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September 17, 2019

Everything You Need To Know About eCommerce Payments

It’s hard to beat the convenience of selling products over the internet.Â Not only do you not have to worry about paying the overhead costs of a brick and mortar store (unless you want to), but you can sell to customers that live far from your local market.

If your experience taking electronic payments has been limited to swapping cash with friends via Venmo, you’ve probably got a lot of questions about how to get started. In truth, it’s probably both more and less complicated than you think.

So let’s dive in and try to teach you everything you need to know about eCommerce payments.

1. There’s No One-Size-Fits-All Solution

First, some disappointing news. There isn’t one single “correct” way to handle eCommerce. The right payment processing solution will depend upon a number of factors. Take a business website, for example. Do you currently have one that you’d like to start selling products through? Or are you content to use a premade shopping cart template? If you’re a relatively technical person, you can integrate solutions into your site with software APIs or plugins. If you’re not, you’ll probably want to consider a service that provides that functionality upfront. While you can potentially save money doing it yourself, you’ll need to make sure that you’re keeping your customer’s information secure and reducing your own liability.

You’ll also want to consider the nature of the payments you’ll be accepting. Are your customers just buying a product one-off, or are they subscribing to a service that will require recurring monthly payments?

And of course, you’ll need to take stock of your budget and figure out how much you’re willing and able to spend on payment processing and any additional software services.

2. You Need A Payment Processor And A Gateway

A common point of confusion for people new to eCommerce is that there are actually two components to taking payments online. You need both a payment processor and a gateway. These services may be offered together as a package (PayPal, Square, and Stripe, for example) or separately. If you do end up going with a payment processor that doesn’t include gateway access, you’ll need to get it from a separate service like Authorize.net.

A payment processor provides an account that allows your business to accept credit cards and receive credit card payments. It’s also used to deduct fees and processing charges associated with the transaction. After the payment gateway successfully processes a transaction, your payment processor receives the information.
AÂ payment gatewayÂ stands in for what would be your point of sale (POS) interface in a brick-and-mortar transaction. It allows you to securely process payments online by relaying the transaction information from your site to the processor, which then requests the payment from the customer’s bank before releasing funds to you. A payment gateway is also responsible for most of the security features associated with online payments as well as offering services like recurring payments and a credit card vault.

Types Of Payment Processors

Because nothing is ever simple in the world of payment processing, you won’t just need to think about getting a payment processor, but what type of payment processor you need.

The safest option is to go with the tried-and-true merchant account. Think of your merchant account as a holding area where all the busy work of receiving a credit card payment happens. Unlike, say, a business checking account, you don’t have direct access to your merchant account or the ability to directly make deposits and withdrawals to it. Instead, it automatically transfers payments to your business bank account, typically a day or two after receiving the transaction.

Merchant accounts are generally stable and you’re unlike to encounter holds, freezes, or terminations unless you have a sudden spike in chargebacks. Because of the underwriting process, merchant accounts are somewhat slow to establish–you’re probably looking at three days or so to get it up and running, though if you are negotiating or your business is particularly complex, it could take longer. The biggest drawback is that they often have minimum credit card transaction thresholds you have to meet; $5,000/month is typical but some expect you to handle at least $10,000/month in credit card sales. Pricing models with merchant accounts vary, and not all of them are great. We recommend interchange-plus pricing because it’s the most transparent and easiest to compare.

So what do you do if your new business isn’t doing that kind of sales volume?

You can turn to a third-party processor (aka payment services provider). Instead of having your own, unique merchant account, a third-party processor puts you in a pooled account with other merchants, from which fees are deducted in a similar manner to the merchant account. Signing up for a third-party processor is typically faster and easier than for a merchant account (you can start accepting payments the same day), but puts you at greater risk of account holds and terminations. Still, they provide an entry point for new businesses, or established ones that want more predictable pricing. Most third-party processors use a flat-rate pricing model where you’ll pay the same fee regardless of the card type; for eCommerce, that rate is commonly 2.9% + $0.30.

3. You Can Accept More Than Just Credit Card Payments

While credit and debit cards will probably make up the bulk of your eCommerce transactions, they aren’t the only way to make payments online.

It seems like every few years a new tech company rolls out their own digitalÂ wallet. We’re talking about services like Apple Pay, Google Wallet, PayPal, Venmo, and Cash App that allow you to link one or more payment sources to a single app account. In person, mobile wallets (a type of digital wallet that lives on your phone) allow you to make near field communication (NFC) purchases at terminals that allow tap-to-pay. In most cases, mobile wallets directly debit a linked credit or debit card while other digital wallets tend to store a balance, which can be used to make payments or be deposited into a bank account.

Many of these services can be used to make payments online as well. If your payment gateway doesn’t support mobile payments out of the box, it probably won’t be that big a deal since the customer can still just pay with the card attached to their mobile wallet. But if you want to go ahead and support mobile payments, you may have to add some code to your store.

The other type of payment you may want to think about isn’t cutting edge. In fact, it’s been around since the 70s: the automated clearing house (ACH). ACH transactions cut out the credit card company middleman and instead establish direct transfers between bank accounts. ACH payments can be one-time transactions, but if you’re using them in a retail context, you’re probably more interested in using them for recurring payments.

ACH is a bit more laborious to use at the point of sale than credit/debit cards, but it is a much less expensive way to process transactions and less prone to fraud and chargebacks. Most payment processors don’t offer ACH support by default, but a number do offer it as an add-on. Failing that, you may need a supplemental service.

Do You Want To Sell Globally? Prepare To Pay More

The internet is a miracle of the modern age, connecting people together and granting you easy access to markets abroad! Right?

While it’s true that you canÂ theoretically sell anywhere in the world, it introduces some additional complexities. For starters, there’s the matter of different currencies. Someone’s got to turn those euros into dollars! Some service providers, like Stripe, will handle currency conversions for you. Keep in mind that this service will usually come at a premium; in the case of Stripe, you’re looking at an additional 2% charge on your transaction.

And of course, you might want to convey the price of your goods to customers in their local currency. This feature usually goes hand-in-hand with automatic currency conversion, but you might need to enable this feature if you want to attract global buyers.

You’ll also need to take local taxes, customs, and duties into account, which means familiarizing yourself with foreign concepts like the value-added tax (VAT), which is used in Europe, Canada, South America, and Africa, as well as China and India. Here again, there are services that can take care of most of this complexity for you, but be prepared to pay for the privilege.

4. You Need To Be PCI Compliant

If you’re doing eCommerce, you’re going to be handling people’s money, and that means security concerns. And yes, yet another acronym.

The Payment Card Industry (PCI) has established a set of guidelines called the PCI Data Security Standard (PCI DSS) designed to minimize the risk of data being compromised by bad actors. So far so good, but PCI compliance is complicated by the fact that it’s actually a set of four different standards. The standard that applies to you is based on the number of debit and credit card transactions you process annually. Risk level four is considered the lowest risk, while risk level one is considered the highest. The fewer transactions you process, the lower risk you are unless there’s a data breach, at which point you’ll probably be considered risk level one regardless of your volume.

It gets a bit complicated, but what this means in practical terms for you is that you want to make sure your payment processor is PCI compliant and that you’re following the guidelines laid out by your PCI-compliant payment processor.

Payment Security Is Important

It can be a headache, but payment security will ultimately help protect your business and save you from costly chargebacks and account freezes. EMV chips have helped to reduce in-person credit card fraud, but unfortunately, that means online transactions are the new low-hanging fruit for fraud.

In addition to maintaining PCI compliance, security features like AVS (Address Verification Service) and CVV (Card Verification Value, that short number you’re asked for sometimes) provide extra layers of verification would-be fraudsters have to work through. Programs like Visa’s 3D Secure are also constantly evolving to make the changing payment security landscape.

How To Find An eCommerce Payment Provider

Got all that? eCommerce payment processing has a lot of moving parts that can confound even the tech-savvy. Having a sense of the functionality you need in advance will make it much easier to select a payment processor and gateway that can handle the transactions your business depends on. But you should also keep in mind how much of a budget you have for the monthly services required to keep your eCommerce setup running, what you can expect to pay for payment processing, and whether you’re going to need some technical assistance in building out your system.

If you’re ready to get started, we recommend checking out our list of the best online credit card processors. This will give you the rundown on some of the best options in the industry. If you want to learn a bit more about online payments before you get started, our article How To Choose An eCommerce Merchant Account is another great resource.

The post Everything You Need To Know About eCommerce Payments appeared first on Merchant Maverick.

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September 17, 2019

The Complete Guide To Finding An Internet Merchant Account

So you’re looking to take advantage of everything that online commerce has to offer and enter the world of ecommerce? Good for you! Of course, this will require you to be able to accept online credit card payments. To do this, you’ll need an internet merchant account.

Sounds simple enough, right? If only! Not all merchant accounts are created equal. When choosing an internet merchant account for your ecommerce business, you’ll need to understand how a merchant account interacts with the other elements necessary for selling online, like payment gateways, payment processors, and shopping carts (not the kind you push around). Some services combine one or more of these elements, but it’s still important to distinguish these elements from one another.

Confused yet? Don’t worry — we’ll spell it all out for you!

What Is A Merchant Account?

A merchant account is a specific type of business account into which your customers’ money is deposited after they use their credit or debit card to make a purchase from you. After these payments are verified, the money is transferred to your own business bank account, which is entirely separate from your merchant account. You have no control over the merchant account — it is merely the middleman between your customers’ money and your business bank account.

So, why include this middleman at all? Wouldn’t it be easier to simply accept credit and debit card payments directly and get the funds deposited directly into your business bank account?

Unfortunately, credit card processing doesn’t work that way. When your customer pays you, the transaction ultimately still involves two other major parties: the issuing bank (which grants the customer cards and is responsible for collecting any payments from the customer) and the acquiring bank (which requests and then collects payments from the issuing bank and then releases them to the merchant). Because the payment process is so complicated — the acquiring bank has to ask for the funds from the issuing bank, which has to verify that the customer has those funds available and then transfer them — the merchant account essentially functions as a holding space or even as a sort of line of credit.

Merchant Account VS Third-Party Processor

When selecting a service to process your customers’ card payments, you’ll be choosing from between two different categories of services: direct processors (the providers of merchant accounts like the kind described above) and third-party processors (also called aggregators) like PayPal, Stripe, and Square.

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Setting up an account with a third-party processor is simpler and less time-consuming than setting up a merchant account. This is because third party processors don’t set you up with your own unique merchant account. Instead, the third-party processor aggregates all of its merchants into one enormous merchant account.

What do these differences mean for you, the merchant? For starters, the merchant accounts offered by direct processors typically provide you with a higher level of account stability. This is due to the extensive underwriting and risk assessment you have to undergo to get your merchant account. With third party processors, you are subjected to very little underwriting beforehand. Therefore, the processor scrutinizes your activities much more intensely, making it more likely that you’ll experience an account hold or termination.

The flip side of this is the cost advantage of third party processors. These services typically feature flat-rate pricing and pay-as-you-go agreements. There are few (if any) monthly or annual fees to pay, and you don’t need to meet a monthly minimum in card transactions, making it easy to start taking credit card payments with no established business history.

With direct processors, you’ll be paying monthly and potentially annual fees, you’ll need to be processing at least $5,000 to $10,000 per month in card transactions, and the pricing is not normally flat-rate — your rates may vary depending on the nature of your business model and your industry. Many merchant accounts still require you to sign a multi-year contract. (That said, many of the best processors in the industry have done away with these 3-year contracts and early termination fees in favor of month-to-month agreements, and we recommend that you not settle for a multi-year contract until you’ve explored all your options.) Still, above that $10,000/month mark, merchant accounts do offer cost savings and as your volume increases you’ll qualify for even more discounts.

For more on third-party processors and how they stack up against traditional merchant accounts, check out these articles:

The Best Online Credit Card Processing Companies
The Truth About Third-Party Payment Processing

What’s A Payment Gateway?

We’ve established what a merchant account is, so let’s move on to payment gateways.

While a merchant account is the account into which your payment processor sends your customers’ payments before they are transferred to your business bank account, a payment gateway connects your online store to your payment processor, facilitating your customers’ online transactions.

Payment gateways enable online transactions like so: the gateway integrates with your ecommerce store to securely capture the payment details for customer transactions. The gateway then routes that information to your payment processor or acquiring bank, which assumes control of the payment process. The gateway will then send an approval or decline message back to the merchant based on whether or not the processor/acquiring bank accepts the payment.

When you use a third-party processor, a payment gateway is typically included in the service. With direct merchant accounts, a gateway service may or may not be included for an additional fee. Some processors do offer gateways as part of their services, at no additional cost. Ultimately you’ll need to check with the processor to find out.

PCI Compliance With Online Merchant Accounts

What is PCI compliance, and how do you achieve it?

PCI compliance refers to a set of safety practices established by a council (the Payment Card Industry, or PCI) sponsored by the major credit card companies to ensure that a consumer’s payment information is secure when making a purchase using a credit or debit card. These standards, which apply to all businesses that accept credit and/or debit cards, are meant to standardize the securing, processing, and transmission of cardholder data.

