The language of Merchant Accounts

Merchant account services are provided by banks and financial institutions to set up Visa, Discover, American Express and MasterCard merchant accounts. These service providers process credit card payments in exchange for processing fees. Approach a bank directly or a merchant account service that can help you start accepting payments as soon as possible. Your service provider must have amicable relationships with banks and financial institutions, ensuring that the services you receive are good quality and appealing.

There are several Merchant Account Providers on the internet. These providers are called Independent Sales Organizations in Industry terms. Make certain that you investigate these companies prior making any payments for their e-commerce certified merchant services.

Once you’re ready to accept payments though our merchant account, you must know what a Transaction Processing Clearinghouse is. A Clearinghouse refers to the organization that authorizes and validates the credit card received during the payment process for a shopping cart on your e-commerce website.

The final piece to setting up a merchant account to accept online payment is the gateway that connects you to the transaction clearinghouse. There are three common gateways:

Credit Card Swipe Machines- machines that are seen at the counter top at every store. The card is swiped through the machine ad a transaction slip is produced. The authorization comes from the clearinghouse, and as the customer signs the slip, a valid payment to the merchant is confirmed.

Desktop Software- For online businesses, soft wares may be used as the transaction gateway. The credit card number received via phone, mail, or email is manually entered into the computer software, and transmitted over the internet to the clearinghouse. This software solution, though better than swipe machines is not practical for large volume stores. Also, re-keying data from each order into a computer can cause user errors and can be a lengthy process.

Real-Time Web Gateways- Real-time gateways are common with most ecommerce shopping cart softwares. With real-time gateways, a merchant can authorize and validate credit card payments through a clearinghouse while the customer is still online.

The cost of a merchant account varies from one Merchant account provider to the other. The cost of a merchant account would also depend on your line of business. For instance, online casinos and gambling websites, where chances of fraudulent activities is heightened, will have to pay much more for a High-risk merchant account. Similarly, International Merchant accounts are more expensive. Also, the deviation in cost among providers is due to the fact providers usually have hidden costs. You may have to pay separately for services such as shopping cart, etc, besides the set up and the maintenance charges that you shell out. So, you need to closely study your options and choose the service that gives you value for money.

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Merchant Account Terminology

Before setting up a merchant account for your e-commerce business, it is imperative that you understand the working of merchant accounts and credit card processing inside out. The first step in acquiring that understanding is to become familiar with Merchant Account Terminology. Following are a few common phrases and words used by merchant account providers:-

Settlement Time: The term "Settlement time" defines the time lapse between the moment you charge a credit card at the sale of a product or service, and the time when you actually receive the payment in your business account. The time period for the completion of the entire payment procedure may vary. It may happen almost instantly or may take as many as three months, the latter being the case with high-risk businesses or poor quality merchant account providers. Most good quality merchant Service providers conduct transactions within two or three days, whereas, a third party credit card processing company will take a day or two more to transfer your dues.

Settlement time may further be determined by the format of payment. Your dues may be either directly transferred to your bank account or you may receive a check. The first option, though costlier, saves on time that is usually consumed in check clearance. Settlement time is crucial in the context, that the sooner you have your money in hand, the sooner you can utilize it or invest it!

Discount Rate: A discount Rate is the percentage of each credit card payment that is deducted by the merchant account provider as fee. This may fluctuate from 2% for a merchant account to over 10% in case of a third party service. And these charges will never be displayed in black and white. You may have to look deeply and evaluate. For instance, if the discount rate is higher but you have services such as a shopping cart and digital delivery software incorporated free of cost, it is a better deal than paying a lesser amount and paying separately for all the other desirable services.

Monthly Fees: Merchant Accounts, more often than not, charge a monthly amount for the maintenance of your account and for additional services such as technical support, shopping cart and payment gateway fees etc. You of course need to pay for the services you receive, but what needs to be determined is whether you are getting value for your money or not.

Third party service providers do not usually charge a maintenance fee. Instead their Discount rates are higher. Also remember that a monthly fee has to be paid not considering whether you have made any sale or not. On the other hand, if your sales are good, paying a monthly fee along with low discount rates, means you take home more profits.

Reserve Funds: Reserve Fund denotes an endowment or “insurance” amount provided to the merchant account provider. This amount is to remain as security of the provider in case there are more refunds than sales in a month’s business. This fund may be created by either providing a lump sum upfront, as soon as your merchant account application is accepted by the service provider, or you may pay a smaller amount each month. Before making any payment for the reserve fund, you need to investigate into the return policy of your service provider. Establish beforehand the time it will take to get your money back, if at all. A smaller sum paid monthly and returned fast is what you're looking for.

Processing Limit: Processing Limit refers to the maximum money that your merchant account provider can process for you. It is dependant on the monthly turnover and may affect the ticket price of your products. A processing Limit is a cause for concern for merchants selling high priced items like jewelry etc, while a small business is unlikely to worry about a processing limit.

Chargeback fee: Charge backs are common on the internet. High-fraud businesses can suffer miserably. A chargeback involves a customer claiming the amount charged on his credit card, for not having received the product that he paid for. Sometimes, customers do this on purpose to save their money and sometimes it could be a criminal who fraudulently uses another person’s credit card to make a purchase. Thus, it is a good policy to remind every customer by email about their purchase and the billing of their credit cards.

