Merchant Account Processing
Whether you're building a Web site or a traditional business, you must first open a merchant account before you can accept credit cards as payment.

How the process works?
When a credit card is swiped through a point-of-sale terminal at the grocery store, the transaction is not completed. The grocery store is verifying that the credit card is active and the buyer are within your spending limit. The transaction is completed when at the end of the day the grocery store sends a collected batch of transactions to its merchant account provider for processing.

There are three ways through which credit card orders can be initiated:
• When a merchant swipes a customer's credit card through a point-of-sale terminal (card present)
• When a customer provides credit card identifiers over the phone or via the mail (card non-present)
• When a customer provides credit card identifiers over the Internet (card not-present)
Real-time verification

After a credit card order has been received by the merchant, the identifiers and sales price are sent to the secured server(s) of the merchant account provider, who then forwards that information to the customer's credit card company and bank. Once the customer's bank approves the transaction, that approval is sent back to the merchant, verifying the credit of the customer. Real-time verification reduces the potential for charge-back fees and prevents the hassle of card entry errors.

Customers are more likely to initiate purchases if they are able to buy on credit. And they are likely to spend more than if they paid with cash or by check.

It is possible to purchase a merchant account service without real-time verification. Though set-up costs may be less, if you expect to process more than 25 credit card (non-present) orders a month, most vendors will advise you to purchase a real-time service.

Note: Point-of-sale terminal transactions are always verified in real-time.

Receiving funds
Once the merchant account provider receives the full amount of the transaction, they credit the merchant's account for the transaction. This process, from start to finish usually takes two to four business days (compared to 25-40+ days for invoice payment methods).

Online accounts
If you are building or expanding your e-commerce presence, setting up an online merchant account makes perfect sense. It enables you to expand your customer base, and it facilitates a fast and efficient purchasing process.

Security for online accounts
The online merchant service provider must use SSL (Secure Sockets Layer) or SET (Secure Electronic Transfer) technology (or proven equivalents). Also be sure that the merchant can provide for:
• Data integrity: the customer's transaction data cannot be tampered with during transmission.
• Authentication: verifies to the customer’s identification to prevent interception of transactions.

In-house processing of online accounts
In order to process transactions in-house you must also then you must secure your server. For this you must build a firewall to prevent the hackers from breaking into your database and stealing the credit card identifiers of the customers. You can even create an offline database. It is beneficial to obtain a digital certificate, that helps in establishing the legitimacy of the business, from a third party certificate authority. These certificates also initiate SSL Transactions.

Types of service/equipment

• Point-of-sale terminals
Point-of-sale terminals allow a customer to slide their credit card through a terminal to verify transactions in real-time. Terminal packages should be able to suit your needs nad be specific to your Industry.
• Card present service (terminals)
In most cases, the point-of-sale terminal is connected to the merchant account provider's network via a private dial or leased line. This allows real-time verification. In some cases, the point-of-sale terminals connect to a computer system. The provider will likely offer to install everything for a set-up fee.
• Card not-present service (mail/phone)
For mail orders and low-volume phone orders, customer transactions are entered into a computer system (or in some cases, a point-of-sale terminal). Transactions can be integrated into your existing customer database. All this can be installed for a set up fee.
• Card not-present Internet application service (phone)
If you expect to process a high volume of phone transactions (several per hour plus), consider an Internet application service. This service allows quick real-time verification of each transaction, reducing the potential for charge-back fees and entry errors.

The fee associated with the merchant account must be taken care of by keeping an appropriate balance between discount rate and per transaction fee. Your provider must provide appropriate customer service to match the needs of your business.

Also, keep your eye on additional charges that add up, notably charge-back fees and touch tone authorization fees. If your business is prone to returned items, and/or does a high volume of point-of-sale terminal sales, then these two fees can add up.

For more information please contact our sales office at 1-800-809-1989.