If your merchant account provider deems you to be PCI non-compliant, you’ll be subject to a PCI non-compliance fee of around $30 per month until your account is compliant. What’s more, if your non-compliance results in a data breach, you can be fined anywhere from $5,000 to $500,000!

You’ve probably gathered by now that it’s a good idea for your business to be PCI compliant. For most small businesses, that means being Level 4 PCI compliant. Level 4 is the PCI standard that applies to businesses up to a certain size — it’s essentially the lowest bar to clear. Larger businesses must comply with higher PCI standards, with Level 1 standards applying to both the largest businesses and businesses that have suffered a data breach.

When choosing a payment processor, you’ll want to make sure your provider offers features such as PCI compliant processing hardware and software, quarterly network vulnerability scans, and assistance with completing and filing a Self-Assessment Questionnaire (SAQ).

Most third-party processors handle the entire process of PCI compliance for you, but with a merchant account, you should be expected at minimum to have to complete the SAQ.

If you’re running a brick-and-mortar business with no ecommerce component, you might think PCI compliance has nothing to do with you. However, if your business accepts credit cards, it almost certainly utilizes the internet to do so at some point in the process, so you’ll still need to be PCI compliant. It’s easier for physical-only businesses to establish PCI compliance than it is for online businesses, though.

Some PCI best practices are no-brainers. For instance, you don’t want to store your customers’ card data on your own hard drive or server, you should never use default passwords, and you’ll need to use a firewall on your network and computers. There’s more to PCI compliance than these obvious measures, however. For a detailed explanation of what PCI compliance means for your business, I highly recommend reading our comprehensive article on the subject, The Quick Guide To PCI Compliance For Small Businesses.

How Much Does An Internet Merchant Account Cost?

When choosing a merchant account, it’s important to know the different pricing models offered by payment processors:

Flat-Rate Pricing: This pricing model has the advantage of being predictable. You’ll pay a fixed rate for each transaction, making it easier to predict your processing costs. While you’ll usually pay more on a per-transaction basis than with other pricing models (and you donât know how much the processor is making off a transaction), you probably won’t have to pay monthly fees or other types of fees charged by processors offering other pricing models. Third-party processors like PayPal, Square, and Stripe use this pricing model. To learn more about flat-rate pricing, check out our flat-rate credit card processing explainer.
Interchange-Plus Pricing: Also known as cost-plus pricing, interchange-plus pricing is the pricing model preferred by Merchant Maverick. Why? Because it’s the most transparent model and it makes rate comparisons between processors easy. With interchange pricing, the processor passes on the interchange fees (fees charged to the merchant’s bank account and paid to the bank that issued the card) and assessments (fees paid directly to Visa or Mastercard etc.) while charging a small markup above that (often a percentage and a flat fee). Check out this article for more on how interchange-plus pricing works and why we prefer it.
Membership Pricing: This is the pricing model used by subscription-based payment processors like Fattmerchant and Payment Depot. Under this pricing model, you’re charged a single monthly subscription fee instead of the assortment of fees other pricing models feature. You’ll also likely pay a flat fee of between $0.08 and $0.15 per transaction as well as interchange fees. Higher-volume businesses can find themselves saving money under this pricing scheme.

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Tiered Pricing: Tiered pricing is an older pricing model not commonly used by modern businesses. We don’t recommend it. All transactions are grouped into two or three tiers of transactions, ranging from the lowest-priced transactions to the highest-priced transactions. Essentially, the problem with tiered pricing is that processors can categorize transactions assumed to be in a lower-priced tier as higher-priced transactions, thus charging you more and leaving you little recourse. You should avoid tiered pricing arrangements.

For most small businesses, using a third-party processor with flat-rate pricing like Square or PayPal may be more affordable than using a full-service merchant account. Of course, this entails a much greater risk of having your account frozen or terminated, which is, in itself, a very costly thing to happen to any business.

One thing that affects what your internet merchant account will charge you is the fact that CNP (card not present) transactions, including online purchases, cost more to process than do in-person transactions. This is due to the fact that the chance of chargebacks and fraud is higher with transactions where the card is not present, and this is factored into the cost of processing the payment.

Other fees you may (or may not) have to pay include PCI compliance fees, payment gateway fees, and fees for ACH acceptance if you want to offer customers the ability to pay with their bank accounts in addition to cards. To learn more about the complex and relatively opaque world of internet merchant account pricing, read through our Complete Guide To Credit Card Processing Rates & Fees.

Features To Look For In An Internet Merchant Account

Let’s go through some of the features that may be included in your internet merchant account package.

Included Gateway

One benefit of third-party processors like Square is that a payment gateway is included as part of the service so you won’t have to go looking for one yourself. Of course, third party processors have their drawbacks as well, so you’ll be glad to know that some direct processors include a payment gateway in their services as well.

Remember, if you plan to do business online, whether it be through selling goods, offering SaaS, or what have you, you’ll need to be able to accept online credit card payments. To do that, a payment gateway is an absolute requirement.

Multiple Payment Methods

We’ve established that you’ll want to be able to accept credit and debit cards. However, there are other payment methods your customers may want to use, and you want to be able to accommodate them. From mobile wallets like Apple Pay on the web to ACH payments, the more payment methods your payment gateway (and payment processor) supports, the better.

Global Payment Support

With some merchant accounts, you can only accept payments in USD. If you expect to be able to attract any international business, that’s obviously not going to be good enough. Thankfully, many merchant account providers can set you up with a multi-currency ecommerce merchant account so you can expand your global reach. Just be aware that you’ll likely pay currency conversion fees (if they aren’t passed to your customers). PayPal and Stripe do very well in this regard, and Stripe actually supports many localized payment methods across Europe and Asia.

As an added note — some processors offer a feature usually referred to as dynamic currency conversion or localized currency displays. This means that your website will automatically convert the price from USD (or your default currency) to whatever currency is most common in the customer’s region. This can improve the shopping experience for international customers and potentially increase your sales.

Included Shopping Cart (Or Other Software)

An online shopping cart integrates with your website to facilitate ecommerce. The shopping cart enables your customers to look through your available products, select different options for each product (size, color, etc.), select the quantity of the products they want to order, and more.

Most merchant accounts can be integrated with major shopping carts, but if you can find one that includes a good shopping cart already, that’s even better, as you’ll be saving money.

Other handy features to look for include a customer credit card vault that allows you to securely store your customers’ card information while keeping it off your own equipment and subscription tools that let you create and manage customer subscriptions. Stripe is an example of a processor with built-in subscription tools and a card vault. However, you can also opt for a third-party provider to get recurring billing functions.

Developer Tools

Processors with integrated developer tools, like Stripe, allow developers to use APIs (application programming interfaces) to integrate the payment platform using a variety of different programming languages. For the business with developer talent, integrated developer tools can help you build custom solutions for your ecommerce outfit.

Customer Service

Good customer service and availability is critical in an internet merchant account. Your ability to do business is reliant on all your systems working correctly 24/7, so reliability and quick response times are crucial. Do some research on merchant account providers to weigh the experiences of other merchants when dealing with any issues that pop up, and make sure that the available support channels jibe with your preferences.

How To Choose The Right Provider For You

That was a lot to take in, wasn’t it? If you’re feeling overwhelmed, don’t worry! Merchant accounts are Merchant Maverick’s original specialty, and we’re here to help you delve into the nitty-gritty of merchant account pricing, features, and provider options.

Here are some links to help you learn more about merchant account options, features, and more:

The Best Online Credit Card Payment Processing Companies
How To Choose An eCommerce Merchant Account
The Complete Guide To Online Credit Card Processing With A Payment Gateway
How To Accept Credit Cards Online

The post The Complete Guide To Finding An Internet Merchant Account appeared first on Merchant Maverick.

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September 14, 2019

ACH VS Wire Transfers: Which Payment Method Is Right For You?

Here at Merchant Maverick, we usually focus on the many ways a business can take in money from customers. In this article, however, we want to discuss a little about how a business can pay money out (to vendors, for example).

Often, for smaller items like office supplies, you can use a business credit card or even cash. However, for larger ticket items such as manufacturing equipment, inventory, or even payroll, you might have to use checks, ACH transfers, or even wire transfers. This article focuses on the difference between ACH payments and wire transfers. Read on to find out more.

How Banks Transfer Money Between Accounts

In order to understand the difference between ACH payments and wire transfers, it’s useful to understand how banks transfer money between two accounts. Note that this general method has been in use since the 1600s. In recent decades, the process has been automated so that the information can be transmitted over privately maintained and secure computer networks.

Transfers Within The Same Bank

The simplest type of money transfer occurs between two bank accounts located at the same bank. For example, maybe Joe and Steve bank at the same bank, and Joe wants to transfer $10 to Steve. The bank merely makes a ledger entry in the two accounts to show that $10 has been moved from Joe to Steve.

If Joe and Steve do not bank with the same bank, however, then there are two ways to transfer the money.

Transfers Between Two Different Banks

The first method involves two banks that have bank accounts with each other.

Let’s say Joe, who lives in Los Angeles, banks with Super Bank, which is also located in Los Angeles. Joe wants to pay Steve $10. Steve, who lives in New York, banks with Mega Bank, which is also located in New York. Super Bank and Mega Bank have bank accounts with each other. So, Super Bank makes a ledger entry to take $10 from Joe’s account and places it in Mega Bank’s account located at Super Bank. Now Mega Bank has an extra $10.

Back at Mega Bank in New York, Mega Bank makes a ledger entry and pays $10 to Steve. Mega Bank now no longer has an extra $10. The practical effect is that Joe has paid Steve $10 even though no bag of money moved from Los Angeles to New York.

Transfers Through A Central Bank

What if Super Bank and Mega Bank do not have bank accounts with each other? But maybe there is a third bank–let’s call it Central Bank–where they both have bank accounts.

So, when Joe asks $10 to be transferred to Steve, Super Bank tells Central Bank to move $10 from Super Bank’s account at Central Bank to Mega Bank’s account at Central Bank. Once Mega Bank is notified that it has an extra $10 in its account at Central Bank, it pays Steve the $10 “sent” by Joe. Again, the practical effect is that Joe has paid Steve $10, but only a ledger entry was made at the Central Bank. No money physically moved anywhere.

Batching For Efficiency

With modern commerce, this sort of transfer could happen millions of times a day back and forth between people who bank at Super Bank and Mega Bank. It would be silly for Central Bank to move, say, $10 between the banks’ accounts back and forth all day long, every time a transfer order is made. So, to be more efficient, banks traditionally hold all the transfer orders until the end of the day, so they can total up the transfers and do only one transfer on the net change. This is called batching. While batching traditionally happens at the end of each business day, there’s no reason why this couldn’t happen several times a day or even once every several days.

The Central Bank

As for our hypothetical Central Bank, each country in the world usually has its own version of a central bank. In the US, that bank is the Federal Reserve. US domestic money transfers between banks usually go through the Federal Reserve. For international transfers, banks usually have to have direct accounts with each other, or they have to find a bank to act as the central bank.

What Is An ACH Payment?

Once you understand how banks transfer money between themselves, then it’s easy to explain an ACH transfer. The ACH transfer is simply a money transfer using a specific type of code. The code is set up and governed by an organization called Nacha (previously NACHA, which stood for the National Automated Clearing House Association).

When money is transferred domestically within the US, the code is transmitted over a computerized network called the ACH Network using the Federal Reserve as the central bank. When money is transferred internationally, the ACH code is usually transmitted over the SWIFT network (a privately owned computer network usually used for international money transfers) to a bank outside the US that takes ACH codes. That international bank can receive the money directly or act as a central bank.

ACH Transfer Fees

It’s important to separate the concept of the physical computer network from the ACH code. As mentioned above, for US transfers, the ACH code is transmitted over the ACH Network. The ACH Network is owned by several large banks, and together they charge a fee for messages transmitted over that network. The fee can range from $0.20-$1.50 per transaction or 0.5%-1.5% of the total transaction cost. In any event, the fee is relatively small so that some US banks do not even charge their customers for making ACH transfers.

For international transfers, the ACH code is usually transmitted over the SWIFT computer network. The SWIFT network charges differently than the ACH Network, and it usually charges more. If you wish to make or take international ACH transfers, we recommend you speak to your payment processor or your bank first so you can understand the charges involved.

ACH Transfer Times And Dollar Limit

ACH transfers are done in batches for efficiency. Typically, the batch is sent out once in a 24 hour period, usually at the end of the day. Nacha, however, is working to increase the number of batches processed per day and hopes to perform up to three batches per day in 2021.

ACH transfers are typically for smaller amounts because there is a per transaction limit of $25,000 for same-day transfers. However, by March 20, 2020, that limit will be raised to $100,000 to better serve the needs of business-to-business (B2B) companies.

Types of ACH Payments: Debit VS Credit

There are two subtypes of ACH payments: credit ACH payments and debit ACH payments. Credit ACH payments tend to be one-time payments while debit ACH payments tend to be recurring payments.

