When it comes to merchant services and credit card processing, there are a lot of details that go into the process. For businesses, it is important to understand all of the ins and outs of these processes in order to ensure that they are getting the best possible deal. In this guide, we will take a close look at some of the most important details you need to know about merchant services and credit card processing.
First, let’s start with a basic definition of each term. Merchant services is simply the process by which businesses accept credit and debit cards as payment for goods or services. This can be done either in-person or online. Credit card processing, on the other hand, is the process of actually completing the transaction and transferring the funds from the customer’s account to the merchant’s account.
Now that we have a basic understanding of each term, let’s take a closer look at some of the key details involved in merchant services and credit card processing.
- Types of Cards Accepted
One of the first things you need to know about merchant services is the types of cards that businesses can accept. The most common type of card accepted is a Visa or MasterCard. However, there are also a number of other cards that can be accepted, such as American Express, Discover, and JCB.
- Card-Present vs. Card-Not-Present Transactions
When it comes to merchant services, there are two different types of transactions: card-present and card-not-present. Card-present transactions are those that take place in person, such as when a customer makes a purchase at a brick-and-mortar store. Credit card processing for these types of transactions is typically done using a point-of-sale (POS) system.
Card-not-present transactions, on the other hand, are those that take place online or over the phone. These types of transactions are more difficult to process because there is no physical card present. As such, businesses will need to use an online payment gateway in order to process these types of transactions.
- Interchange Rates
Another important detail to know about merchant services is interchange rates. Interchange rates are the fees that businesses are charged for each credit card transaction. These fees are typically a percentage of the total transaction amount, plus a flat fee.
- Qualified vs. Non-Qualified Rates
When it comes to interchange rates, there are two different types: qualified and non-qualified. Qualified rates are the lower of the two and are typically only available to businesses that meet certain criteria, such as having a physical location where customers can make purchases. Non-qualified rates, on the other hand, are typically higher and are available to all businesses.
- Discount Rates
In addition to interchange rates, businesses are also charged discount rates. Discount rates are the fees that businesses are charged for each credit card transaction, minus the interchange rate. These fees are typically a percentage of the total transaction amount.
- Transaction Fees
Another fee that businesses are charged for each credit card transaction is a transaction fee. Transaction fees are typically a flat fee, but can also be a percentage of the total transaction amount.
- Monthly Fees
In addition to the fees mentioned above, businesses are also typically charged monthly fees. These fees can vary depending on the merchant services provider, but are typically a flat fee.
- Termination Fees
If a business decides to cancel their merchant services agreement, they may be charged a termination fee. These fees can vary depending on the merchant services provider, but are typically a percentage of the total amount processed over the course of the contract.
- PCI Compliance Fees
All businesses that accept credit cards are required to be PCI compliant. PCI compliance is the process of ensuring that businesses meet certain security standards when it comes to storing, processing, and transmitting credit card information. In order to become PCI compliant, businesses will need to complete a self-assessment questionnaire (SAQ).
There are four different levels of PCI compliance, depending on the volume of credit card transactions a business processes. The higher the level of PCI compliance, the more stringent the security requirements.