In addition to the above details, there may be additional charges that you need to check out. These costs will vary from one service provider to another.

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International Merchant Account Services

An Internet merchant account is set up through a bank, a financial establishment or an online merchant account provider in order to accept credit cards as payment from customers. It is in the best interests of your business that you partner with a provider that you can trust to represent and safeguard your business interests. Accepting credit card payments is essential to keep your customers coming back for more of the convenience you offer.

There are many reliable offshore merchant account providers that can provide quality international merchant account for your business. For instance, if you need to process in a foreign currency such as Euro, Yen, or Sterling Pounds, partner with a bank that has a less expensive gateway and does not require you to possess a corporate license in another country.

An international merchant account is going to cost you much more than a normal merchant account. There will be set up rate. An international merchant account allows you to settle in United States dollars and in sterling pounds, euros or yen.

Choose an international merchant account service that maintains one of the highest merchant approval rates in the industry. They may charge more, but their services will be reliable and hold you in good stead. Make sure your service provider has a history of approving in two days or less, has cutting-edge electronic processing products and services and accepts transactions in a safer, more secure and more profitable environment.

In addition, every business has its own individual requirements. With the amount you pay for an international merchant account, ensure that products and services are tailor-made to suit your specific business needs. You need a leader in the payment processing industry that offers both small and mid-size merchants, electronic payment solutions, that provide results and works to strengthen ties with customers.

Let cost not be the only factor while signing up for an international merchant account. Your considerations must include a Merchant Account for immediate credit card transaction processing, a secure payment gateway for real-time processing on your website, a web-based credit card processing terminal for manual credit card orders, and the ability to accept all major credit cards. In addition, your service provider must be able to transfer your funds into the checking account of your choice. Last, but not the least, you may look for someone who either has no or minimum set up fee, annual fee and paperwork.

Being able to accept and process credit card payments is a huge advantage in the world of e-commerce. If you live outside the US or the UK, what you need is a quality international merchant account and credit card processing service, with cheap transaction rates and flexible processing terms in their countries, especially for business starters.

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High Risk Merchant Accounts

A High-risk merchant account is a merchant account service provided to internet merchants that have been declared “high-risk” by Visa and MasterCard. This is owing to the nature of their businesses, that have a high credit rate or a high turnover but also, an increased risk of fraud.

Characteristically, it's very hard for high risk and non-US businesses to obtain a merchant account. High risk merchant accounts offered by different service providers allow International Merchants to privately process their credit card transactions and have the proceeds sent to an offshore bank account. The fees are higher for offshore/high risk credit card processing.

Credit card processors are likely to reject you if your business is considered high-risk. The aim is to locate a credit card processor that gets you approved and has you up and accepting credit cards quickly and efficiently, with either a high risk merchant account or an international merchant account.

Examples of high risk businesses include pharmaceuticals, telemarketing, infomercials, travel industries, online dating, etc. Some of these are considered more high risk than others. So a merchant account provider allowing telemarketing Merchants in its high risk merchant account network may not allow online casino or adult merchants due to their credit limit.

An established provider of High Risk Merchant account for businesses must have the following features:-
• No volume caps
• Online Payment Gateway
• Virtual online terminal for manual entries
• 24/7 real-time online reporting
• Cards accepted - Visa, MasterCard, American Express, Discover
• Multicurrency feature
• Payouts every week
• Payouts are sent to offshore or international banks.
• Merchant accounts can be set up for offshore companies.

Since high risk merchant accounts are usually set up with offshore acquirers, the opening and operating requirements are less stringent and completely tax free. So obtain an online merchant account and accept credit cards worldwide.

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Setting up a Retail Merchant Account

Retail merchant accounts are considered relatively low risk merchant accounts and setting them up is fairly simple. There are a lot of options available with the best rates. Despite the low risk associated with retail merchant accounts, there are a few pitfalls that one must be aware of, in order to avoid them effectively. Following are a few measures you can take to ensure smooth working of your retail merchant account.

If you have a long-standing business relationship with a small, local bank, you would obviously want to have a merchant account with them. However, small banks usually do not offer merchant account services themselves, but work for larger banks for commission for very merchant account they outsource to them. It would save you a lot of time and money by directly approaching that larger bank for their merchant account services. This will in the long run add to your money making process, generating considerable profits.

Be very careful while discussing the fees associated with a retail merchant account. Different banks and financial groups have different policies and charges. As a retailer, you will be charged the discount rate for processing credit cards. This amount is les than 2% of the sale made. But you may have to pay more depending on the risk involved in any credit card purchase. In addition to this percentage, your service provider may charge you a fixed amount per transaction. Also, most merchant account services will charge you a monthly and an annual "statement fee".

A merchant account is required to provide an estimate of the sales volume and average ticket cost. This is crucial because if the difference between the predicted amount and the actual sale is large, the merchant can run into problems. This rarely happens owing to the representatives of merchant account service providers that are skilled in coming up with fairly accurate projections, based on your business. In fact, the estimate provided to you can help you choose your merchant account provider.