ACH Credit Payments: With an ACH credit payment, the sender of the money must authorize each payment before money is transferred out. The recipient of an ACH credit payment first gives the sender his bank account number and bank routing number. The sender then sends the bank information along with instructions to its bank to pay a certain amount. The payment information is batched and then sent to the central bank for settling according to a daily schedule. Once the transfer is settled, the money shows up in the recipient’s account. This type of payment is better suited for payroll or occasional bill payments where you want to control when and how much to pay.
ACH Debit Payments: With ACH debit payments, money of varying amounts is taken from an account according to a set schedule. This type of payment is better suited for recurring bills such as utility payments. With ACH debit, the payor sends the information to the entity where payment is due (e.g., the utility company). The information includes account number, routing number, and a payment authorization to pay on a certain date of each month. On that date, the recipient of the payment sends a payment request to its bank. The bank batches the information and sends the information through the central bank to the payor’s bank. The payor’s bank checks for previous authorization and for sufficient funds in the account. If there are sufficient funds, then the payor’s bank tells the central bank to release the money.

If you wish to accept or receive ACH payments on a regular basis, we have an excellent article covering the basics. Talk to your payment card processor to find out the details on the costs and setup.

For high-risk businesses, ACH payments might seem like an ideal alternative to credit card processors, which typically charge much higher fees with more stringent requirements. The first thing you should know is that not all ACH payments are handled in the same way because of how check payments are regulated.Â We have an article covering this subject in detail, but the bottom line is that depending on your business, it could be a good option. However, in some cases you’ll still need to meet underwriting requirements similar to what credit card processors require so you may need to look for a processor that specializes in working with high-risk businesses.

What Is A Wire Transfer?

A wire transfer is a traditional way banks transfer money using the method described earlier in this article. Wire transfers predate computer networks. Originally, banks simply transmitted the money transfer messages over telegraph lines. In today’s computerized world, however, domestic US wire transfer messages are transmitted over the Fedwire network or the CHIPS network. International wire transfer messages are usually transmitted over the SWIFT network.

With a wire transfer, a bank transfers the money right away without batching. Depending on the business relationship between the sending and receiving banks, they could transfer the money by simply adjusting their account ledgers (when they hold accounts with each other) or use a central bank. With international wire transfers, either method can be used, but with domestic US wire transfers, the Federal Reserve usually acts as the central bank. Because wire transfers are specific, one time transfers, they can be ordered and effectuated whenever the sending bank, the receiving bank, and the central bank are all open for business.

The Cost Of A Wire Transfer

Wire transfers typically cost much more than ACH transfers. For domestic US wires, it usually costs between $10-$35 to send a wire, though often it’s free to receive one. International transfers often cost more.

It’s not difficult to understand why banks charge more for wire transfers. These transfers are done individually without batching, so there are no savings from efficiency. The Fedwire, CHIPS, and especially SWIFT network all charge more than the ACH Network. Finally, with a wire transfer, the process is not automated, so a bank employee must initiate and confirm the transfer, thereby adding more cost to the transaction.

How To Make A Wire Transfer

In order to make a wire transfer, you must know the account and routing number of the recipient. After that, you must contact your bank and ask them to make the transfer. You can specify the date of the transfer, but you cannot specify the computer network the bank uses to send the transfer order.

There is no monetary cap on a wire transfer. Unlike ACH transfers that can be scheduled for recurring payments, wire transfers are one time only transfers that are irreversible once made. Wire transfers, therefore, are not well-suited for regular payments such as payroll or utility bills. Instead, wire transfers are typically used to pay for one-time equipment purchases or large inventory.

Wire Transfer And High-Risk Merchants

Lastly, there seems to be no reason why high-risk merchants cannot use wire transfers to send or receive payments. However, because wire transfers are expensive, it may not be cost-effective if the purchases are for smaller amounts.

One last thing to note: while some people use the term wire to refer sending money through Western Union or other person-to-person transfer services like Venmo, these are not true wire transfers. They use a different business model and messaging network. It is, therefore, important that these money transfer services should not be confused with true bank-to-bank wire transfers.

How Secure Are ACH Payments & Wire Transfers?

When it comes to security for ACH and wire transfers, there are a number of fairly obvious points of vulnerability. Money transfer messages can be hijacked in mid transfer, or fraudulent transfer messages can be initiated by criminals.

On hijacking messages, the networks used for these transfers are usually private networks with controlled access. The messages transmitted are encrypted, so the messages are relatively secure. There have been several instances of the SWIFT network being hacked (through malware infections) and money being stolen. However, the losses are assumed by the banks. You, as the merchant, are unlikely to have to be responsible for these unauthorized transfers.

From a merchant’s standpoint, you should keep bank account information secure by observing best practice security procedures. Typically, money transfer information can be stolen through social engineering methods such as hijacking a corporate officer’s email to order a money transfer to the hacker’s account, posing as a vendor and asking the payment to be routed to a different account, posing as an employee and asking payroll to be sent to the hacker’s account, or pretending to be a party in a mortgage closing and sending “updated” account routing information to steal the closing funds. Be sure to educate employees who handle money transfers to be aware of these vulnerabilities and scams so that both ACH and wire transfer account information can be kept safe.

Dealing With Disputes For ACH Payments & Wire Transfers

What happens if you make an incorrect wire transfer or realize a business deal is in dispute and you wish to withhold an ACH payment? With wire transfers, the transfers are final, so you cannot reverse the payment. With ACH payments, a transfer can be reversed under three very limited circumstances:

Transaction was never authorized and authorization was revoked.
Transaction was paid on a date earlier than authorized.
Transaction was for incorrect amount than authorized.

ACH transaction disputes must be filed within 90 days of the transaction (60 days after statement sent to account owner). If you wish to learn more, our article on ACH payments includes a detailed explanation of the ACH dispute policy.

Should You Use ACH Payments Or Wire Transfers?

ACH Payments and wire transfers each have their uses. If you wish to send or receive smaller payments that can be scheduled and paid out automatically, ACH is likely the way to go. However, if you have larger, one-time transfers that are time-sensitive, then wire transfer is pretty much your only choice. ACH costs much less than wire transfers, but a large part of that is because ACH is an automated process requiring no human intervention while a wire transfer requires humans to send and receive the payment.

At the end of the day, no business can survive by paying with or receiving only ACH payments or wire transfers. While understanding these payment options can add to your normal payment card processing options, unless you do business only with other businesses, it would be difficult to require your customers to pay only with ACH or wire transfers. It would make better sense to merely add ACH and wire transfer as a payment option.

The post ACH VS Wire Transfers: Which Payment Method Is Right For You? appeared first on Merchant Maverick.

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September 9, 2019

Everything You Need To Know About Using A Credit Card Imprinter

Here at Merchant Maverick, we try to stay on top of the latest trends in point of sale technology and present that information to you, the reader. This, however, will not be one of those blogs. Instead, we’ll be looking at a device from another era that still stubbornly holds onto a small niche in contemporary face-to-face retail.

That’s right, we’re talking about the good old credit card imprinter.

Why, you might ask, would anyone want to look into something so… well, antiquated?

Power outages and internet outages happen. When they do, your business can be left without a way to process payments — turning customers away, and possibly ensuring they never come back. Having a backup can be very important.

In addition, some businesses still operate in locales that don’t support power or internet. At your friendly local Renaissance Faire, for example, you’ll likely see several of the artisans and merchants who accept “Lady Visa” & “Lord Mastercard” use a credit card imprinter. The old-fashioned vibe still fits with the event but allows businesses to make sales to customers who might have run out of cash or come unprepared to step back into a truly low-tech world.

What Is A Credit Card Imprinter?

If you’re over 35, you’ve probably seen one and would recognize its distinct two-part pop-swish sound. If you’re younger: this is what credit card processing used to look like in the bygone analog days.

There are a few design variations, but the most common one, lovingly dubbed “the knuckle-buster,” looks like flat metal slabs with a raised plastic or metal grip that slides over the slab on rails. There’s another version that looks a bit more like a pump or a cross between a stapler and paper cutter.

Regardless of the design, the purpose of these devices is to take a (you guessed it) physical imprint of the customer’s credit card for further processing later. The imprinter captures all the vital information on the card, and much more quickly than you could by copying it by hand. These things were all the rage in the 70s and 80s.

You may have noticed the raised numbers and letters on most credit cards and wondered why they were designed this way when ink would serve just as well for the human eye. Turns out, those little nubs allow credit card imprinters to work their magic. It also means that some modern cards that don’t have bevels may not work with imprinters.

A credit card imprinter essentially uses a miniaturized version of printing press technology. Your card is secured in place along with a paper of some kind; carbon paper can be used, but isn’t always necessary. Typically three papers are imprinted at once, allowing you to provide a copy to the customer and card issuer while keeping a copy for yourself. Old school card imprinters usually came with a custom plate with your business’s information on it, which would be imprinted alongside the card information.

Depending on the model, you will then either slide the roller across the slab, paper, and credit card twice, or press the pump down until you hear a confirming click.

What Do You Need To Process Payments With A Manual Credit Card Machine?

You need three things, at minimum, to process credit cards with a manual credit card machine:

The machine/imprinter itself
Paper for receipts and imprints
A way to process the transaction — that is, a merchant account with the appropriate software or hardware.

The machines aren’t that hard to come by, even today. Credit card imprinters are still being made and they’re not particularly expensive. The knuckle-buster models start around $16.50 and mostly top out around $60. Pump-handle imprinters are bit more expensive, running from around $60 t0 $120. Such is the cost of protecting your knuckles. If you’re really fancy, there are even electric ones that come in at over $200. Your best bet for buying one is probably online. They’re easy to find on Amazon or through sites like POS Supply Solutions.

Since these are mechanical devices with moving parts that can wear out with heavy use, make sure to read the user reviews to make sure you’re buying a durable model. You’ll also want to take size into account for portability and storage.

Credit card sales slips for imprinters vary widely in price, ranging from $4 or $5 for 100 to around $40 for 100. The only point of caution here is that you’ll want to get papers that align nicely with your machine’s dimensions for easy imprinting.

When you’re ready to process the transaction, you’ll have to key it in through a terminal, gateway, mobile POS, or virtual terminal.

Will Manual Credit Card Payments Cost You More?

Not if everything goes well.

If your business takes credit cards, you may have noticed that certain transactions incur a higher processing fee than others. When you take credit card information over the phone, or through the internet, it’s considered a card-not-present (CNP) transaction. The higher cost reflects the greater fraud risks associated with processing a card payment without directly capturing that card’s information, as well as a higher risk of human error.

Normally, processing a transaction as card-present (CP) involves POS hardware reading a magnetic strip or an EMV chip to capture the card’s information.

But wait! Aren’t you capturing the card’s information with the imprinter? As it turns out, yes, an imprinted transaction counts as card-present and should be processed at lower cost. Be aware, however, that most POS service providers don’t see a ton of these transactions these days and probably won’t assume you’re working with an imprinter when you enter the information.

You’ll want to make sure you’re working with a reputable processor, and one that has policies in place to give your old-school efforts their due. If they won’t, it may be time to switch processors.

Other Concerns With Credit Card Imprinters & Manual Credit Card Transactions

Making a nearly complete copy of a customer’s credit card information introduces some security concerns you normally don’t have to worry about.

There are no fancy encryption and two-factor security features here. You’re literally making a physical copy of the customer’s credit card information for later processing. You won’t have to worry about your slips being hacked, but they can be stolen or copied by hand. Any security involved in the process will need to be directly provided by your business practices. You’ll need to store the slips securely until such time as you can process them, making sure only authorized personnel have access to them. To ensure you and your customers are protected, you should adhere to the PCI DSS (Payment Card Industry Data Security Standard). As we touched on earlier, imprint-captured transactions can be considered card-present even though the information isn’t immediately being transmitted, but check with your processor to be sure.

You’ll likely want to hold onto the receipt for the 180 days or so during which the customer can dispute the sale. When the receipts are no longer needed, make sure they’re promptly and completely destroyed.

And, of course, when it comes time to process the slips, you’ll be dependent upon the security features of whatever program or medium you’re using to submit the information. You also need to make sure that you are keying in the transaction properly — both the card number and the transaction amount. An incorrect amount could cause a dispute, while an incorrect card number could be a failed transaction.

You should also be aware that using an imprinter means you won’t know if you’ve accepted a declined card until you attempt to process the transaction. The imprint does provide precious evidence in your favor should a chargeback investigation be conducted, but it can’t do much with a failed transaction. That does mean you’re at risk of losing the cost of any inventory associated with the sale as well.

Alternatives To Using Manual Credit Card Machines

Still not excited about going back to the 20th century when the internet goes down? Fair enough.

POS service providers like Square allow retailers to process transactions in “offline mode.” Assuming your service offers this feature, you may still be able to capture card transactions with your local terminals and mobile devices. When your connection is restored, you can process the backlog. If you’re using a cellular-data-ready mobile device to process the payments, you may not even need to wait; services like Square allow you to transmit data over the cellular network.

Be careful, though. You’ll want to have an idea of the number of transactions your POS service allows you to cache; if you’re doing a lot of business with your connection interrupted, you could run into problems.

Now, if you’re unlucky enough to have your power go down as well, and you’ve drained your battery-powered devices arguing about the election on Facebook, you may need to go cash-only (or if your customers are adamant, throw up your hands and break out the manual processor). That, or just take the day off.

Do You Really Need A Credit Card Imprinter?

