My Merchant Account Blog

Manually Processing Credit Cards

Wednesday, April 25, 2007

A lot of merchants think they can use their swiped merchant account for their e-commerce solution.  A swiped merchant account is given to the merchant on the pretext the merchant will verify the credit card holder while doing the transaction using Visa's credit card security features or MasterCard's security features. If you suspect suspicious activity during the transaction, you might want to make a Code 10 call.

When a merchant is given a merchant account, the merchant assumes some risks and responsibilities.  These risks are also assumed by the merchant account provider, acquiring bank, issuing bank, and the card associations.  Basically there are two types of merchant accounts - one for your brick and mortar store, sometimes known as a swiped account, an internet merchant account, and a mail-order / telephone (MOTO) account.  The internet and MOTO accounts are sometimes known as keyed accounts.  You will need an electronic payment gateway, i.e. LinkPoint, Payflow, Quantum, or Authorize.net, to help process the transaction.  You can also accept credit cards over the telephone with an internet merchant account because the risks are very similar. 

Higher Risks

You have no way of verifying the cardholder on an keyed account as you would on a swiped account. The risks that the merchant assumes is usually passed through as a discount rate.  Since the risk is greater on a merchant keying in a transaction, usually the merchant account provider will downgrade this transaction.  This usually will result in a higher discount rate being charged on the transaction.

Even More Risks - Storing Cardholder Data

Plus you will need to store cardholder data, which you will need to be PCI compliant, to get the credit card number. Failure to comply could be very costly, especially to the small business owner.

Merchant Account Agreements

Read your merchant account agreement - it might even say that you only will swiped a certain per cent of your transactions a month.  This could be very costly in time making sure you do not violate this agreement.  I have even seen some providers raise the rates to over 3% on a swiped account because the merchant was keying in all of his transactions.  They claimed it was for his excessive chargebacks (he only had one in three years).  He immediately signed up for a MOTO merchant account. 

Savings

Let's say that you have 30 transactions that month at $50.00 each.  So you take time out of your busy day to enter the credit card number into your POS terminal.  And the provider charges you 1.9% on top of your 1.69% that you are already paying.  You would be paying about $63.00 a month for this.  This also does not include any time that you might need to use to call the customer because the credit card transaction failed. 

Internet Merchant Account

With an internet merchant account, you would probably be spending about the same amount of money.  But a few big differences that come to mind are:

• You are not doing anything that is against your contract that could get your merchant account terminated and you end up on the MATCH list
• Your customer knows immediately if his / her ordered was approved or denied
• You have a more professional look - having the transaction processed on your secure website
• You have saved your valuable time
• You can sleep well at night knowing that no credit card numbers will be compromised if your website is hacked
• There is no need to be PCI Compliant (even though it is a good idea), saving you hundreds of dollars up-front.

Level I, Level II, Level III Data

Friday, April 20, 2007

Some of the buzzwords in the merchant account business seems to be Level I, Level II, and Level III data.  Even though this information has been around for quite some time, April is the big month for card association changes.  And some of the changes affected the regulations on how this data is processed.  But exactly what is this data?

Level I Data

Level I data includes:

• Date
• Merchant Name
• City
• State
• ZIP Code

which is not prompted by the terminal.  The merchant will need to enter the purchase amount which also includes sales tax. 

Level II Data

Level II Data includes:

• Date
• Merchant Name
• Tax ID
• Merchant Type Code
• Merchant Category Code (MCC)
• City
• State
• ZIP Code

This information will automatically programmed into your terminal and you should not need to enter it.  The merchant will then need to enter:

• Purchase Amount Excluding Sales Tax
• Sales Tax
• Local Tax Indicator
• Customer Code (if using a purchasing Card)

Your terminal should prompt you to enter the above information for all Level II transactions.

Level III Data

Level III Data includes:

• Date
• Merchant Name
• Tax ID
• Merchant Type Code
• Merchant Category Code (MCC)
• City
• State
• ZIP Code

This information will automatically programmed into your terminal and you should not need to enter it.  The merchant will then need to enter:

• Purchase Amount Excluding Sales Tax
• Sales Tax
• Local Tax Indicator
• Customer Code (if using a purchasing Card)
• Full Line Item Details

Your terminal should prompt you to enter the above information for all Level III transactions.