Owing to the wide range of options available for retail businesses, a need based shift from one provider to the other is never off the cards. To facilitate easy movement, avoid becoming associated with a merchant account processor that tries to tie you down with a heavy cancellation fee. Certain service providers automatically renew your merchant account. If you do not want such a renewal, discuss the options for cancellation prior to setting up an account.

It usually takes a couple of weeks to set up all the aspects of a merchant account, delivery of the credit card terminal, and more. Thus, a smart merchant would be one who sets up his merchant account a few weeks prior to the starting day of business. Applying in advance will have you all set in time, ready to accept payments through credit cards the very first day of opening shop. You will notice the sales shooting up with time and your business is sure to run smoothly with credit card processing.

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Wireless Merchant Accounts for Mobile Merchants

In the wireless world of today, why not opt for a wireless merchant account and open a world of opportunities for your business? Wireless is a fast evolving technology and a sensible choice for many merchants. Mobile commerce merchants have seen their volume grow manifold ever since they have set up a wireless merchant account for credit card processing. This allows them to use their wireless credit card terminal wherever they are- in the car, at home, at the customer’s office or even when flying. Its portability is particularly applicable for service industries.

Wireless is a fast evolving technology and a sensible choice for many merchants. Wireless credit card terminals use advanced terminal technology that has an internal battery and wireless service; it does not require any external source of power or connection to a phone line.

The benefits of opting for wireless credit card processing include fast transaction times of around three seconds combined with ultra fast thermal printers to generate customer receipts. Wireless units are qualifying for swiped "card present" transactions at the lowest possible Interchange rates. With instant approval and decline codes, completing secure transactions is quick and easy. Wireless processing will benefit merchants with high volume sales, those who have incurred losses from risk of fraudulent and declined cards, and Merchants who need extra fast transaction speeds or incur lost sales opportunities.

The first thing to consider before you pick up your wireless terminal is to check for network coverage. Just as cell phones work on a network and the service varies from location to location, similarly, a wireless credit card terminal has a coverage area, beyond which, the device may not function properly. In addition, receptions problems with a wireless terminal will vary due to location, weather, network traffic, terrain, signal strength, obstructions, building density, construction, environmental conditions, and other factors.

There are several wireless credit card processing terminals available in the market today. Choose wireless credit card processing equipment that includes a flexible, lightweight, handheld terminal that enables fast, secure, error-free transactions for on-the-go merchants. The terminal must also support a range of payment & value-added services - including credit, debit, T&E, EBT, smart card, gift and loyalty cards. An easy-to-load thermal printer, with a touch screen, built-in PIN Pad, and EMV smart card reader will be an added advantage. Merchants can also use GPRS as it offers greater coverage with no additional costs. It works on a tiny chip as it does in mobile phones, and with GPRS, a merchant can roam freely as coverage is as good as assured!

While setting up a wireless merchant account, do not compromise on the equipment you purchase. First and foremost, identify the coverage area and consider the programming and wireless chip activation. Ensure that you have equipment warranty with your processor. That will save you time, effort and shipping costs in the long run.

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A Comprehensive List of Items You Need for a Merchant Account

Once you’ve decided on the type of merchant account that best suits your business and have elected to partner with a particular bank or any other financial organization, its time to get your paperwork together. Opening a merchant account requires a long list of documents and financial information. Following is a checklist of items that you must have in your kitty when you open your merchant account.

Identity Proof- Proof of identity is essential when applying for a merchant account. A photocopy of your driver’s license is a reliable form of identification. This is because identity fraud is an area of significant criminal activity. If you are a victim of identity theft, your merchant account could be used unlawfully. Thus a service provider needs to see documents that identify you and may ask for additional information to verify a document.

Voided Check- It is very important that you submit a voided check from your business checking account along with other documents. This provides the correct routing number for the bank in which your money will be deposited.

Merchant Account Application- The merchant Account Application must be clearly and completely filled out and submitted to avoid any unnecessary delays in the approval process of your merchant account.

Product or service information- Your merchant account provider will need a list of all the products and services for which you will be accepting credit cards. There should be a short description of each such product and its price on a separate sheet of paper, which must be attached to the merchant account application. If the various products have customized prices, you must provide some basic price for every product. If you have a webpage on your website dedicated to a list of products along with their prices, you may simply provide the URL instead of making a list manually.

Business Financials- If your business ticket or monthly volume is high; you may also be required to submit a profit & loss statement for your business. Different providers may have their own limit for a ticket and monthly volume. It may be, for instance, an average ticket of more than $800 or a monthly volume higher than $150,000.

Current processing Statements- If you already hold a merchant account with any other bank of financial establishment or have credit cards through another service, you can ensure quick approval by providing the last three months of processing statements from your other account.

If you have all the above documents and papers ready with you while opening a merchant account, the process will be smooth, simple and uncomplicated. So read your checklist and make sure you have all these items together when you open your merchant account.

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Pre-requisites for getting a Merchant Account

Accepting credit cards through merchant accounts leads to significant increase in sales. The merchant account for every business would depend on their business type and how they make sales. For instance, a brick and mortar businessman needs to have a merchant account that enables the acceptance of point-of-sale credit card payments, in which the card itself is swiped. Similarly mail order transactions will require a MOTO (Mail Order/Telephone Order) merchant account.