With the ability to process transactions in offline mode, most businesses probably can sleep soundly at night without a credit card imprinter in their closet. That said, there are outlier cases where certain businesses may find them useful. If you do a lot of business at markets, fairs, or outdoor flea markets where you don’t have easy access to electricity and/or make occasional credit card sales, a knuckle buster can fill the gap. Just be aware of the risks — and be prepared to do a little bit more work.

The post Everything You Need To Know About Using A Credit Card Imprinter appeared first on Merchant Maverick.

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September 5, 2019

The Merchantâs Guide To Recurring Payments And Billing

Photoshop. Dropbox. Microsoft Office 365. Netflix. These are just a few of the products and services Iâve used in the last few days that require a monthly or annual subscription. There are several others that Iâm paying for as well but havenât used recently. If youâre old enough, you might remember the bad old days of personal computing when software came in big, shiny boxes that held a thick manual (that no one ever read) and a stack of 3.5â disks that youâd have to feed one at a time into your computer just to install the program. A year or so later, the company would come out with a new version, and youâd have to buy it and repeat the installation process all over again — if you wanted the latest and greatest, at least.

Today, many major software applications are available over the internet at the click of a mouse, and they donât come in a box at all. Instead, theyâre offered via a monthly subscription service. For a few dollars a month, you can download the software onto your computer in minutes, and it will update automatically whenever a new version is released. Subscription-based software is very convenient, and it can seem like a real bargain to pay $9.99 per month for an expensive program such as Photoshop rather than shelling out $500 for a stand-alone product.

The subscription-based model of selling products and services has proven so successful that you can now get a subscription to just about anything. Subscription box services such as Birchbox and Loot Crate deliver random trinkets you didnât know you needed every month. Other services, such as Hello Fresh and Blue Apron, solve the âwhat do you want for dinner?â riddle by dropping pre-packaged meal kits right on your doorstep.

If youâre a merchant looking to increase sales and ensure a steady stream of revenue, you might wonder how you can enable multiple, recurring (and automatic!) payments from your customers. Thatâs where recurring billing comes in. This service allows you to set up repeating payments without your customers having to authorize each payment separately or enter their credit card information more than once.

In this article, weâll explain what recurring payments and recurring billing are and give you a rundown of the types of businesses that use them. Weâll explain the advantages and disadvantages of using recurring billing, and weâll show you important features to look for in finding a provider that supports it. Finally, weâll show you how several popular merchant services providers implement recurring billing and how much it will cost you to set up this popular feature.

Our Top Picks For Credit Card Processing

heading	Payment Depot	Fattmerchant	National Processing	Dharma	Square
	Payment Depot	Fattmerchant	National Processing	Dharma Merchant Services	Square Payments

	Get Started Review	Get Started Review	Get Started Review	Get Started Review	Get Started Review
Availability	US-based businesses	US-based businesses	US-based businesses	US-based businesses	US, Canada, UK
Serves in-store, mobile, and eCommerce	â	â	â	â	â
No early termination fee	â	â	â	â	â
Compatible with most POS systems	â	â	â	â
Rate matching / negotiableÂ	â	â	â	â
High-quality sales and customer service	â	â	â	â
Pricing model	Interchange-plus	Interchange-plus	Interchange-plus	Interchange-plus	Flat rate
Monthly fee	$49	$99	$10	$20	$0
Standard retail rates	0% + $0.15 markup	0% + $0.08 markup	0.20% + $0.10 markup	0.15% + $0.07 markup	2.75% total
Good for higher volume (over $20K/month)	â	â	â	â
Good for mid volume ($10K-20K/month)	â	â	â	â
Good for lower volume (under $10K/month)	â		â		â
	Get Started with Payment Depot	Get Started with Fattmerchant Payments	Get Started with National Processing	Get Started with Dharma Merchant Services	Get Started with Square Payments

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Each of these companies provides excellent customer service and fair pricing.

See more data

What Is A Recurring Payment?

Recurring payments are quite simple to understand. Instead of making a one-time purchase of goods or services, the customer signs up for a subscription where products or services are delivered on a recurring, prearranged schedule. This schedule could be monthly, weekly, annually, or whatever is appropriate under the circumstances. Monthly subscriptions are the most common, but just about any other period is also possible. For example, Amazonâs Subscribe and Save feature allows customers to reorder common household products on a recurring schedule, with the interval being determined by how often they need to replenish the product in question.

To establish a subscription, the consumer needs to provide a card on file. This is any valid payment method (e.g., credit card, debit card, or bank account number) from which all payments will be made. In establishing a card on file, the consumer agrees to authorize both the initial payment and all subsequent payments as well. Most subscriptions are open-ended, meaning that the consumer will continue to be charged indefinitely until the subscription is either canceled or the submitted card on file is no longer valid.

Because most subscription-based services require online payments, recurring billing features are usually offered as part of a providerâs payment gateway. However, retail merchants can get in on the action too, as long as they use a payment gateway or virtual terminal to process the recurring transactions. For example, almost all of the wineries in the area where I live offer a wine club membership that automatically ships several bottles of wine to participating club members according to a predetermined schedule.

What Kinds Of Businesses Use Recurring Payments?

Weâve already given several common examples of businesses that offer their products or services on a subscription basis, but there are many others as well. Software and cloud backup services use recurring billing almost exclusively, and health clubs wouldnât be able to stay in business without it. Just about any type of business could, in theory, use subscriptions and recurring billing to sell their products or services to the public.

Although most subscriptions are open-ended, recurring billing can also be used to spread a large, single bill over a more extended period. Attorneys and wedding planners, for example, could use recurring billing to allow a customer to spread a single, expensive bill over several months.

Advantages To Recurring Payments

Recurring billing offers several benefits to both consumers and merchants. For the consumer, the convenience of having recurring bills paid automatically is perhaps the primary advantage. Thereâs no need to track when the next bill is due or to have to fill out and mail a paper check on time. The âset it and forget itâ nature of recurring billing ensures that consumers donât have to worry about any interruptions to their services. At the same time, itâs all too easy to keep a subscription going long after youâve stopped using it. Gym memberships are (ahem) the most obvious example of this situation.

Recurring billing also saves time for merchants, as thereâs no need to generate and send out multiple invoices whenever a subscription payment is due. Transactions are processed automatically, requiring no action on the part of the merchant unless thereâs a problem (expired credit cards are the most common reason for a recurring authorization to fail). Subscriptions also provide a steady, predictable source of income over time. Naturally, theyâre not 100% foolproof. Youâll have to offer top-notch products or services at a fair price all the time to avoid a surge in subscription cancellations.

Disadvantages To Recurring Payments

The advantages of recurring payments generally outweigh the disadvantages, but there are a few downsides that you should be aware of in using them. Payment security, while always extremely important, is even more critical when youâre accepting multiple payments over time from the same customer. This means protecting your customerâs sensitive payment data and protecting yourself from fraud. Your provider can help you implement a strong PCI compliance program that will safeguard your customerâs data according to established industry standards. Many providers also offer fraud detection and prevention measures that can protect you from unscrupulous consumers. The impact of someone submitting a fraudulent payment method will be much higher with multiple, recurring transactions than for a single, one-time purchase.

Storing card-on-file information requires additional work on your part, but most providers offering support for recurring billing include features to automate this process. Nonetheless, you will have more paperwork to deal with if you use recurring billing.

Another minor disadvantage of recurring payments is that it can be more difficult to correct a billing error. If a customer is charged in error, youâll have to issue a refund. For this reason, we recommend that you use a recurring billing service that allows customers to change their payment information or cancel a subscription directly from your website. Otherwise, youâll have to make these changes yourself before the next automatic payment is processed.

How To Choose Recurring Billing Software

These days, just about every merchant services provider on the market offers support for recurring billing, usually as a feature of their payment gateway. However, not every business needs it, so in most cases, itâs an optional add-on to the companyâs basic payment gateway. Optional add-ons are rarely free, so you can expect to pay extra to enable recurring billing as part of your account. Each provider has a different method of charging you for recurring billing. As weâll see below, you might pay an additional monthly fee, or you might pay a higher processing rate for each recurring transaction. In some cases, you might pay both an extra fee and higher processing rates. If you need recurring billing support, itâs critically important that you understand how your provider charges you for this service. You should compare multiple providers before signing up for an account.

Features To Look For In Recurring Billing Software

Features of recurring billing services vary from one provider to another. While some are bare-bones and only offer the most basic functions, others are more robust and allow you to customize virtually every aspect of your subscription service. Here are the most important features to look for in selecting a recurring billing service:

Billing Intervals:Â Not everyone bills on a once-a-month basis. Your service should provide the ability for you to bill on whatever interval you need.
Support For Metered Billing:Â If your subscription service charges by actual use rather than a flat fee, youâll need the ability to track your customersâ usage and automatically generate a bill from that data.
Support For Free Trials:Â Many businesses offer a free trial period before the customer has to start paying for the service. Your recurring billing service should be able to support providing a free trial period of whatever length you specify. Customers should also be able to opt-out at the end of the free trial period rather than being charged automatically.
Security Features:Â Tokenization and encryption are usually standard features of payment gateways today. Theyâre even more important when you have recurring, automatic transactions.
Customer Information Vault:Â This is another feature that usually comes standard with a payment gateway. It allows you to store your customersâ payment data securely, so they donât have to re-enter it every time they shop on your site. To greatly simplify your PCI compliance requirements, this data should be stored on your providerâs server — not on your computer or your websiteâs server.
Automatic Card Updater:Â This feature automatically pulls updated card information from your customerâs issuing bank when a replacement card is issued, allowing a subscription to continue without interruption. Note that this feature wonât work if your customer switches to a different credit card altogether.

Merchant Services Providers Offering Recurring Billing

Below, weâll look at how several popular merchant services providers handle recurring billing. Some providers are significantly more affordable than others, so it pays to shop around before settling on one choice.

Square

Square

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Read our Review

Square (see our review) offers recurring billing through its Square Invoices add-on service. Like most of Squareâs offerings, recurring billing charges on a pay-as-you-go model — there are no additional monthly fees. However, you will pay higher processing rates for recurring transactions. Recurring credit or debit card transactions are charged 2.9% + $0.30 per transaction, while card-on-file transactions will cost you 3.5% + $0.15 per transaction.

Although the higher processing rates will cost you more, Squareâs lack of monthly fees makes this a very cost-effective alternative for a small or newly-established business. Although itâs very affordable, the recurring billing feature of Square Invoices doesnât have the robust feature set found in some competitors. For example, you currently cannot integrate Squareâs recurring billing feature into an API for in-app recurring billing. However, the company is planning to introduce this feature sometime in the future.

Stripe Payments

Stripe Payments

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Read our Review

Stripe Payments is a popular ecommerce-only merchant services provider that powers a lot of the webâs most well-known online retailers. Recurring billing support is available through the Stripe Billing feature. Like Square, thereâs no additional monthly fee to use this service. Recurring transactions process at a flat rate of 2.9% + $0.30 per transaction for your first $1 million in sales and then Stripe will begin adding a 0.4% transaction fee as well. Most merchants will find that Stripe is less expensive than Square, especially if you process a lot of card-on-file transactions.

PayPal

PayPal

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Read our Review

PayPal is another payment services provider (PSP) thatâs very popular with small business owners and ecommerce merchants. The company charges the same flat rate of 2.9% + $0.30 per transaction as Stripe for recurring transactions. However, they also charge a $10 monthly fee to enable recurring billing on your account. To make matters worse, its recurring billing feature is only available if you use either PayPal Payments Pro or the PayPal Virtual Terminal. Both of these features cost an additional $30 per month. In other words, it will cost you $40 per month just to use recurring billing.

Unfortunately, PayPal is by far the most expensive option weâve found for getting access to recurring billing. Unless you have another compelling reason for using either PayPal Payments Pro or the PayPal Virtual Terminal, we canât recommend using them for this purpose.

Dharma Merchant Services

Dharma Merchant Services

Visit Site

Read our Review

If your business needs a full-service merchant account, Dharma Merchant Services (see our review) is one of the best choices available. The company offers competitive interchange-plus pricing, low monthly account fees, and a month-to-month billing system that doesnât lock you into a long-term contract. They also offer recurring billing as an optional feature of their MX Merchant integrated payments system. While the MX Merchant system is included as a standard feature of all Dharmaâs merchant accounts, support for recurring billing is an optional add-on, and it will cost you $10 per month. However, youâll pay the same interchange-plus rates for recurring transactions as you would for one-time purchases. If you process a lot of recurring transactions, the savings on processing rates should more than make up for the additional monthly fee.

Final Thoughts

Do you need recurring payments for your business? The answer will depend on your business type and how you make your sales. Many retail-only companies will not need recurring billing at all, while online businesses that sell via a subscription model wonât be able to function without it. As weâve seen above, selling products and services via subscriptions is becoming more popular all the time. If you think your business could benefit from using a subscription model, youâll need to add a recurring billing feature to your merchant account to make it happen.

If youâve determined that you need a recurring billing service, youâll want to make sure that it includes all the features you need, without paying an additional premium for them. Features such as the ability to store cards on file, customize your subscription intervals, and support free trials are all things to look for in selecting a recurring billing service.