Enhanced Data

With Level II and Level III data, some merchants can require even more specific data depending on their category.  Some examples are:

• Fleet
  • Level II Data
    • Vehicle or Driver ID Number (AKA Customer Code)
    • Fuel Type
    • Fuel Quantity
    • Fuel Unit of Measure
    • Fuel Unit Cost
    • Fuel Tax Exemption Status
    • Gross Fuel Price
  • Level III Data
    • Odometer Reading
    • Service Type
    • Net Fuel Price
    • Non-Fuel Gross/Net Price
    • Item Discount Amount
    • Item Description
    • Item Commodity Code
    • Item Unit Cost
    • Item Quantity
    • Item Unit of Measure
    • Item Total
• Airline Itineraries
  • Level II Data
    • Merchant Name / Original Ticker Number
    • Passenger Name
    • Departure Date
    • Origination City / Airport Code
    • Travel Agency Code / Name
    • Detailed Data for up to four legs of Travel
      • Carrier Code
      • Services Class
      • Stop-over Code
      • Destination City / Airport Code
  • Level III Data
    • Restricted Ticket Indicator
    • Total Fare / Tax / Fee Amount
    • Currency Code
    • Exchange ticket number and amount
    • Internet Indicator
    • Electronic Ticket Indicator
    • Conjunction Ticker Number
    • Ticket Issue Date
    • Fare Basis Code
    • Control ID detailed information for up to 198 legs of travel
• Hotel Folios
  • Level II Data
    • Check-In Date
    • Hotel Folio Number
    • Number of Room nights
  • Level III Data
    • Daily Room Rate
    • Summary Tax Elements
    • Telephone and FAX Charges
    • Gift Shop Purchases
    • Movies Charges
    • Health Club Charges
    • No Show Indicator
    • Business Center Charges
    • Laundry Charges
    • Check In / Out Dates
    • Food & Beverages & Mini Bar Charges
    • Folio Number
    • Parking & Valet Charges
    • Cash Advances
    • Non-Room Charges
• Purchasing
  • Level III Summary Data
    • Ship to / from ZIP Code
    • Destination Country Code
    • VAT invoice Reference Number
    • VAT tax amount / rate
    • Discount Amount
    • Freight / Shipping Amount
    • Duty Amount
    • Order Date
  • Level III Line Item Detail
    • Item Description
    • Item Quantity
    • Item Unit of Measure
    • Item Total
    • Item Commodity Code
    • Item Product Code
    • Item Unit Cost
    • Item VAT Tax Amount / Rate
• Car Rentals
  • Level II Data
    • Days Rented
    • Car Rental Agreement Number
    • Renter Name
    • Check-Out Date
  • Level III Data
    • Daily/Weekly Rental Rate
    • Check Out/In Date
    • Location/City of Car Return
    • One-way/Drop-off Charges
    • Late Return Charges / Hourly Rate
    • Insurance Charges
    • Fuel Charges
    • Regular and Extra Mileage Charges
    • Total Tax/VAT
    • Telephone Charges
    • Car Class Code
    • No Show Indicator
    • Extra/Other Charges
• Shipping and Overnight Courier Services Data
  • Level III Data
    • Tracking Number
    • Pick up Date
    • Origin/Destination Country Code
    • Number of Packages
    • Origin/Destination Name and Address
    • Item Service Description
    • Item Unit of Measure
    • Item Weight
    • Item Discount Amount
    • Item Net / Tax Amount
• Temporary Help Services Data
  • Level III Data
    • Employee/Temporary Name
    • Social Security Number
    • Description
    • Cost Center
    • Week Start / End Date
    • Rate Indicator

This data might be be passed back to the consumer if the merchant has not made the investment of such terminals.  Merchants are only likely to pass this data if there is a demand for it.  Merchants who have made the necessary changes to their systems will be capable of passing this enhanced data through their card systems.

Application Programming Interface - API

Saturday, April 14, 2007

Each gateway will offer an API to process transactions on your secure website. One of the many benefits to using an API to consistency. When checking out, the consumer does not notice any difference in the layout of your website.  The consumer is able to enter his / her credit card information on your secure website.

Quantum Payment Gateway

Unlike most of the other electronic payment gateways, the Quantum Gateway is one of the few electronic payment gateways that does not charge a transaction fee or a monthly fee.  The API can handle pre-authorizations, sales, recurring billing, and returns.  The Quantum Gateway API will allow the merchant to choose to store the credit card number in a secure manner on Quantum's servers, allowing the merchant to do recurring billing if necessary - simplifying your PCI DSS complaince.

The Quantum Gateway does not charge a fee for transactions.

Fraud Prevention

The Quantum Gateway offers basic fraud protection services (AVS, CVV2 / CVC2 / CID, IP Blocking) at no additional charge.  Advanced protection services (VBV / MSC, MaxMind GeoIP, DialVerify) at no additional charge.

Technical Support

The Quantum Gateway offers free merchant support 365 days a year at no extra fee.

LinkPoint API

LinkPoint's product is called LinkPoint API.  They will provide you a free store to use to test the functionality of your script.  The LinkPoint API module can handle sales, returns, real-time authorizations (pre-authorizations), and it will automatically set up recurring charges if needed.  LinkPoint does not charge a transaction fee for its services.  LinkPoint also does not charge a fee for its recurring billing product.