You may open these merchant accounts with a bank or with an Independent Sales Organization (ISO). Banks are very secure and reliable and the fact that you already have an account with the bank will hold you in good stead. Banks are very selective about the type of businesses to which they grant merchant accounts; while ISO’s are more flexible about offering merchant accounts to high-risk businesses. However, ISO’s will usually charge more in return for their leniency.

Whether you choose a bank or an ISO as your merchant account service provider, there are certain requirements that the card processor will insist on. Thus, following are a few features that your website must have to be eligible for a merchant account:-

• Privacy Policy- A privacy policy adds to the credibility of the e-commerce businessman, indicating his commitment to keep customer information confidential.

• Return Policy- A return policy indicates the company’s policy about returns of purchases made if the customer is not satisfied. Details about any refund that has to be paid, mode of payment, time period, exchange policy, shipping and handling must all be chalked out.

• Shipping Methods- There are several methods of transporting your product to your buyer. Which one you select depends on the nature of the product, where it's going, how much of the product is in the order, and so on. The website must clearly indicate the method of shipping, the time taken, and any additional shipping and handling costs, if applicable. Shipping for oversized, perishable, damaged or defective items must be separately and clearly mentioned

• All products must have a clear image and pricing- Any product that you sell on your website must have a price that is in large font and easily readable by all. The picture must be kept as close to the truth as possible. Else, customer dissatisfaction may lead to fraud allegations. Once a chargeback takes place, it would be difficult for you to find another credit card processing and merchant account provider.

• Shopping cart- A website must offer a secure, feature-rich PCI/CISP Validated e-commerce shopping cart solution for multi-channel online sales, featuring integration with leading Accounting, Point of Sale, and Fulfillment systems as well as other online selling venues, such as eBay and comparison shopping portals. Whether you're a small merchant just getting started or a high volume seller looking to streamline and upgrade your online operations, a shopping cart is a must!

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Choose a Payment Gateway that’s best for you

Every e-commerce businessman needs to choose an online payment gateway service that allows the website to securely accept credit cards in real-time; one that recognizes that availability and security are essential elements of a Payment Gateway provider. In addition payment solutions should be simple and easy to use.

Choosing an online payment gateway isn’t an easy process. Firstly, the range of payment gateway services available on the internet is overwhelming. They are feature-rich and the competition is fierce. The first thing to do in such a scenario is to acquire all possible information by reading about each gateway you're considering. Compare the features and decide what all you would need for your particular business. In short, do your homework well, and then prepare a query list for the salesperson to ensure that all your doubts and concerns are taken care of.

Shopping cart compatibility is one of the most important factors in selecting the right online payment system. It is critical that your technical team be included in the decision making process. A member of the technical team that handles your database and shopping cart will be in a much better position to establish which of the Payment Gateways you are considering, is attuned with your shopping cart.

Mostly, Payment gateways are designed in a way to work well with almost all commonly used. Just to be on the safer side, it is advisable to ascertain with a salesperson and confirm that they're offering an online payment gateway that works with your system. The idea is to choose a gateway that will make everything simple.

Most online gateways have more or less the same features. The prices may wary. Don’t look for the Payment gateway that quotes the least price. Look out for hidden costs and your priority should be a service that helps you keep your bookkeeping and other tasks to a minimum, and does everything you need in the shortest amount of time.

The Payment Gateway you pick is bound to influence the expansion of your business operations in the online world. Thus, choose wisely for your business!

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How to set up an Online Merchant Account

Merchant accounts are not just about accepting payments electronically. The idea is to enhance customer experience and convenience. By catering to the needs of customers and offering them added ease, a business establishes an image of seriousness and commitment. Merchant Accounts are a powerful selling tool. Here are some important tips regarding the setting up of an online merchant account.

Fraud is a major concern that plagues online merchant services and accounts. Since Merchant accounts are all about convenience and reliability, the first thing to do is to decide on a gateway that has established a reputation by already processing payments for thousands of merchant accounts. Lots of companies offer gateways with excellent rates and great features, but no credibility. Opt for a gateway that is sure to work with little or no downtime.

Secondly, select a bank that understands and has experience with merchant accounts. Even though you may prefer to do business with a small, local bank or credit union, it would probably be a good idea to approach a company with experience and expertise as far as processing credit cards is concerned. This will save time, money and be safe.

It is very important that you set up your merchant account at least three weeks prior to starting accepting credit card payments. If not, you may find yourself waiting at a payment gateway loosing several orders in the meantime. Prevent business loss in the very first days by allowing plenty of time to set up and approve your merchant account.

Different merchant account service providers have different fees. The amount may vary too. There may be some hidden charges that are not disclosed in your merchant account application. It’s critical that you understand how much you’re being charged, what you’re being charged for, when you’ll be charged and how often. Typically there are annual fees, monthly fees, and per-transaction fees. But each of these categories can be broken down in additional ways.

Also, make sure that the rates being quoted suit your business model. Since, retail transactions are low- risk transactions, the rates associated with them are much lesser than the ones for online transactions. However, merchant service providers only advertise the lesser rates for retail transactions as their rates which can be very misleading for an e-commerce business. If you need to accept credit cards for a mail order or internet business, you can expect to pay significantly more.