Because recurring billing support is offered as part of a payment gateway, youâll want to be sure to select a high-quality gateway thatâs a good overall fit for your business. To learn more about payment gateways, and how to choose a good one, check out our article The Complete Guide To Online Credit Card Processing With A Payment Gateway. For more information about specific gateway providers, our article The Top 5 Payment Gateways For Online Credit Card Processing is an excellent resource. Finally, our Payment Gateway Comparison Chart allows you to compare popular gateways side-by-side. Good luck!

Our Top Picks For Credit Card Processing

heading	Payment Depot	Fattmerchant	National Processing	Dharma	Square
	Payment Depot	Fattmerchant	National Processing	Dharma Merchant Services	Square Payments

	Get Started Review	Get Started Review	Get Started Review	Get Started Review	Get Started Review
Availability	US-based businesses	US-based businesses	US-based businesses	US-based businesses	US, Canada, UK
Serves in-store, mobile, and eCommerce	â	â	â	â	â
No early termination fee	â	â	â	â	â
Compatible with most POS systems	â	â	â	â
Rate matching / negotiableÂ	â	â	â	â
High-quality sales and customer service	â	â	â	â
Pricing model	Interchange-plus	Interchange-plus	Interchange-plus	Interchange-plus	Flat rate
Monthly fee	$49	$99	$10	$20	$0
Standard retail rates	0% + $0.15 markup	0% + $0.08 markup	0.20% + $0.10 markup	0.15% + $0.07 markup	2.75% total
Good for higher volume (over $20K/month)	â	â	â	â
Good for mid volume ($10K-20K/month)	â	â	â	â
Good for lower volume (under $10K/month)	â		â		â
	Get Started with Payment Depot	Get Started with Fattmerchant Payments	Get Started with National Processing	Get Started with Dharma Merchant Services	Get Started with Square Payments

Each of these companies provides excellent customer service and fair pricing.

See more data

The post The Merchantâs Guide To Recurring Payments And Billing appeared first on Merchant Maverick.

“”

August 21, 2019

What Is Cardholder Data And Why Does It Matter?

When it comes to payment processing, security matters. After all, every time you handle a credit card, your customer is trusting you with their financial information. By now, you have probably come across the term PCI compliance on your monthly processing statements, and you know it’s a data-security related term. A little digging on the internet reveals that PCI compliance is complicated and the subject matter is full of acronyms and industry jargon.

One term often associated with PCI compliance is cardholder data. Even though the term is a small part of the overall PCI compliance scheme, it is a fundamental building block term. Understanding what cardholder data encompasses will help you navigate more smoothly as you learn more about the complicated world of PCI compliance.

Our Top Picks For Credit Card Processing

heading	Fattmerchant	Payment Depot	National Processing	Dharma	Square
	Fattmerchant	Payment Depot	National Processing	Dharma Merchant Services	Square Payments

	Get Started Review	Get Started Review	Get Started Review	Get Started Review	Get Started Review
Availability	US-based businesses	US-based businesses	US-based businesses	US-based businesses	US, Canada, UK
Serves in-store, mobile, and eCommerce	â	â	â	â	â
No early termination fee	â	â	â	â	â
Compatible with most POS systems	â	â	â	â
Rate matching / negotiableÂ	â	â	â	â
High-quality sales and customer service	â	â	â	â
Pricing model	Interchange-plus	Interchange-plus	Interchange-plus	Interchange-plus	Flat rate
Monthly fee	$99	$49	$10	$20	$0
Standard retail rates	0% + $0.08 markup	0% + $0.15 markup	0.20% + $0.10 markup	0.15% + $0.07 markup	2.75% total
Good for higher volume (over $20K/month)	â	â	â	â
Good for mid volume ($10K-20K/month)	â	â	â	â
Good for lower volume (under $10K/month)		â	â		â
	Get Started with Fattmerchant Payments	Get Started with Payment Depot	Get Started with National Processing	Get Started with Dharma Merchant Services	Get Started with Square Payments

Each of these companies provides excellent customer service and fair pricing.

See more data

What Does Cardholder Data Include?

Even from its plain meaning, cardholder data suggests that the data includes information on both the front and the back of a credit or debit card. Formally, cardholder data is defined as:

The primary account number (PAN).
And may include:
- Cardholder name.
- Expiration date.
- Service code.
- Other sensitive authentication data used to authenticate cardholders and/or authorize payment card transactions, including, but not limited to, card validation codes/values, full track data from the magnetic stripe or chip on a card, PINs, and PIN blocks.

Cardholder data, therefore, could include most of the information on the payment card itself, whether plainly visible like the PAN or stored in the magnetic strip or on the chip of the card.

Cardholder Data & Maintaining PCI Compliance

Knowing the definition of cardholder data is one thing, but this knowledge is useless without understanding how cardholder data fits into the overall scheme of PCI compliance.

Basically, cardholder data includes all the information on a credit or debit card thatâs needed to transfer money from one party to another. Unfortunately, where there is money, there are thieves. So, some years ago, the larger credit card companies banded together to form the PCI Security Standards Council. The Councilâs job is to formulate data security rules and best practices so that the storage and transmission of credit and debit card information from the cardholder to the merchant to the banks — and everywhere in between — can be secure.

How Cardholder Data PCI Compliance Rules Affect Merchants

As a small business merchant, not all of the PCI compliance rules apply to you. For the rules that do apply, failure to follow them means getting a fine, usually from your processor. However, note that there are other country- or state-specific data security and privacy laws that might apply to merchants as well. Often, the laws require the holder of the information to take reasonable steps to keep the information safe. Failure to comply with the laws often results in a fine, but sometimes can result in heavier punishments like an injunction. Since the PCI Security Standards Councilâs rules are typically more stringent and detailed, it is easier for a merchant to simply follow the PCI Security Standards Councilâs compliance rules and best practice suggestions. Requirement 3 of the Payment Card Industry’s Data Security Standard (PCI DSS) specifically addresses cardholder data.

Different Rules For Storing Or Not Storing Cardholder Data After A Transaction

There are several ways a merchant could choose to handle cardholder data. As a threshold matter, we assume that you already use PCI compliant card readers, point of sale terminals, and encryption software for transmitting the cardholder data to your processor.

A customer might pay in person, pay over the phone, or pay through a web interface. As long as you do not keep the cardholder data on file (whether stored electronically or even just temporarily scribbled on a piece of paper), then you are in compliance with PCI requirements for cardholder data. If, however, you do wish to keep cardholder data on file so you can, for instance, provide your customers a faster checkout, then there are additional PCI rules and best practices you must follow.

To keep the cardholder data on file, a merchant has two basic choices: keep the cardholder data in a computer system at the business (all the while making sure everything is PCI compliant), or hire a third-party service to keep the data on their server while only keeping a token at the business.

With the former, the merchant must follow additional complex requirements for both hardware and software set out by the PCI Security Standards Council. Typically, this method is only employed by larger businesses that have the money and personnel to maintain the hardware and software. With the latter, it is possible to keep the cardholder data with a third-party service provider that is already PCI compliant. Rather than the cardholder data, you only keep a token that can eventually be matched to the cardholder data. Recently, credit card tokenization has become a more popular choice because a token is not cardholder data so is not subject to the same PCI compliance rules as cardholder data.

Protect Cardholder Data With Tokenization

We have an article explaining the details of tokenization, but, briefly, payment card tokenization is a process that takes the cardholder data and assigns it a random series of numbers and (sometimes) letters called the token. The cardholder data is stored in a highly secure electronic vault using PCI compliant hardware and software. Only the owner of the vault has the ability to match the token with a specific cardholder data.

As a business owner, all you have stored in your system is the token. In order to access the rest of the payment card information, you must send the token to the vault holder to retrieve the actual cardholder data before sending the information onward for further payment processing. If you experience a data breach, then all you have to do is notify your storage company so they can assign new tokens to you. The cardholder data should be secure as long as you quickly find and notify the storage company of the breach.

From a practical standpoint, with tokenization, you wonât have to worry about PCI compliance because you donât have the cardholder data on your premises. All the encryption and data security required to be PCI compliant are farmed out to a third party, leaving you time to concentrate on running your business.

Protecting Cardholder Data Protects Your Business

If you are a merchant who accepts credit or debit cards, then you will be handling cardholder data. If you wish to store this information, both industry rules and public laws require you to handle this information in a highly secure manner and in very specific ways. Failure to protect cardholder data could subject you to fines or even harsher penalties under the law. Not only that, because the law requires you to report data breaches and notify your customers, you would have to fight the bad publicity associated with such a breach, and your business’s reputation will suffer. Protecting cardholder data, therefore, translates directly to protecting your business.

Fortunately, there are payment processors and third-party tokenization providers who can help you simplify PCI compliance and make it easy for you to protect cardholder data with secure, easy-to-use software. Reputable payment processors and tokenization providers are also mindful of their own practices on who can access cardholder data and stand behind their practices.

Whatâs your experience with handling cardholder information? Do you keep the information in-house, or do you take advantage of third party storage services?

Our Top Picks For Credit Card Processing

heading	Fattmerchant	Payment Depot	National Processing	Dharma	Square
	Fattmerchant	Payment Depot	National Processing	Dharma Merchant Services	Square Payments

	Get Started Review	Get Started Review	Get Started Review	Get Started Review	Get Started Review
Availability	US-based businesses	US-based businesses	US-based businesses	US-based businesses	US, Canada, UK
Serves in-store, mobile, and eCommerce	â	â	â	â	â
No early termination fee	â	â	â	â	â
Compatible with most POS systems	â	â	â	â
Rate matching / negotiableÂ	â	â	â	â
High-quality sales and customer service	â	â	â	â
Pricing model	Interchange-plus	Interchange-plus	Interchange-plus	Interchange-plus	Flat rate
Monthly fee	$99	$49	$10	$20	$0
Standard retail rates	0% + $0.08 markup	0% + $0.15 markup	0.20% + $0.10 markup	0.15% + $0.07 markup	2.75% total
Good for higher volume (over $20K/month)	â	â	â	â
Good for mid volume ($10K-20K/month)	â	â	â	â
Good for lower volume (under $10K/month)		â	â		â
	Get Started with Fattmerchant Payments	Get Started with Payment Depot	Get Started with National Processing	Get Started with Dharma Merchant Services	Get Started with Square Payments

Each of these companies provides excellent customer service and fair pricing.

See more data

The post What Is Cardholder Data And Why Does It Matter? appeared first on Merchant Maverick.

“”

August 13, 2019

What’s the Difference Between Credit And Debit Transactions?

As consumers, we all have a good understanding of the difference between a credit card and a debit card. For a credit card, we get a statement on a monthly basis, and we can pay off the entire balance or only a portion of the balance while paying interest on the rest. In other words, credit cards work like bank loans.

If we use a debit card, however, the money is immediately taken out of our bank account, and we will not have to deal with additional statements. Debit cards are more analogous to paying by cash or by check.

For a merchant, the cost of processing a debit card transaction can vary quite a bit from that of processing a credit card. Otherwise, a merchant receives the money within the same timeframe, so that there appears to be very little difference between the two methods of payment.

That said, at times, a point-of-sale terminal will ask the customer to choose between credit or debit after they swipe, dip, or tap a debit card. Answering credit does not suddenly turn a debit card into a credit card, but it does affect the merchantâs cost of processing the transaction.

Below, we give a more detailed explanation of how credit and debit transactions can impact a merchantâs costs of doing business.

Understanding How Debit Cards Work

Generally, there are two behind-the-scenes ways a debit card can be processed. The first way is called the debit/online/PIN debit method, and the second way is called the credit/offline/signature debit method. If the customer selects “credit”, the transaction is sent through the credit card processing network. If the customer selects “debit”, the transaction is sent through a different computer network and the merchant is charged a debit-specific rate for the transaction. Both methods will fund the merchant’s bank account in about the same timeframe. The difference is only in the fee thatâs charged per transaction.

In order to better understand how debit cards work, let us first examine how credit cards work.

How Credit Card Transactions Work

Credit cards essentially are revolving lines of credit between the issuing bank and the consumer. When a consumer pays with a credit card, the money is transferred in roughly the following way:

The payment information is transmitted through multiple tiers of financial entities to the acquiring bank.
The acquiring bank asks the issuing bank for payment.
The issuing bank, after it makes sure the consumer has enough credit, authorizes the payment.
The acquiring bank pays the merchant.
Typically, two to three days later, the two banks pay each other to settle the charges.
Now the only money owed is between the consumer and the issuing bank.
The consumer pays the issuing bank on a monthly basis, according to the terms of the credit card agreement.

For the banks, there is some risk involved in credit card transactions because the consumer might default on the loan.

How Debit Card Transactions Work

Debit cards work differently because the consumer has already pre-authorized the bank to take the money from a specific bank account. So, when the issuing bank of the debit card gets a payment request from the merchantâs bank, the issuing bank authorizes payment and then, without waiting for additional authorization, takes the money out of the consumerâs bank account.

There is very little risk of default to the issuing bank on a debit card charge because the issuing bank can make sure the bank account does indeed have the money before authorizing payment and can place a hold on that amount until, in the regular course of business, the money can be transferred out of the account. Again, the distinguishing difference between a credit card charge and a debit card charge is that, with a debit card, the issuing bank is allowed to reach into the consumerâs bank account to take the money right away.

