My Merchant Account Blog

Merchant Discount

Saturday, May 28, 2011

Consists of interchange fees charged to merchants by issuing banks for the ability to accept bankcard transactions combined with fees charged to merchants by acquirers to cover such services as processing, terminal installation, help desks and statement rendering. The merchant discount is set by the acquirer at a percentage of the purchase amount, typically between 1.5 percent and 3.5 percent. Sometimes the acquirer's portion of the merchant discount is referred to as the net merchant discount. Also referred to as a transaction fee.

Merchant Bank

Tuesday, May 24, 2011

A federally insured financial institution responsible for connecting merchants to Visa Inc. and MasterCard Worldwide authorization and settlement systems. Also called an acquiring bank, merchant bank or Sponsor Bank. Acquirers and merchants are the two signatories to merchant agreements. Acquirers can be thrifts, banks or credit unions. For example, First National Bank of Omaha is an acquirer and a bank. To sell bankcard services, it is necessary to have a signed agreement with an acquirer or be part of an ISO that is sponsored by an acquirer. Among other things, an acquirer deposits daily card totals to merchant accounts and debits monthly processing fees from those accounts. The acquiring bank must handle all funds, deposits and settlements with merchants.ISOs and other entities on the acquiring side of the bankcard business also refer to themselves informally as acquirers, as evidenced by several regional acquirers associations thriving throughout the United States, but strictly speaking, they are not acquirers. Also known as: acquirer.

Member Service Provider

Sunday, May 22, 2011

An organization registered with Visa and sponsored by an acquiring bank to sell VISA card acceptance services; also refers to an organization that works with and does business under the name of such a registered ISO. ISOs may also service merchant accounts once they are registered, dependent upon the contract with the acquirer. MasterCard uses the term "member service provider" to describe ISOs. However, it is common within the payments industry to use the term "ISO" when referring to independent sales organizations registered with either or both card brands. Also known as: independent sales organization (ISO).

Statement Fee

Thursday, May 19, 2011

The merchant statement fee is a fixed fee charged by the card processor at the end of each monthly processing cycle.  The fee covers the monthly statement and any customer service/support the merchant may need.  It is a flat monthly fee that is charged to cover the monthly mailing of merchant bankcard statements the merchant might need. 

Usually, the merchant account provider will provide free online access for the merchant to print their statements.  Even though most processors and card associations recommend differently, we recommend you keep a copy for seven to ten years. 

The statement fee can be anywhere from $0.00 to $20.00 monthly.

Mail Order-Telephone Order

Monday, May 16, 2011

A category of card-not-present transactions involving purchases made through mail order or telesales companies. In this type of transaction, the merchant typically has a card terminal and manually keys in required card information for transmission to the appropriate authorization network. Interchange rates for these transactions are among the highest.

Discount Rate

Saturday, May 14, 2011

This fee is probably one of the most confusing terms in the merchant account industry.  When you hear the word discount, you think you might be getting something for less.  In a sense, you are.  Your income will be discounted - not by your choice.  This fee has a number of fees included, mainly the interchange rate, assessments, network charges, and merchant account provider fees.  Usually, the interchange rate is the largest fee, being paid to Visa / MasterCard / Discover Card / American Express.

There are basically two types of merchant accounts - retail and keyed (also known as card not present, e-commerce, Internet, Mail Order / Telephone Order (MOTO)).  Retail discount rates are cheaper because the risk of a chargeback is not as high as a keyed account.

Qualified Rate

This "qual" rate is the price that is usually listed on the agent's website.  A lot of times, you won't even see the other rates until you sign the contract.  Usually, this rate is what you will be charged on most transactions. 

Mid-Qualified Rate

Some providers have this "mid-qual" rate in their structure to help increase their income.  Usually, merchants won't even know they are being charged this rate until they review their statement.

Non-Qualified Rate

These transactions are downgraded to "non-qual" for different reasons.

• Extra charges from the card associations (rewards or business cards)
• The transaction was not completed in a timely manner - usually when you do a transaction, that money is guaranteed yours for a certain amount of days.  This is why most processors will automatically batch the transactions for you daily.
• If you have a retail account and you key in the transaction (the risk of a chargeback is higher)
• If you have an Internet account and you do not do Address Verification Service (AVS) (the risk of a chargeback is higher)

This structure makes is more profitable for the merchant account provider.  For example, if you have an e-commerce business and your customer does not live in the United States, you probably will be unable to do Address Verification Service (AVS) since this service relies on the house number and ZIP code.  Let's say your standard rate is 2.15%.  Your mid-qual rate is .5% and your non-qual rate is 1%.  Since AVS cannot be done, that transaction is 3.65%. 

Their is also a 6 tier structure as well that is offered by some providers due to a lawsuit brought by Wal-Mart.

Also known as Qualified Discount Rate.

With the fee, providers might have a three-tiered pricing structure: qualified, mid-qualified, non-qualified.

See also mid-qualified rate and non-qualified rate.

Magnetic Ink Character Reader

Monday, May 09, 2011

A countertop device used to scan magnetic ink character recognition lines. A MICR line is a sequence of digits at the bottom of a check that provides details about the bank and account on which the check is drawn and supports authorization and clearing routines.

Issuing Bank

Sunday, May 08, 2011

A federally insured financial institution that issues credit and debit cards; this is the cardholder's financial institution. The issuing bank assumes primary liability for the consumer's capacity to pay off debts they incur with their card. In the case of credit cards, the issuing bank extends a line of credit to the consumer. Liability for non-payment is then shared by the issuing bank and the acquiring bank, according to rules established by the card association brand.

ISO

Saturday, May 07, 2011

An organization registered with Visa and sponsored by an acquiring bank to sell VISA card acceptance services; also refers to an organization that works with and does business under the name of such a registered ISO. ISOs may also service merchant accounts once they are registered, dependent upon the contract with the acquirer. MasterCard uses the term "member service provider" to describe ISOs. However, it is common within the payments industry to use the term "ISO" when referring to independent sales organizations registered with either or both card brands. Also known as: independent sales organization (ISO)

ISA

Friday, May 06, 2011

People who sell bankcard services to merchants on behalf of ISOs , acquirers and processors. Also known as merchant level salespeople (MLSs) and independent sales agents (ISAs), most agents are independent contractors. Others are paid employees of ISOs, acquirers and processors. Also known as: independent sales agent (ISA)

Interchange

Wednesday, May 04, 2011

The fee paid to the card issuing bank by the card acquiring bank by way of the processor. Interchange is the base fee to which all other acquiring and processing fees are added to come up with the merchant discount rate. Interchange rates vary widely based on card type, transaction amount, risks and retail sector. It is assessed on all Visa- and MasterCard branded cards, even PIN-based debit cards. In certain circumstances interchange flows in reverse, such as following a chargeback.