Hopefully, the above tips will prove helpful while you set up your merchant account.

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The Mechanics of Credit Card Transactions

The process of credit card processing involves
• The card holder
• The card issuer, which is the bank that issues the credit card to the cardholder;
• The merchant
• The merchant acquirer, which is often a bank that processes transactions on behalf of the merchant
• The card association- examples of which include VISA or MasterCard.

Collecting payment through the interchange systems is a two-part process:

The Clearing Process- The clearing process does not involve any financial transaction but is an exchange of data. The information regarding a sale is provided to the issuer by the acquirer. Also, the acquirer provides data to the issuing bank to help identify the cardholder’s account and provide the dollar amount of the sales. The issuing bank then draws against the card holder’s available credit and prepares to make a payment to the acquirer.

Settlement- The settlement process undertakes the actual exchange of funds. The issuer sends a record to the acquirer containing details of the amount being paid. From this account the acquirer pays the merchant. These transactions take place through accounts with banks that are members of the Federal Reserve System. Payments to merchants are made through an electronic funds transfer system, called the Federal Reserve’s Automated Clearing House (the “ACH”).

Credit card transactions involve front-end processing and back-end processing.

Front end Processing involves the authorization by the issuer that a particular account may be charged for the amount of the sale. Authorization may be completed by swiping a card’s magnetic strip through the point of sale terminal’s card reader or the information may be keyed into the terminal in order to get an electronic response. Authorization may also be obtained through other methods such as voice authorization and electronically generated audio responses (ARU).

Electronic Draft Capture involves the transferring of data about sales draft, electronically for clearing and settlement.

Back end processing is the process that ensures that all fund transfers are recorded to the proper merchant or cardholder account. In addition, the acquirers are provided reports containing settlement data, security and fraud data, retrieval and chargeback data, and Funds disbursements data.

Thus, credit card processing is carried out as explained above. For internet transactions and other options where the card is not physically present, the basic process remains the same but can have additional processing steps.

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Credit Card Processing Machines

Credit cards are said to be a ruling mode of payment. The use of credit cards is taken as a status symbol among the society. New types of credit card processing machines have come in the market that enables a user easy, safe and quick processing. We can say that a wide spectrum of credit card machines and credit card processing equipment have been introduced to accept credit cards. The most popular brands of credit card equipment in the US is Verifone, Hypercom, and Lipman.

The credit card processing machines come both with and without printer. The machines without the printer are to be used commonly for mail orders or the phone in order business where the merchant is not issued a paper receipt at the time of sale or while dealing with the client. This option is very effective in case of the mobile business such as landscaping, plumbing, locksmiths or electronic contracto rs etc as it is less costly and does not involve heavy cash dealings. The printer-less credit card machines are the cheapest processing machines available, ranging in price from $200.00 - $450.00, for a new machine, and $150.00 - $300.00 for a refurbished unit.

Another category of the credit card machines are the ones that come with the printers. Mostly, these machines have an integrated impact or thermal printer that is the most common in the retail market. They are slightly expensive than the usual credit card processing machines that are not having attached printer to it. The price range for a credit card processing machines with a built in printer is around $275 - $900, depending on the model and the options that are needed. The most popular ones in this category are: the Hypercom T7 Plus, the Nurit 2085, and the Verifone Omni 3200se. These credit card machines are all compact, reliable, easy to use, and all feature a fast built-in thermal printer that eliminates the need to purchase replacement ink cartridges. None of these machines include an internal pin pad, but their upgraded counterparts; the Nurit 2085 Plus, Nurit 8320, and the Omni 3210se have internal pin pads for debit transactions.

Even more hi-tech machines are the ones that do not have any cod attached to it. They are termed as wireless machines. They are termed as advanced machines that are fast processing machines too. Theses machines are complex and come with a detailed manual so that the user can read and understand its functionality and complexity. These kinds of machines are portable too.

New and innovative technologies in credit card processing machines extend a new and hi-tech mode of payment that includes style and comfort both going hand in hand.

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Credit Card Payment Methods

Merchant accounts, as the name suggests are accounts for merchants or business owners with banks or financial institutions, through which credit cards are processed. Thus, a merchant account provider works to process credit cards for a merchant for a certain fee that is fixed or a small percentage of the amount being processed. The methods utilized to process credit cards may vary from one merchant account provider to the other. The industry type and the volume of credit card payments that need to be processed, further determine the credit card payment method.

• Credit Card Processing Terminals- Credit card terminals are the smart choice for worry-free electronic processing. A credit card terminal, also known as Point-of-sale Terminal (POS) is the latest in technology and equipment. It is a stand-alone apparatus that must be plugged into an electrical outlet as well as the phone line. Also, a credit card terminal can work on batteries and operate over the internet or be powered by satellite dishes and communicate wirelessly. A credit card terminal allows a merchant to swipe or key-enter a credit card's information as well as additional information required to process a credit card transaction. The card number, date and amount are verified. Then follows the authentication procedure when it is decided whether the processor needs to go for VISA or MasterCard. Then the information is logged in the processors' computer and then transmitted back to the terminal, in which it then prints a receipt to the customer. Within a few days the payment is electronically deposited in the merchant account.