We’ve gone over a high-level view of how a debit charge works, but if we dig a little deeper, debit card transactions can get a little complicated.

The Different Paths A Debit Card Transaction Can Take

As mentioned in the introduction of this article, a consumer might have to select debit or credit after swiping, dipping, or tapping a debit card. Typically, this question is only asked if the merchant is at a brick-and-mortar location and has a PIN pad on their point-of-sale terminal. If the merchant operates online, uses a point-of-sale terminal without a PIN pad, or uses a third-party processor such as Square, Stripe, or PayPal, then the question wonât be asked because there will be only one way to process the debit card–by using the credit method.

With the credit method, the debit card charge is processed like a credit card charge. This method is also called a signature debit or offline charge. For clarity, in this article, I will refer to this type of charge as a credit path debit charge.

If the merchant does have a point-of-sale terminal with a PIN pad, then the consumer has a choice of processing the charge as either a credit path debit charge or a true debit charge. The true debit charge is also sometimes called the PIN debit or online charge. Both the true debit charge and the credit path debit charge will be explained in more detail below.

What Happens When A Consumer Selects The Credit Path Debit Charge Option

When a consumer makes a credit path debit charge, the transaction is sent through the system like any regular credit card charge, except that it is flagged as a debit transaction. The payment request goes from the merchant to the processor to the acquirer to the issuer. The issuer — that is, the bank where the customer keeps the bank account tied to the debit card — puts a hold on that amount of money in the account and then authorizes the acquirer to release the money to the merchant.

The merchant is paid in the same way and in the same time frame as any typical credit card charge. However, from the consumerâs standpoint, there will be a hold on that amount of money in their bank account, usually for up to three business days, until the bank takes the money out.

A hold on the account means the money is still technically in the account but is earmarked to be taken out, so the consumer can no longer use that money to make other purchases. Sometimes, this hold can be larger or smaller than the actual charge. If itâs larger than the actual charge, it can cause non-sufficient funds (NSF) issues on a later charge. If itâs smaller than the actual charge, it can cause overdraft issues on a later charge.

So, with a credit path debit charge, it can take up to three days for the issuing bank to pay the acquiring bank for the money the acquiring bank already fronted to the merchant for the debit card charge. This payment timeline mainly has to do with the way credit card companies, acquirers, and issuers settle charges between themselves.

What Happens When A Consumer Selects The True Debit Charge Option

The behind-the-scenes money movement works differently with a true debit charge. Instead of borrowing the credit card companyâs communications network, the true debit charge uses various other communication networks for interbank money transfers. This is the same path used by ATM networks, wire transfer networks, electronic bill payment networks, or even direct deposit paychecks.

With a true debit charge, when the debit card issuing bank gets the payment request, it places a hold for that amount of money in the consumerâs account and transfers the money through normal interbank money transfer channels to the merchantâs bank. The hold on the consumerâs account is much shorter than it would be with a credit path debit charge because banks settle these transfers much more quickly — sometimes in just a matter of hours, and typically by the end of the business day.

Because money is transferred so quickly, the true debit charge typically requires an added layer of security in the form of a PIN. The PIN is encrypted and serves as additional evidence that the debit card holder has authorized the charge.

A merchant is charged differently when running a debit card transaction as a true debit charge or as a credit path debit charge. The reason is simple: it costs money to send information through these (typically computer) networks, and each network charges a different amount.

Even though the way the banks transfer the money to one other is the only real difference between a true debit charge and a credit path debit charge, the credit path debit charge is subject to different rules (set up by the credit card companies) and is treated differently under the law. We point out the key differences below.

Key Differences Between Credit & Debit Transactions

Whether your customer uses a credit or debit card, the money shows up in your bank account relatively quickly, but there are a few discrepancies between the different types of transactions that can affect your business. Keep in mind that we are actually looking at three types of transactions: (1) a true credit charge, (2) a true debit charge, and (3) a credit path debit charge. The answer will vary slightly for each.

Cost

Merchants are charged per credit or debit transaction, and the charges depend on whether the card is processed through a credit card network or the debit card network. If a cardâwhether credit or debitâis processed through a credit card network, it will be charged the typical credit card transaction fee. If a debit card is processed through the debit card network, the transaction is charged a debit card rate. Some processors, in an effort to compete for your business, might offer a fee for a credit path debit charge that falls between a standard credit card charge and a true debit charge.

For debit cards backed by banks in the US, the federal government has set a standard rate for banks with $10 billion or more in assets. (See the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.) Currently, that rate is 0.05% + $0.21 per transaction ($0.22 if the transaction meets certain fraud criteria). Smaller banks can charge more, and processors who contract with the large banks can add to this government-set base charge. For banks outside of the US, the processing rates can be even lower. Check your processing agreement to see the amount that is applicable to you, and remember that it might be possible to negotiate this rate.

For credit cards, if youâre a frequent reader of this website, you already know that the rate varies, so be sure to check your credit card processing agreement for the precise amount. This charge typically applies to both your true credit card transactions and your credit path debit card transactions.

As between pure debit transactions and credit path debit transactions, the math works out that smaller charges cost less if processed as credit path debit charges. Larger ticket items cost less if processed as true debit charges. We have an article giving a very detailed explanation of the true cost of debit card transactions and credit path debit card transactions. We also have multiple articles comparing credit card rates. Be sure to check them out as you consider your options.

Dispute Process

Credit and debit card disputes are covered not only by different consumer protection laws, but they are also modified by credit company rules if the transaction is run through credit card companies. From a high level, both credit and debit card disputes will first show as a chargeback on a merchantâs statement. The merchant can respond to the chargeback (and pay appropriate fees) according to the procedure set out by the merchantâs processor.

Debit card disputes tend to show earlier in the chargeback cycle. Consumer protection laws covering stolen debit cards give the consumer a specific time frame to report a stolen card, and if the consumer reports outside of that time frame (i.e., more than 60 days after receiving a bank statement reflecting the unauthorized charge), then the consumer must pay for all the unauthorized charges, and the merchant gets to keep the money.

With credit card disputes, a different set of laws govern fraudulent charges, and the consumer is typically liable for only up to $50 of the charge. The consumer also has longer to dispute the charge, so the merchant might have to answer a dispute later into the chargeback cycle.

Minimum Amount/Surcharge

For a true credit card charge or a credit path debit charge, merchants can require a minimum amount a customer must charge for using a credit or debit card. Additionally, as long as a stateâs laws allow it, the merchant can attach a surcharge to the use of a credit card to recover processing fees for the card. Mostly, what the merchant can and cannot do depends on the credit card companyâs rules, and these rules discourage surcharges and encourage the use of the cards for transactions of any size.

With a debit card, the merchant cannot require a minimum amount nor can it add a surcharge for the use of the debit card. Debit cards are regulated by a very different set of laws than credit cards, and current laws forbid requiring a minimum charge or adding a surcharge to a true debit card transaction.

How To Accept Debit Card Payments

From a merchantâs perspective, if you can accept a credit card, then you can almost certainly accept a debit card. Naturally, you should check with your processor first, but even if you do not have a PIN pad at your point-of-sale terminal, you should be able to process a debit card using the credit path debit charge method.

If you do have a PIN pad at your point-of-sale terminal, then you have the hardware needed to accept credit card transactions, credit path debit transactions, and true debit transactions. Double-check with your processor that all three methods are allowed. If so, your customers can swipe, dip, or tap credit or debit cards as normal, and you will be charged depending on the type of card and the transaction path of the card.

As a side note, if you travel to Canada, the UK, or mainland Europe, you will see that having a PIN pad is fairly normal and both credit and debit cards can require a PIN before use.

How To Accept Debit Card Payments On A Phone

With the popularity of mobile point-of-sale devices, you might be wondering if you can accept a debit card with a phone-connected reader from, for instance, Square (read our review) or PayPal Here (read our review). These readers typically do not have PIN pads. In these cases, you can indeed accept a debit card because the transaction can be processed as a credit path debit charge.

Outside of the US, this is not the case. For example, Square can accept Interac debit transactions in Canada. iZettle (read our review) and SumUp (read our review) can also accept debit transactions in Europe.

Is The Difference Between Credit & Debit Transactions Important?

From a consumerâs standpoint, the difference between using a credit or debit card definitely matters because money is taken out of oneâs bank account at very different times after using a card. The dispute process for a credit card is typically less painful than for a debit card. After all, with a debit charge, the money has already been taken out of the bank account and the consumer protection laws for debit cards place a higher burden on the consumer to be vigilant for fraudulent charges.

From a merchantâs standpoint, the difference between a credit and a debit card matters less but still can be detectable because the transactions carry different costs. In fact, because a PIN pad is necessary to initiate a true debit charge, a merchant must invest in purchasing a point-of-sale terminal with a PIN pad before a true debit charge can be processed. For larger ticket items, a true debit charge can cost the merchant less to process than a credit charge or a credit path debit charge.

At the end of the day, a merchant typically wants a customer to have a smooth purchasing experience, which includes an easy checkout when paying for the purchase. This often translates to being able to accept any form of payment that is convenient to the customer. So, while there is a difference in the cost of processing debit and credit cards, this cost is likely minor when compared with keeping a customer satisfied so they come back to your store for more.

The post What’s the Difference Between Credit And Debit Transactions? appeared first on Merchant Maverick.

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August 6, 2019

Why Flat-Rate Credit Card Processing Works Great For Some Businesses (And Not Others)

So, youâre a first-time small business owner, and you want to be able to accept credit and debit cards from your customers. After all, youâre bound to get a lot more sales â and make more money — right? Well, this is generally true. However, credit card processing is also a mysterious and rather complex subject, and getting an account with a payment processor often ends up being a more expensive proposition than most business owners expect.

One of the more confusing aspects of credit card processing is figuring out exactly how much your processor is going to charge you for each credit or debit card transaction. Reading through your monthly processing statement can become an exercise in frustration, and it can often seem that your costs vary widely (and seemingly randomly) from one transaction to the next. Wouldnât it be nice if you just paid the same amount for each sale? Your costs would be predictable, and it would be easier for you to anticipate how much youâre going to pay each month for credit card processing.

Well, it is possible to enjoy this kind of stable, reliable pricing. The flat-rate pricing model is predicated on the idea that youâll pay a fixed rate for each transaction, thus allowing you to anticipate your processing costs each month. However, we should point out that we have yet to see a true flat-rate pricing model being offered by any processor. Even small business-favorite Square (see our review) has at least three different rates, mostly depending on whether youâre accepting a card in person, over the internet, or manually entering the card information.

Another important consideration with flat-rate pricing is that it involves an important tradeoff â itâs usually significantly more expensive on a per-transaction basis than other pricing models. However, this disadvantage is offset by the fact that most providers using a flat-rate pricing model donât charge a monthly account fee, or any of the other fees that most traditional providers tack onto your bill. For this reason, flat-rate pricing is often the least expensive option overall for very small or seasonal businesses.

In this article, weâll analyze how flat-rate pricing works and how you can use it to save money on your processing costs. Weâll also show you how it compares to interchange-plus pricing, another popular pricing model that is actually less expensive for some businesses. Finally, weâll show you how to analyze your processing costs to determine which pricing model is going to be a more affordable option for your business.

What Is Flat-Rate Credit Card Processing?

By now, youâve figured out the obvious fact that credit card processing isnât free. Although many consumers donât understand this, all business owners are acutely aware that a certain percentage of any credit card transaction will go toward covering the costs associated with processing the transaction. Unfortunately, that percentage isnât really certain at all, which is why the subject of credit card processing can be so confusing.

In a nutshell, hereâs how it works: Your credit card processor has to pay percentage-based fees to the bank that issued the credit card (called, unsurprisingly, the issuing bank). These fees are called interchange fees, and they vary widely based on several factors, such as the type of card used, the type of transaction, the nature of the item purchased, etc. There are literally hundreds of different interchange fees, any one of which might apply to a given transaction. Thereâs also a network fee, which is paid to the card association sponsoring the card (i.e., Visa, Mastercard, etc.). Network fees typically run around 0.05%, so they wonât be a significant expense for your business. Finally, thereâs the markup, which is the fee that your processor keeps for itself after itâs paid out the other fees. No matter what type of processing rate plan your processor uses, there will always be a markup â even if you have no idea how much it really is.

Flat-rate pricing aims to eliminate some of the confusion surrounding interchange fees and give you a simple, predictable set of rates that youâll pay every time. The primary advantage of flat-rate processing is that youâll always know in advance exactly how much a given transaction will cost to process. Most flat rates include both a percentage and a fixed per-transaction fee.

Letâs use Square (see our review) as an example of how flat-rate pricing works in actual practice. The company offers three primary processing rates:

75% for all card-present transactions
90% + $0.30 per transaction for all ecommerce (i.e., card-not-present) transactions
50% + $0.15 per transaction for all manually entered (also card-not-present) transactions

What does this type of pricing mean for your business? In a word: predictability. If youâre solely a traditional brick-and-mortar retailer, youâll always pay 2.75% for every transaction, unless the customerâs card isnât working, and you have to key in the information manually. Likewise, if youâre ecommerce-only, youâll always pay the same 2.90% + $0.30 per transaction every time you process a payment. Mail order and telephone order businesses will almost always pay the same 3.50% + $0.15 per transaction. Omnichannel businesses will have a little more variability, but with only three possible rates available, it wonât be too hard to figure out how much youâre paying.