Technical Support

Level One technical support is available with 24-hours a day, seven days a week through a toll free number (888-477-3611). Level Two support is available Monday - Friday from 9 a.m. - 6 p.m. Pacific time.

Fraud Prevention

The LinkPoint gateway offers basic fraud protection services (AVS, CVV2 / CVC2 / CID, IP Blocking) at no additional charge.  Advanced fraud measures, like VBV / MSC is about $8.00 a month and 8¢ a transaction.  They also have something called Fraud Flex Detect that is proprietary.  They charge about $8.00 a month and 9¢ a transaction.

Authorize.net

Authorize.net Advanced Integration Method (AIM) is their API product. Authorize.net currently just released their periodic billing module as well.  They still charge about $19.95 a month.  They also charge $19.95 to use their Customer Information Manager.

Fraud Services

Authorize.net offers Advanced Fraud Detection Suite for $9.95 per month.

Technical Support

Authorize.net's technical support is opened only Monday - Friday from 6:00 a.m. To 6:00 p.m., closing January 1st and December 25th. Technical support's phone number is can be reached at 877-447-3938.

Paypal Payflow

Paypal bought the Payflow gateway from Verisign in 2006, but it kept it's name. Payflow calls its API Payflow Pro.  The Payflow Pro allows you to do sales and pre-authorizations.  Payflow charges $.10 per transaction after 1,000 transactions is reached each month.  Payflow Pro also offers other features as well like recurring billing, fraud support, and technical support. Payflow recurring billing is $39.95 to set up and $29.95 a month to maintain this service.

Fraud Services

Payflow offers a basic and an advanced fraud protection. Their basic plan will allow you to catch high dollar amounts, check for suspect IP addresses and ZIP codes, watch for address mismatches, and repeat buying.  The advanced plan offers everything with the basic plan plus rapid card use, and whitelisting of current customers.  There is a set up for of $29.95 for the basic plan and $89.95 for the advanced plan.  The monthly rate is $19.95 a month for basic plan and $49.95 a month for the advanced plan.  There is also a transaction cost as well - $.05 per transaction for the basic plan and $.10 per transaction for the advanced plan.

Technical Support

Technical Support is available through monthly plans.  They offer a 13X7 Enhanced Support for $159.00 monthly and 24X7 Premium Support for $495.00 a month.

Similar Articles: Comparison of Fees and Options for Six Payment Gateways and Comparing Electronic Payment Gateways

Cheaper Merchant Account Provider

Sunday, April 01, 2007

A lot of times, people go looking for the cheapest merchant account provider.  I totally understand that people want to save money.  However, a lot of times, when you are dealing with a few basis points - you are only dealing with a few dollars every month.  And the time that you have put in trying to get a better deal even though you know the provider is top notch, costs you more money in the long run.

For example, let's say that you are going to be doing $10,000 a month.  And this largest merchant account provider wants to charge you 2.44% for your discount rate.  And chances are, it will cost more to maintain your account but the provider still wants to do business with your company.  But you found another processor who is willing to offer you 2.29%.  Now the actual difference in this is about $15.00.  And chances are, you charge $150.00 an hour at least for your time.  In the time that you have taken to inquire about a cheaper rate, you probably have already spent the $15.00 and then some.  And you know that the other provider might be smaller and could not support all your needs when your business grew.

Or maybe Visa and MasterCard raised their rates.  So the merchant account provider decided to pass along those fees to you, the merchant.  And let's say you are doing $10,000 a month.  At raising your discount rate 4 basis point (.04 per cent), it is basically $4.00 more a month that they are charging you.  The time you have taken out of your schedule to possibly complain to others, etc., is time that you have wasted.  And of course, you understand that usually these smaller companies actually cost more to maintain but you would rather have a large, stable company process your credit card transactions.

The best thing, of course, use a large, stable, reliable processor - since this is your money in the end.  A processor that started and built its business with merchants in mind the first time, CDGCommerce.  You can see a few of their partners: Mile High Merchant Accounts, LoudestCommerce, and ProcessingMatters.

Another issue is fraud prevention.  If a gateway offers you a proprietary solution, you might be in a world of hurt if you have to move.  Plus, using a fraud prevention tool, like MaxMind, you know other merchants can use it.  For example, a merchant account with First Data will cost you $8.00 a month for their "Fraud Flex Detect" and 9¢ per transaction.  If you add Verified by Visa / MasterCard Secure Code, expect to pay $8.00 more a month and 8¢ per transaction.  You will also be paying a yearly PCI compliance fee of $99.00.  Including the payment gateway fee, that is almost $500 a year just in known fees.  Each transaction is going to cost you about 35¢.

See our article: Comparison of Fees and Options for Six Electronic Payment Gateways.