• Automated Response Unit (ARU) - ARU is a credit card processing option which is intended for merchants with low volume. With ARU, credit cards can be accepted using any touch tone phone- your cellular phone, a pay phone or your office phone. The benefits of Automated Response Unit are that it can be used in any setting, while out in the field, at your office, in your car or anywhere you have access to a touch tone telephone. Also, this method is cost-effective as no credit card terminal or processing equipment needs to be purchased.

• Payment Gateway- A payment gateway is equivalent to a physical POS (point-of-sale) terminal located in most retail outlets. It is an online payment solution. It can be integrated with their shopping cart or can be used with options such as online invoicing, quick pay etc. to receive payments from their buyers.

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Processing Credit Card Payments

The world is now doing business on the internet. To beat the cut throat competition, merchant accounts and credit card processing services are a must. This is because more than 80% of online customers pay via credit cards. Those who fail to bank on the opportunity are sure to loose out sooner or later.

It isn’t just enough to get a merchant account with a bank or financial institution and start with credit card processing. Every online business owner must garner all possible information regarding credit card processing, rates and fees, how it is done etc. This article is an endeavor to help find out how credit card payments are processed.

First, let’s get acquainted with all three methods of processing credit card transactions: -

Virtual Terminal- You can use a virtual terminal to manually process mail and telephone credit card transactions, as well as issue credit, from any Internet connection in the world.

Simple Integration Method- allows you to link your web site to the system in order to accept credit card payments from customers in real-time with complete automation.

Advanced Integration Method- This is a little complex and requires custom programming. The idea is to ink more complex web sites with the transaction gateway server to carry out credit card transactions.

The most convenient method of processing credit card payments for small businesses is by using existing merchant accounts. This is the best option for businesses that have a brick and mortar storefront along with an e-commerce site. Another option is to hire a company to do the credit card processing for you. There are several such establishments that charge a fee of 4%-5%, per transaction. In addition, they have a minimum monthly charge that ranges from $20 to $50. This model is idyllic for existing businesses with a moderately large and regular volume of sales.

Third party companies have made a foray into credit card processing. They simply clear the credit card transaction using their merchant accounts and cut you a check for the transaction minus the transaction fee, which rarely exceeds 9%. You may receive the payment in your bank or receive a check. A few examples are CCNow, ClickBank, iBill, iFulfill, NetBanx, PayPal, Verotel and Verza. This alternative is best at the initial stages of business set up when the number of sales are not large enough to subscribe for a monthly minimum merchant account.

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Merchant Accounts- Rates and Fees

A merchant account facilitates electronic money transfers and transactions. It is used for processing credit/debit card payments as well as accepting gift cards and additional variety of electronic payment. Like any other service, merchant accounts come with a certain charge or a fee, which is based on Interchange- the base rate, decided by Visa and MasterCard as a standard for all merchant account providers.

There are three types of merchant accounts with as many as 7 different sub-categories associated with each - all of which have different rates, fees, and charges. The primary concern, before you get down to considering the rates and fees, is to choose a merchant account and processing method that best suits your business.

A retail merchant account comes with the lowest discount rates and transaction fees. However, this account is most profitable to a business that is able to swipe at least 80% of their credit card transactions through a credit card terminal. A mail order merchant account is an account that is used by businesses that will be punching in most of their credit card transactions on the keypad of a credit card terminal after receiving orders over the phone, by mail, or out in the field. Internet merchant accounts are used by businesses that sell products or services online and wish to accept real-time credit card payments. Then there is the option of touchtone credit card processing. It is popular due to its portability and reasonable price. A store and forward merchant account also comes with low fees and rates and is an account that allows a merchant to accept credit card transactions on the go and forward them to the processor at a later time. A wireless merchant account is an account that is used with a wireless credit card terminal. It allows a merchant to accept credit cards in the field and get a real-time authorization of decline for the transaction.

Following are the typical fees associated with a merchant account: -

Application fee- All merchant account providers have a one time application fee, which could be les or more than $100. This fee is either charged right in the beginning or is added to the solution purchase/lease costs.

Hardware/Software- Try and stay away from leases or you’ll end up paying 3 times or more then involved in purchasing the solution. Leases usually have certain damaging clauses that must be checked out in advance. There are additional costs involved that are not mentioned in the price quoted. For instance, there is the state sales tax and the amount charged for the damage/loss waiver. If you still choose to lease, determine the lease's buyout clause and end of lease terms. Purchase costs around $100 and up. Lease may cost anywhere above $20.

Programming costs- Programming costs apply to merchants who change from one merchant account provider to another. The charge is a one time fee and may be less than or a little more than $100.

Discount Rate- The discount rate varies from 1.70% to 4%, per transaction. It is the fixed percentage amount that is deducted from the purchase cost.

Transaction Fees- a transaction fee is also deducted from the purchase cost. Varying from $0.20 to $0.50 per transaction, this fee is lower for retail businesses while slightly higher amounts are charged for MOTO and Internet businesses.

Monthly Minimum- This term indicates that the merchant account provider will charge you a monthly minimum of $25 (less or more), which shall include your discount and transaction fees. So if your transaction and discount rates equals or exceeds 25, no monthly minimum will be charged. However, if the fees collected for that month do not meet the $25 minimum, you will be charged the difference.