Flat-rate processing is the rate plan of choice for payment services providers (PSPs) like Square, PayPal, and Stripe that donât offer you a true merchant account. Instead, youâll be aggregated in with every other business using the companyâs services. For small business owners, the primary advantage of signing up with one of these PSPs is that you usually wonât pay a monthly account fee, or any other recurring fees, for that matter. This can save you a lot of money, especially if youâre a seasonal business owner or only accept the occasional credit or debit card transaction.

The main disadvantage of flat-rate pricing is simply that the processing rates are high â often higher than what youâd pay under any other type of processing rate plan. As weâve mentioned above, there are hundreds of possible exchange rates that might apply to a given transaction. However, for comparison purposes, letâs assume that the average exchange rate is roughly 1.4% for card-present transactions and 1.9% for card-not-present transactions. Compare this to Squareâs rates quoted above, and itâs obvious that youâre paying a much higher rate for each transaction. Why is this? Well, your processor is not going to take a loss on any transaction, so theyâre going to set their flat rates high enough to cover even the most expensive exchange rates. This is one reason why the processing rates offered by the most popular PSPs are almost exactly identical.

Where flat-rate pricing really starts to cost you money is with debit card transactions. Because these types of payments come straight out of the customerâs bank account and donât require the issuing bank to cover the full cost of the transaction, interchange fees for debit transactions are much lower than they are for credit cards â typically less than 1.0%. Unfortunately, a flat-rate pricing plan doesnât take this into account, so youâll pay the same full price regardless of whether the customer uses a debit card or a credit card.

Interchange-Plus VS Flat-Rate Pricing

By now, it should be apparent that the simplicity and predictability of flat-rate pricing come at a cost. If you donât like the idea of paying much more than the basic interchange fees (especially on debit card transactions), you might want to consider an alternative.

An increasingly popular processing rate plan is interchange-plus pricing. Under this type of pricing, your processor will charge the basic interchange rate plus an additional markup. For example, a typical interchange-plus rate quote might be something like interchange + 0.30% + $0.15 per transaction. In this case, interchange fees are passed on at cost, and the processorâs markup is clearly disclosed as being 0.30% + $0.15 per transaction. If we again assume an average interchange fee of 1.4% for card-present transactions, this works out to an effective average rate of 1.70% + $0.15 per transaction. In most (but not all) cases, this will be much less expensive than what Square or any other PSP charges for the same type of transaction. Remember, however, that interchange rates vary quite a bit, so if your particular transaction has a higher interchange fee, there might not be that much of a difference between the two processing rate plans.

You should also be aware that some providers will offer you an interchange-plus rate quote that only mentions the markup. Donât be misled into thinking that youâre getting a really good deal â youâll always have to pay the interchange fees. In fact, interchange fees constitute the bulk of your processing costs for almost all transactions.

Of course, processing rates are only one part of your total costs. Providers offering interchange-plus pricing will be signing you up for a traditional, full-service merchant account. This is a lot more stable and secure than what youâll get with a PSP, but it does come at an additional cost. Expect to pay a monthly account fee at an absolute minimum. There are also a host of other fees you might have to pay, increasing your costs even more. For this reason, a full-service merchant account with interchange-plus pricing works best for year-round businesses that accept credit and debit cards on a daily basis, and process at least a certain amount (typically around $5000 per month) in credit and debit card transactions.

For more information on interchange fees, see our article, What Are Interchange Fees For Credit Card Processing?.

When Does Flat-Rate Pricing Work Well?

The simple answer to this question is that flat-rate pricing works best for small or newly-established businesses that donât have a high monthly processing volume and donât want to be burdened by additional account fees. If youâre just starting out or your business is a side gig that isnât expected to grow significantly over time, flat-rate pricing makes it easy to accept credit and debit cards without the commitment and expense of a full-service merchant account. Yes, youâll pay more on a per-transaction basis for credit card processing. However, you also wonât have a long-term contract or have to pay all the additional fees that typically come with a true merchant account. Flat-rate pricing can save you money overall by eliminating most, if not all, of these additional fees. The lack of a long-term contract makes switching to a full-service merchant account when the time is right easy and painless.

Can You Get A Better Deal Than Flat-Rate Pricing?

It should be obvious from the above discussion that flat-rate pricing isnât for everyone. Yes, itâs simple to understand, and you wonât have a long list of confusing extra fees on your monthly processing statement. However, youâll still be paying more for each transaction, and at a certain point this reality will catch up with you. Once your business grows large enough, itâs imperative that you switch to a full-service merchant account with interchange-plus pricing. Weâre always a little disappointed to see businesses still using Square when theyâve obviously grown to the point where theyâre losing money by not switching to an interchange-plus plan.

Where exactly is the âtipping point,â beyond which you should upgrade to interchange-plus pricing? Unfortunately, thereâs no simple answer. Weâve seen vendors that claim that you need to process at least $10,000 per month to benefit from interchange-plus, while other providers put this point as low as $1500 per month. The truth is that there is no hard and fast rule. Youâll have to analyze your actual processing costs under flat-rate pricing and compare it to what your estimated costs would be for the same transactions under an interchange-plus pricing plan. Remember that thereâs nothing stopping you from keeping your Square account as a backup even after you sign up for a full-service merchant account under a different provider. Many businesses keep their Square card readers in case of technical problems with their primary accountâs processing hardware.

Final Thoughts

Is flat-rate credit card processing right for you? As weâve seen in this article, it depends. As a general rule, flat-rate pricing is the best option for a small or newly established business with a low monthly processing volume. While the processing rates themselves are on the expensive side, the lack of other monthly account fees usually more than makes up for this disadvantage. Of course, this assumes that you sign up with a vendor who offers flat-rate pricing on a per-transaction-only basis and doesnât charge you any additional recurring fees. Beware of providers who offer flat-rate pricing, but then tack on a variety of monthly fees or try to lock you into a long-term contract. Flat-rate pricing only works well if you donât have a host of recurring fees and you can close your account at any time without penalty.

For larger businesses, flat-rate pricing is not a good deal. Youâll pay much higher processing rates than what youâd get under most interchange-plus plans, particularly for debit card transactions. Not having to pay recurring fees might seem appealing, but if your processing volume is high enough, this advantage will be negated by the cumulative effect of paying higher processing rates. You also wonât have the stability and protection of a full-service merchant account â something that will become increasingly important as your business grows in size.

As weâve mentioned above, determining the point at which it makes sense for your business to switch to a full-service merchant account is complex and varies from one business to the next. Youâll have to compare what youâre currently paying for payment services against quotes from providers offering interchange-plus pricing to determine which method offers the lowest cost overall. Our Cost Analysis Workbook is an invaluable resource for helping you âdo the math,â as weâve included spreadsheets that allow you to plug in the relevant information and quickly determine which pricing model is the best deal for your business.

For a much more in-depth discussion about rates, fees, and processing rate plans, please see our article, The Complete Guide to Credit Card Processing Rates & Fees. If youâve decided that switching to an interchange-plus pricing plan is right for you, youâll want to consult our Merchant Account Comparison Chart for an overview of the best merchant account providers in the industry. Good luck!

Our Top-Rated Merchant Services Providers

heading	Payment Depot	National Processing	Fattmerchant	Dharma	Square
	Payment Depot	National Processing	Fattmerchant	Dharma Merchant Services	Square Payments

	Get Started Review	Get Started Review	Get Started Review	Get Started Review	Get Started Review
Availability	US-based businesses	US-based businesses	US-based businesses	US-based businesses	US, Canada, UK
Serves in-store, mobile, and eCommerce	â	â	â	â	â
No early termination fees	â	â	â	â	â
Compatible with most POS systems	â	â	â	â
Rate matching / negotiableÂ	â	â	â	â
High-quality sales and customer service	â	â	â	â
Pricing model	Interchange-plus	Interchange-plus	Interchange-plus	Interchange-plus	Flat rate
Monthly fee	$49	$10	$99	$20	$0
Standard retail rates	0% + $0.15 markup	0.20% + $0.10 markup	0% + $0.08 markup	0.15% + $0.07 markup	2.75% total
Good for higher volume (over $20K/month)	â	â	â	â
Good for mid volume ($10K-20K/month)	â		â	â
Good for lower volume (under $10K/month)	â	â			â
Good for selling occasionally					â
Instant account setup					â
	Get Started with Payment Depot	Get Started with National Processing	Get Started with Fattmerchant	Get Started with Dharma MS	Get Started with Square Payments

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The post Why Flat-Rate Credit Card Processing Works Great For Some Businesses (And Not Others) appeared first on Merchant Maverick.

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August 5, 2019

What Is A Merchant ID?

Some credit card industry terms can seem innocuous or self-evident but are actually quite specific to how payment processing works. One such term is the merchant ID, which is often abbreviated as MID. It is also sometimes just called a merchant number.

Not every merchant who accepts credit cards has an MID, but for those who do, the MID plays a key part in how money is transferred from the customer to the merchant.

Does your business have an MID? If so, do you know how to find it? How does the MID fit into the grand scheme of credit card processing? Read on to find out.

Know Your Terms: Merchant Identification Number (MID)

The MID is a unique number used to identify your business for credit card payment processing. Think of it as an account number that is shared among several service providers when transferring payment from the customerâs account to your merchant account.

You will have an MID only if you have a merchant account. If you use third-party processors such as Square, Stripe, or PayPal, you won’t have an MID.

How The Merchant ID Is Used To Transfer Funds

To see how the MID works, first, let us look at a very simplified credit card payment process flow:

The customer presents a credit card, and you send the information electronically to your merchant account provider.
Your merchant account provider passes this information–sometimes through multiple tiers of businesses–to the acquirer.
The acquirer passes the information to the issuer.
The issuer checks to make sure the customer has sufficient credit, approves payment, and sends the approval to the acquirer.
The acquirer pays–often through multiple tiers of businesses–your merchant account provider.
Your merchant account provider pays you.

Your MID comes into play when the merchant account provider passes the payment request to the acquirer and then when the payment is passed to you. The credit card processing industry often subcontracts a lot of work, so your merchant account provider might be a subcontractor working within several layers of other businesses. The credit card payment request must move through all these layers before it gets to the acquirer. Only the acquirer can request payment from the issuer (a.k.a. the customer’s bank). Your MID is the account number that identifies your specific business as the payment request moves through third-parties to the acquirer and then back to you. In other words, you can’t get paid without the MID.

Wondering whether the MID is used between the acquirer and the issuer as well? We dug through several guidelines from Visa, Mastercard, and Discover. We couldnât find an explicit requirement for the MID. The rules only generally speak of the type of information that must be passed between the acquirer and the issuer in order to transfer the money. While a specific format for the MID might still be buried in technical specs not available to the public, it seems that Visa, Mastercard, etc. do not require a standard format for the MID.

Can A Merchant Have More Than One MID?

When setting up a merchant account for a business, Visa (Rule 5.2.1.13), Mastercard (Rule 5.7.1), Discover, and American Express all require your business’s industry to be identified through a code called the Merchant Category Code (MCC). Each merchant account can have only one MCC, and the MCC can affect your processing rate.

Most merchants have only one main line of business, so using one MCC to identify the business is easy. Some merchants, however, have multiple lines of businesses. For instance, hotels, amusement parks, or even big furniture stores (think IKEA) may have restaurant businesses as well. The restaurant credit card processing rate can differ from the hotel, amusement park, or furniture rates. So, to get the best processing rates, these businesses might have multiple merchant accounts with multiple MIDs.

Having multiple MIDs is unusual, however, so if you are a small business owner and see multiple similar terms on your statement, your payment processing software, or even your contract, these are probably not extra MIDs.

Don’t Confuse Your MID With Other Similar Terms

Sometimes, merchants can inadvertently confuse the MID with other similar terms. For instance, if a merchant has several registers at a store, each register can be identified through a terminal ID. Other merchants have an online business so, in addition to the MID, they have a gateway ID for the online credit card processing. These IDs are not the same as the MID, and they are not used in the same way. The terminal ID or the gateway ID might be used to troubleshoot hardware or software issues, but they are not used to transfer money from your customer to you.

Do All Businesses Need A Merchant ID?

Since the MID is a shared account number used by your merchant account provider, your acquirer, and any service providers in between, you wonât have an MID if you donât have a merchant account. What is more, if you ever change merchant account providers, you will receive a new MID.

In the credit card processing world, there are hybrid entities called third-party processors/aggregators. Third-party processors use a slightly different business model. They have one big merchant account under their name, so you don’t get an individual account under just your businessâs name. This is why you donât get an individual MID.

When these third-party processors need to identify a business, they issue their own account numbers. These account numbers are for internal use only, so there’s no need for the kind of uniformity that would make an ID easily sharable. Square, for instance, uses an email address to identify its merchants, while PayPal has its own account number system (which they also call a merchant ID). Stripe and Shopify Payments also have their own internal schemes on how to assign account numbers.

