed to connect to the right provider.    

Here are seven questions to ask as you research myriad credit card terminal offers:

1-What types of terminals are available?

There are a few types on the market. These are traditional models which can come with or without printers, wireless terminals, and virtual or software-based devices. 

A basic model comes with a magnetic stripe reader, keypad for entering prices and other data, and a small display area. The printer can be separate or built into the device and the terminals work the same way with either. However, when combing hardware, you need to make sure all pieces are compatible and work together properly.

There are several types of displays available and naturally, bigger ones can show more information at once. The display areas are typically measured in lines and columns: For example, an 8 x 20 display area means it has eight lines of text that is 20 columns wide.

Credit card machines with backlit displays are ideal for use in all lighting conditions and most models come with these. 

The keypads vary in their number of keys, and the more available, means you can allocate frequently used tasks their own keys. 

Wireless terminals

Wireless machines are ideal for people who conduct transactions while they’re mobile or in temporary locations. They allow you to conduct business without the necessary phone and electrical lines needed for basic models. These units come with built-in printers. When shopping for a wireless tool, be sure to consider its battery life, range, weight, and shock-resistance. 

Virtual terminals

If all of your business transactions are conducted by phone and/or via the Internet, you don’t really need a physical machine. Ask your merchant account provider for a virtual terminal that can process transactions. All you need to do is enter the credit card number and the web-based interface does the rest.  (You can also obtain software that offers credit card processing capability.) 

2-Will my equipment accept debit cards, gift cards and other types of payment cards?

It’s a good idea to get an apparatus that also accepts debit cards. Most do, but you need to let customers enter their personal identification numbers (PIN). Some terminals have this feature built in, where others require a separate pin pad.  When using a separate pin pad, the credit card terminal does not have to move from its location. 

Being able to issue and accept gift cards is a bonus, but not all terminals have the capability. Some models also let you take payment by phone cards, electronic bank transfers (EBT), and paper checks (run through a check reader).

3-Are there any security devices available?

You need to make sure you’re protected against fraud, so an address verification system (AVS) is essential for security. This system compares customers’ ID addresses with their credit card billing addresses. The system is standard on most units and I wouldn’t buy a machine without it.  You should also be able to utilize a CVV2 check (the 3 or 4 digit number indicated on the card) to ensure that customers have their credit card in their possession at the time of sale.

4-What type of printers are there?

You need a reliable built-in or separate printer with the terminal so you can give receipts to customers. There are three types of credit card terminal printers, which are dot matrix (impact), thermal and inkjet. Make sure the one you pick is fast and dependable.

Dot matrix printers employ pins and an ink ribbon to print on regular paper. They generally cost between $200 and $400. However, they can be pretty slow as they print one to four lines per second.

Thermal printers utilize heat and special heat-sensitive paper to produce receipts. They cost a little more, between $300 and $500, but are quicker and quieter as they typically print 10 to 15 lines per second. They’re usually more reliable than dot matrix printers as they possess fewer moving parts.

Inkjet printers are pretty rare with credit card terminals and the only bonus they offer is they can print in a variety of colors. They aren’t very fast and their cost is high. 

While thermal printers and paper may cost more than dot matrix, they usually cost the same in the long run as you have to buy paper and ribbons to run dot matrix printers. 

5-How much does payment processing equipment cost?

Credit card terminals won’t cost you an arm and a leg. Basic models generally sell between $150 and $300. Terminals with printers are usually $200 to $600, and wireless devices are usually between $600 and $1,000.

It’s a good idea to buy a terminal instead of leasing one as it will definitely save you some money.  It’s also a good idea to make sure you get a reliable model that can handle all of your needs even if it costs a little more.

Please note that some merchant account providers offer equipment at no initial expense although conditions may apply.

6-Where can I buy one?

You can easily buy processing contraption from your merchant account provider and they will pre-program the terminal for you. They usually give a decent price as they hope you will be working with them for several years.

If you’d rather buy the machine elsewhere, then be sure to consider the price, manufacturer's warranty, the type of business you do and what your terminal needs are.

If you’re considering buying a machine over the Internet, make sure you are buying from a reputable seller, understand any return policies and restocking fees, along with any warranties and service agreements that come with it.

7-What else should I know?

Make sure the credit card instrument meets all of your business needs. If your device can’t connect to the merchant account provider, the unit’s memory may store transactions for later verification. A model with 256k memory can store about 1000 transactions. 

Make sure you keep the equipment clean as printers and credit card stripe readers can easily get clogged up. A can of compressed air is ideal for cleaning a credit card terminal.

Some models use flash memory to store their operating software. This means system updates can be easily downloaded and installed and can extend the life of the terminal.

Finally, make certain that your selected machine is PCI compliant, conforming to the most up-to-date Visa and Mastercard security standings.  Refurbished machines may be considered (to lower your cost), but again, ensure that any device is PCI compliant.

In summary, by raising the aforementioned questions and discovering the answers, you will be able to obtain the “best” credit card terminal.