Gateway Access Charges- This charge usually approximates $25. Usually the Secure Payment Gateway being is a separate company from the Merchant Processor, charge extra access fees every month.

Statement fee- This fee is for the month end transaction statement that is sent to you like your other bills. This statement will list all the transactions that went through for that particular month. This would not cost more than $15 per month.

Address verification System charges- The AVS verification system works to compare and verify the address on the credit card with the one provided by the customer. VISA and MasterCard charge extra if no AVS is used. Most merchants now offer AVS with no extra charges. If there is any charge; it does not exceed $5. Currently, The AVS service works only with US credit card holders.

Chargeback fees- Anywhere from $5 to $25, a chargeback occurs when the cardholder disputes a charge that they found on their monthly credit card statement. A large number of chargebacks can pose problems in finding another merchant account for your business.

Reserve- This is a charge applied to a Non-US based merchant who is trying to obtain a merchant account or businesses that do a high volume of sales each month. The reserve amount varies and is determined by your businesses estimated sales receipts. The reserve fee is used to cover for any chargebacks on the merchants account.

Annual Fee- An annual fee may be charged n an yearly basis, for maintenance and system upgrades. This fee is usually not disclosed upfront. Its best to ask your service provider for details.

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Types of Merchant Accounts

A merchant account is an account with a bank or any other financial establishment that allows a business owner to accept credit cards or electronic checks through channels that include storefronts with credit card terminals, over the internet via online credit card processing, over the telephone, etc. Depending upon the different channels used, the types of Merchant accounts may be defined.

Broadly speaking, there are three types of merchant accounts- Retail, MOTO (mail order - telephone order), and Internet. A business may have more than one merchant account, and all accounts need not be of the same type. What differentiates the three types of Merchant accounts from one another is the transaction fees charged and the rules associated with the use of the account.

A Merchant account used to process transactions for a particular merchant will depend on the merchant’s business model. This is crucial because the rates and fees are determined on business model classification. Merchant accounts are assessed and evaluated for conformity by a processor’s risk department and credit card associations routinely.

The three types of Merchant accounts are: -

• Retail Merchant Accounts- With the least restrictive rules and minimum transaction fees, retail merchant accounts involve large transactions that are to be conducted physically. In this case the credit card has to be swiped by passing it through a physical credit card terminal. Retail accounts are mostly used by "brick-and-mortar" businesses such as restaurants, hotels, and grocery stores. Since the card is present during the transaction, the rates are lower and there is less risk.

• MOTO (mail order - telephone order) Merchant Accounts- Telephone order accounts are processed in the physical absence of a credit card. Thus, they have a higher transaction rate compared to retail accounts. They were originally created to address the credit card processing needs of mail order companies who receive all of their sales by mail or telephone. Customers are not seen in person and the risk involved is high. So the rates and surcharges are normally high.

• Internet Merchant Accounts- Internet Merchant accounts are similar to MOTO merchant accounts in cost and usage. Internet Merchant accounts address the unique needs associated with online business. The payments are made using a "virtual" terminal or by using a payment service gateway with custom-designed HTML forms or a shopping cart application.

Now that you know about the three types of Merchant accounts, you will be able to choose the right one to fulfill your needs. Choosing the cheapest one may not always be the wisest of business decisions. You could eventually end up paying fees, surcharges and penalties. Instead choose a merchant account that best fits your particular requirements.

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Credit Card Terminals

Credit card terminal is the most promising way of getting secure transactions. The credit card terminals system is provided by a number of companies that ensure safety and security in every transaction. It is the smart choice for worry-free electronic processing because of a commitment to provide merchants with the latest in Point-of-Sale (POS) technology and equipment.

Credit cards terminals are even a better option to the credit card machines though the function and purpose of both are the same but there is variation of sizes and portability. Most of the credit card terminals include integrated printing capability. The latest models of the credit card terminals are wireless and highly portable. They can be carried to along due the feature of being light weight. The features of touch screen are also one of the ruling features of these kind terminals. Most of the credit card terminals have ability to EMV smart card reader, easy-to-load thermal printer and a built-in PIN pad. The model named NURIT 8000 is the one that is able to support a wide range of payment services: gift, proprietary, loyalty, prepaid and smart cards as well as credit, debit T&E and EBT.

The use of credit cards terminal is also referred to as a perfect technologically sophisticated transaction processing. The credit card terminals made by popular brands like Verifone, Hypercom, Nurit, Eclipse and so on have enhanced the non cash payment options and made sure that all transactions can take place at one terminal rather than allotting separate terminals for each payment option like credit cards, debit cards, checks and other electronically submitted transactions.

There are a number of companies that promises you to provide best POS or point-of–sale technology and equipments. They offer competitive pricing for the terminals that guarantee to serve you for the longest duration. Theses terminals or credit card processing machines can be purchased either by one time payment or on lease or even in installments anyways as per your convince. Credit card processing machines or credit card terminals can be obtained on any site on the internet that would allow online processing or in a retail shop that would allow electronic processing through manual operations.