Why You Should Know Your Merchant ID Number

As mentioned above, your MID is meant to be shared between multiple links in the payment processing chain. Without this number, if you contact one of these businesses for help, they cannot access your file and point you to the correct department or entity.

For instance, your merchant account provider might be an independent contractor who works with a bank acquirer to set up your account. If you have issues with chargebacks, you might have to contact the acquirer for customer support. Under those circumstances, you must know your MID so that the customer support personnel can find your file and help you with your issue.

How To Look Up Your Merchant ID Number

Looking up your MID is fairly easy. Here are some tips for finding your MID:

The MID is usually located on your monthly statement. Typically, you can find your MID along with other identification information, such as your business name, your business address, business phone number, etc.
If you have an online portal where you can see your credit card processing account, then you should be able to find your MID online. Look under the main menu and go to your account information page, and it should be listed there.
If you have an online app through a tablet or phone, you should be able to find your MID through the app as well. Simply follow the same procedure as the portal above.
Lastly, you might be able to find your MID on your processing/merchant agreement. This is the contract you signed to set up credit card processing in general. You are more likely to find your MID in the attachments/application forms instead of in the contract itself.

As already mentioned above, if you have a third-party processor, you wonât have an MID. These companies use other ways to identify you. Sometimes, it will be your email address, and sometimes it is an account number similar to an actual MID. Be careful and not confuse these with the actual MIDs.

What Should You Do With Your Merchant ID Number?

The MID is an account number shared between various credit card processing entities to help identify your business, so credit card payments can be moved from your customerâs account to your account. It is a fairly important number that you might have to refer to frequently, so we recommend that you keep it in a safe but easily accessible place, with your other financial and legal documents.

Unauthorized personnel should not have this number because it deals with money transfer. For those authorized to have access, they should know how and where to find the number quickly, so that they can give the MID to customer support in case payment issues arise.

Have questions or comments about merchant ID numbers? Leave us a message below!

The post What Is A Merchant ID? appeared first on Merchant Maverick.

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July 23, 2019

What Is An Issuing Bank?

If you have a Visa or Mastercard, then you already have an intuitive understanding of what an issuing bank is. It is the bank whose name is on the card, alongside the Visa or Mastercard brand. It is the bank where you applied for the card, the bank that sends you a bill each month, and the bank that you (hopefully) pay each month. As a cardholder, the issuing bank is the only entity you work with, and you probably donât care how the money you charged eventually ends up with the merchant.

If you are also a business owner, however, you do indeed care about how the money gets to you, and the issuing bank plays an important role in the process. Read on to find out what an issuing bank is, and why it is important to a merchant.

Defining An Issuing Bank

The credit card business can be complicated. Its technical terms can make a personâs head spin, and one of these terms is issuing bank or, sometimes, issuer.

The issuing bank is the entity that owns the relationship with the cardholder. The issuing bank finds the consumer it wants to do business with, investigates the creditworthiness of the consumer, issues the consumer a revolving line of credit in the form of a credit card, fronts the money for the consumerâs purchases, and then collects all or some of the money in one invoice to the consumer every month. They assume some of the risk if the consumer is unable to pay back the credit card debt.

There are four major credit cards brands in the US: Visa, Mastercard, American Express, and Discover. Each card has a slightly different relationship with its issuing banks.

Visa and Mastercard

With Visa and Mastercard, it is easy to identify the issuing bank of each cardâthe bankâs name is always on the card. The reason this is so has a lot to do with how the modern-day credit card got started.

Visa was formerly called BankAmericard. It was the first successful consumer credit card, and it was started by Bank of America in 1958. Mastercard came along soon after. It was formed by a consortium of banks who wanted to compete with Bank of America in the credit card business.

In the beginning, BankAmericard was only available in California because that was where Bank of America did business. As the card became more successful, Bank of America wanted to expand the card into other states. However, at that time, a bank from one state could not operate in another state, so Bank of America had to license the cardâs name to individual banks authorized to operate in specific states.

BankAmericard became a franchising business and the licensee banks found their own consumers and issued their own cards, but all under the BankAmericard name. They used the payment infrastructure from Bank of America to move money from the cardholders to the merchants to pay for the goods and services.

Mastercard grew in a similar way with a similar business structure. It started out as a consortium, so it had always been a licensing business.

The BankAmericard continued to belong to Bank of America until 1970, when it became an independent company. In 1976, it changed the cardâs name to Visa, and became the company we know today.

Because of this history, with Visa and Mastercard, the name of the issuing bank always appears on every card along with the cardâs brand. Because each individual bank had the responsibility of finding new cardholders, the cardholders worked with the issuing banks whenever a payment or purchase issue arises.

American Express

The American Express card originally started as a charge card instead of a credit card, and only the American Express company issued the card.

Charge cards are slightly different than credit cards. There is no stated limit on a charge chard–it changes as the creditworthiness of the cardholder changes, so it can change on a month-to-month basis. Charge cards must be repaid in full at the end of every month. In contrast, a credit card is a line of credit with a stated limit that can be paid back over a longer period of time.

American Express still issues charge cards, and the issuing bank for these charge cards is American Express itself (it became a bank holding company in 2008). However, American Express also offers a line of credit cards, and the credit cards can be issued by third-party banks such as Bank of Hawaii (actually owned by Bank of America), MBNA, Citibank, Wells Fargo, and quite a few others.

So American Express is sometimes its own issuing bank, but it also works with other banks to issue credit cards. When an American Express credit card is issued through a third-party bank, the issuing bankâs name is on the card, along with the American Express logo.

Discover

Discover works a little bit like American Express because it functions as the issuing bank. That bank is called the Discover Bank, but its name does not appear on the card. It is the only issuing bank of Discover cards in the US. (There are international arrangements, so a few banks outside the US do issue Discover cards in their respective countries.)

Discover began its life in 1985 at Sears, when Sears wanted a general-purpose credit card in addition to its own store card. When the card started, it was issued by The Greenwood Trust Company located in Delaware, which Discover bought in the same year. Even to this date, the trust has one physical location, in Delaware. Discover changed the trustâs name to Discover Bank and the bank continues to issue Discover cards as well as offer a suite of traditional financial products like checking accounts. You can explore its traditional banking services online on Discoverâs website.

Now that we understand how to identify an issuing bank for each card, letâs look at the issuing bankâs role in payment processing.

The Issuing Bank’s Role In Payment Processing

As mentioned above, the issuing bank owns the relationship with the cardholder. The issuing bank is the entity that investigates the creditworthiness of the cardholder, grants the line of credit to the cardholder, and fronts the money for purchases made with the card to send to the merchant.

A highly simplified flow of the process is as follows:

Cardholder presents the card to pay.
Merchant takes the information and contacts its own credit card processing entity, which, for the sake of simplification here, is a bank (called the acquiring bank).
Acquiring bank contacts the issuing bank.
Issuing bank verifies the cardholder’s funds and sends the purchase amount to the acquiring bank.
Acquiring bank pays the merchant.
Issuing bank recoups the money from the cardholder based on a regular billing cycle.

As can be seen above, as a merchant, you do not have to deal with the issuing bank in this normal process flow. However, sometimes the cardholder disputes the charges, maybe because of buyerâs regret, maybe because they never got the goods/services, or maybe because the charge is fraudulent in some way.

The cardholderâs relationship is with the issuing bank, so they file a complaint with the issuing bank. The issuing bank then works with the acquiring bank and the acquiring bank might come back to you and ask you about the disputed charge. Note that the issuing bank has a direct business relationship with the cardholder while you have no direct business relationship with the issuing bank–your relationship is with the acquiring bank.

Unfortunately, it is the issuing bank who has the final say on disputed charges, and it often decides in the cardholderâs favor. This results in a chargeback and you end up not only having to pay the money back, but also pay a fee for the investigation. Even if you do win the dispute, you may still not get the investigation fee back.

Issuing Bank VS Acquiring Bank

There are a few things to note about the acquiring bank or acquirer. First, this is the bank that owns the relationship with the merchant. It fronts the credit card payment to the merchant and then shares some risk with the issuing bank on not being able to eventually recoup the money from the cardholder. Some acquiring banks work directly with a merchant, others farm out the work to another specialized entity called the payment processor (who then owns the direct working relationship with the merchant), yet other acquiring banks do both.

In the above simplified flow, the acquiring bank is a bank different from the issuing bank. Real life, however, is never this simple. As discussed above, the first widely accepted credit card was started by Bank of America. They had to build an entire backend infrastructure to pay the merchants, so they were their own issuing bank as well as the acquiring bank. Even to this date, Bank of America continues to be both an issuing bank and an acquiring bank. Many other big banks work the same way.

As a merchant, the most important bank for taking credit card payments is the acquiring bank, so it is worth your time to get a deeper understanding of what they are and how they work. We have a terrific in-depth article on acquiring banks, so be sure to check the article out.

How Important Is The Issuing Bank To Merchants?

If you have a business credit card, then, of course, the issuing bank is important to you because you work with the issuing bank on your businessâs purchases. As a merchant who accepts credit card payments, however, the issuing bank is only important when a chargeback occurs.

If your business experiences very few chargebacks, then you would have to deal with the issuing bank only occasionally. If you have a lot of chargebacks, you would have to deal with issuing banks often, but only indirectly. Because you do not have direct contact with issuing banks on chargebacks, it could handicap your ability to dispute a chargeback. It is, therefore, not the actual issuing bank that is important to a merchant, but the role of the issuing bank in the credit card processing that is important to the merchant.

How often do you have to deal with issuing banks? Is there an issuing bank you found particularly difficult or easy to work with? Leave us a comment below.

The post What Is An Issuing Bank? appeared first on Merchant Maverick.

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1. There’s No One-Size-Fits-All Solution

2. You Need A Payment Processor And A Gateway

Types Of Payment Processors

3. You Can Accept More Than Just Credit Card Payments

Do You Want To Sell Globally? Prepare To Pay More

4. You Need To Be PCI Compliant

Payment Security Is Important

How To Find An eCommerce Payment Provider

What Is A Merchant Account?

Merchant Account VS Third-Party Processor

What’s A Payment Gateway?

PCI Compliance With Online Merchant Accounts

How Much Does An Internet Merchant Account Cost?

Features To Look For In An Internet Merchant Account

Included Gateway

Multiple Payment Methods

Global Payment Support

Included Shopping Cart (Or Other Software)

Developer Tools

Customer Service

How To Choose The Right Provider For You

How Banks Transfer Money Between Accounts

What Is An ACH Payment?

What Is A Wire Transfer?

How Secure Are ACH Payments & Wire Transfers?

Dealing With Disputes For ACH Payments & Wire Transfers

Should You Use ACH Payments Or Wire Transfers?

What Is A Credit Card Imprinter?<img class="alignnone wp-image-66990" src="https://www.shopping-cart-reviews.com/wp-content/uploads/sites/9/2019/09/everything-you-need-to-know-about-using-a-credit-card-imprinter-1.jpg" alt="" width="823" height="473" />

What Do You Need To Process Payments With A Manual Credit Card Machine?

Will Manual Credit Card Payments Cost You More?

Other Concerns With Credit Card Imprinters & Manual Credit Card Transactions

Alternatives To Using Manual Credit Card Machines

Do You Really Need A Credit Card Imprinter?

What Is A Recurring Payment?

What Kinds Of Businesses Use Recurring Payments?

Advantages To Recurring Payments

Disadvantages To Recurring Payments

How To Choose Recurring Billing Software

Features To Look For In Recurring Billing Software

Merchant Services Providers Offering Recurring Billing

Square

Stripe Payments

PayPal

Dharma Merchant Services

Final Thoughts

What Does Cardholder Data Include?

Cardholder Data & Maintaining PCI Compliance

How Cardholder Data PCI Compliance Rules Affect Merchants

Different Rules For Storing Or Not Storing Cardholder Data After A Transaction

Protect Cardholder Data With Tokenization

Protecting Cardholder Data Protects Your Business

Understanding How Debit Cards Work

How Credit Card Transactions Work

How Debit Card Transactions Work

Key Differences Between Credit & Debit Transactions

Cost

Dispute Process

Minimum Amount/Surcharge

How To Accept Debit Card Payments

How To Accept Debit Card Payments On A Phone

Is The Difference Between Credit & Debit Transactions Important?

What Is Flat-Rate Credit Card Processing?

Interchange-Plus VS Flat-Rate Pricing

When Does Flat-Rate Pricing Work Well?

Can You Get A Better Deal Than Flat-Rate Pricing?

Final Thoughts

Know Your Terms: Merchant Identification Number (MID)

How The Merchant ID Is Used To Transfer Funds

Can A Merchant Have More Than One MID?

Don’t Confuse Your MID With Other Similar Terms

Do All Businesses Need A Merchant ID?

Why You Should Know Your Merchant ID Number

How To Look Up Your Merchant ID Number

What Should You Do With Your Merchant ID Number?

Defining An Issuing Bank

The Issuing Bank’s Role In Payment Processing

Issuing Bank VS Acquiring Bank

How Important Is The Issuing Bank To Merchants?

What Is A Credit Card Imprinter?