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International Merchant Accounts

Today, with the widespread availability and convenience associated with the Internet, products and services are promptly bought and sold online. Though there are several means of conducting financial transactions, being able to accept and process credit card payments is an added advantage in today's digital world of eCommerce. That’s where merchant accounts and credit card processing companies come into the picture. Merchant accounts are provided mainly by banks and financial institutions

It is imperative to associate your eCommerce business with quality international merchant accounts and credit card processing services. Business starters should especially ensure that their credit card processing service provider has bank partners who are well-known for their cheap transaction rates and flexible processing terms in their countries.

Offshore eCommerce banks tend to provide a better service for certain businesses, especially for high risk businesses and outside the US eCommerce businesses. Europe is a strong and secure economic centre in the world. The choice of offshore banks is vast. Each bank has its own rates, terms, initial conditions, and guidelines. Choose the best international offshore merchant account for your business, depending on your volume caps, monthly minimums, and chargeback rates.

Most international offshore merchant accounts will let you process such credit cards as Visa Credit Card, Visa Prepaid, MasterCard, Diners Club, and Eurocard. Depending on the merchant account providing bank you will also be able to process the bank’s local credit cards. No currency limitations are present when using an international offshore credit card processor.

Security of Service must be looked into. Make sure that your merchant account service provider has certified transaction protection and verification systems, which guarantee safety of transactions conducted online.

You may establish a business relationship with service providers who can consult with you and help you find the best international merchant account for you. After studying the nature of your business and discussing the possible and best offshore merchant account solutions with you, it’s up to you to make the final choice.

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Online Merchant Accounts

There are several options available on the internet to receive payments for your online business. The choices are limitless! The internet is fraught with credit card processessing services. To choose the correct partner, it’s imperative to understand the different components of internet credit card processing, and know what to look for in a merchant provider.

Merchant account and credit card processing services are provided by banks and financial institutions that set up Visa, Discover, American Express and MasterCard merchant accounts. A Merchant Account is an account that enables you to accept credit card payments from your clients. These services are provided for a processing fee. Processing credit card transactions usually occurs at a clearinghouse. It is a Transaction Processing Clearinghouse that authorizes and validates the credit card, once an online shopper pays for his online shopping cart.

A Payment Gateway is a code that conveys a customers order back and forth from an internet merchant account provider. This payment gateway makes possible the transfer of information such as credit card number, credit card type, expiration date, and payment amount. Following this necessary validation steps are taken before the credit card is finally billed.

Local banks usually do not provide Merchant accounts. The reason is because face to face bank transactions are signature bond, and thus are secure. Online transactions are prone to credit card fraud. While choosing a credit card processing company, fraud protection must be your primary consideration.

Merchant Account costs can be really tricky. They also vary from one provider to the other. Typically, an internet merchant account will have Up Front Application Fees, On Going Fixed Fee, Discount Rate, Fixed Transaction Fee, Termination Fees, and Miscellaneous Fees. Understanding all the above cost components is necessary before you choose an internet merchant provider

85% of all Internet transactions are paid for using online credit card payments. This is enough to realize the importance of establishing a merchant account now. E-commerce business is incomplete without Merchant accounts. Its easy, fast and cost-effective!

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Evaluating Ecommerce Credit Card Processing

Selling products online makes online payment processing imperative. Credit cards are the most common mode of online payments and money transfer. Thus, your website must be able to accept credit card payments. If not, you’re liable to incur losses approximating 60 to 80 percent of your potential orders, as marketing studies indicate.

Several financial services offer merchant accounts. The evaluation and selection process of an ecommerce credit card processing service provider requires knowledge and caution. Credit card processing services are present in hundreds and claim to provide quick and reliable services. Finding the right service that best suits your business is not an easy process. You may first consider available alternatives such as charging purchases to a phone bill, using electronic funds transfers (EFT), paying by electronic check and various forms of prepayment. In fact, offering multiple payment methods on your website will add to customer convenience and increase sales.

A merchant account provider will work to verify credit cards, process transactions and deposit money in your account. Every ecommerce credit card processing provider does not charge the same way. The credit card processing provider you choose must depend on whether you receive several large payments or small payments. Depending on your products and their prices you may decide on a flat-rate transaction fees or a certain percent deduction from the charge.

Small business may find it difficult to formulate merchant account partnerships with banks and may have to go through third party providers. Furthermore, you need to ensure that the shopping cart software you use is compatible with your merchant card. Also, some credit card processing companies would like to send a representative to your company address to fulfill their verification procedure. You may also have to provide a copy of your business license or certificate of doing business, profit and loss statements, copies of previous years' tax returns and a photo of your office.

What will further affect the amount of fees you pay to a credit card processing service are factors such as your personal and professional history, time-period of business establishment, debt history, products and services offered and more. No merchant account processor wants to deal with high-risk online businesses. Thus, evaluate your business’s credit worthiness and find service providers you can work with.

Once you have a list of potential credit card processing services you can work with, its time to pick out one that best suits your business. You may compare the charges and offerings of different merchant account providers and also ensure technical compatibility. To prevent fraud, also make sure that your merchant account provider has satisfactorily addressed security concerns. Also note that all providers do not cater to international commerce. If you have a lot of international customers, it is advisable to search specifically for an international provider.

The bottom-line is to compare various offers and choose a credit card processing service which is reliable, has the most reasonable charges and has no hidden fees.