MERCHANT SERVICES

Merchant Account General Info

CREDIT CARD EQUIPMENT: CREDIT CARD TERMINALS VERSUS POS SOFTWARE SYSTEMS

Merchants needing to acquire a new credit card machine of some type often consider the possibility of using a POS system, or software, versus a more traditional credit card terminal solution. Often, unless a POS system application is mandated based on the nature of the industry of the business, with the intent of eliminating additional expense by wanting to make use of an existing computer already located at their place of business.

POS systems are best applied to environments such as restaurants, hotels, larger retail chains, and other applications where a credit card authorization and adjustment in inventory or purchase record need to coincide within the same point of sale function. Merchants' owning smaller, or lower volume ticket, businesses where inventory and purchase records need not be incorporated into a single credit card authorization and purchase invoice will find the more traditional solution of a separate credit card terminal and purchase receipt is an overall easier format to use.

Basic credit card authorization software that can be downloaded into any PC certainly has its applications, but is best restricted to merchants who tend to accept most of their credit card purchases from telephone orders from their customers. Those merchants marketing from Internet websites, not using a virtual terminal network, can also benefit from using credit card authorization software. However, retail storefront businesses normally produce too many tickets per day too hand key transactions into a terminal key board. And although magnetic card readers are available hardware add-ons to most computers systems, the combined cost of software and card reader can far exceed the cost of a traditional credit card terminal.

CREDIT CARD TERMINALS: FINALLY AN EASIER WAY TO LOAD PAPER ROLLS

Most merchants have struggled with the unpleasant and timely task of changing paper rolls in their credit card terminal. Normally, right at an extremely busy moment during the day when changing paper is the last thing the merchant would want to be doing. The time consuming task of threading the leading edge of a paper roll into a small slot at the back of the terminal, and hoping that the paper aligns and then feeds in a semi-straight line through the printer mechanism, can be frustrating to say the least.

Fortunately, over the last couple of years credit card terminal manufacturers have addressed this issue by developing a line of credit card machines that incorporate what's commonly referred to as both an integrated "drop-in" paper load system, and "clamshell" printer. These integrated printers allow the merchant to simply open the outer lid of the paper roll compartment, drop the paper roll into position while leaving the leading edge of the paper roll an inch or so above the top of the compartment, then close lid. That's it, and you're done.

The feed roller is located at the outer edge of the compartment lid, and is responsible for feeding the paper through the paper mechanism. Therefore there is no slot or space in which the operator must insert the leading edge of the paper. This reduces paper loading time from what was anywhere from a minute or so up to a few minutes, to mere seconds!

This new printer technology can be a real time saver (and eliminate a lot of frustration) in high volume ticket businesses such as restaurants, convenience stores, hotels and motels, coffee shops, and other high traffic environments. When the time comes to purchase new credit card equipment, purchasing a credit card terminal with an integrated drop-in paper load system is well worth considering!

MERCHANT ACCOUNTS: AVOIDING CREDIT CARD PROCESSING RULES VIOLATIONS

Visa and MasterCard, as well as the other credit card brands, set standards all merchants must follow. When a merchant violates these standards, it could be subject to fines. If the merchant does not cease the prohibited practices, the acquirer (credit card processor) may be forced to close the merchant account. There are credit card processing rule violations and there are program violations that result from excessive negative activity patterns found by the credit card brands' monitoring programs.

Although these types of monitoring programs may be perceived as a nuisance by the majority of those using credit card processing merchant accounts they are actually a necessary tool in helping to reduce fraud and chargebacks. The majority of credit card processing rule violations falls into a just a few categories, and can be avoided by following a few simple guidelines:

• Avoid setting minimum or maximum transaction amounts for customers
• Don't add extra or additional customer paid fees to cover merchant account processing expenses
• Honor all credit cards advertised on storefront and counters
• Make certain the credit card equipment or software being used complies with all truncating requirements (not showing entire credit card account number and expiration date on customer credit card transaction receipt).

ETA/Transaction Trends

CREDIT CARD EQUIPMENT: CHOOSING THE RIGHT CREDIT CARD TERMINAL

Considering the many credit card machines available in the merchant services industry today, many merchants can be easily confused as to which credit card terminal is right for their business. Compounding the problem are merchant services industry representatives who often recommend credit card equipment, based not on what a merchant may actually need, but what the sales representative feels they have the best chance of convincing the merchant to buy.

Merchants are often inundated with a credit card processor sales agent who recommends credit card equipment that's features and capabilities far exceed the actual requirements of the merchant. This can include more expensive credit card terminals that incorporate integrated internal pin pads in an environment that requires the merchant to use a hand held pin pad, resulting in the merchant paying for two pin pads versus just one. Or, credit card terminals that include things like Ethernet dual communication capabilities and value-added programs features such as check guarantee or gift/loyalty card processing that the merchant will never use.

The most dependable method to avoid these "over-kill" recommendations by merchants needing to purchase or lease new credit card equipment is actually quite simple. When being presented with a credit card terminal recommendation, don't accept just the one credit card machine suggestion. Ask about additional options. Secondly, if you know you'll only require basic credit card processing capabilities, and will never need the ability to conduct both telephone line and networked based transactions, or check and gift card processing, then inform the sales representative of those facts upfront. Stating that you really don't want to buy or lease a credit card terminal that offers features that you'll never use.

Finally, do a little research for yourself. Ask for copies of various credit card machine brochures that have been recommended for you to study, prior to making a final decision to buy. This will allow you to review the specific features of the credit card terminals you're considering, and verify that you're not going to pay for something you don't really need! In a business world often dictated by managing monthly expenditures to insure annual profitability, following these simple guidelines can help prevent merchants from spending hard earned dollars for credit card terminals and related credit card equipment far in excess of what's actually needed.

CREDIT CARD TERMINALS: DO I NEED A CREDIT CARD MACHINE THAT READS SMART CARDS

Much has been made over the last several years about the introduction of Smart Cards into the U.S. marketplace. Smart Cards are credit cards that utilize a small-encrypted microchip on the front of the card to record cardholder information, instead of the normal magnetic stripe on the back of the card. The benefits of microchip-based credit cards include the ability to hold vast amounts of data, far in excess of traditional magnetic striped cards, and increased security. In that Smart Cards utilize an encrypted microchip to store cardholder account information, it is virtually impossible to electronically capture that information for the purposes of duplicating the credit card for use in conducting fraudulent transactions.

Many sales offices in the merchant services industry have used the introduction of Smart Card microchip technology to increase equipment sales. Making the need to upgrade to a new credit card terminal, due to the advent of Smart Cards, a significant part of their sales presentation. And as such, have convinced many merchants to purchase or lease a new credit card machine because it included a Smart Card reader. In reality, the merchants' existing terminal would have sufficed for years longer, and the need to upgrade to a credit card terminal that included a Smart Card reader was at best, erroneous. And at worst, very misleading on the part of the sales office.

The truth of the matter, in relation to the introduction of Smart Cards into the U.S., is that most merchants will not be required to contend with Smart Cards whatsoever, let alone upgrade their equipment in order to accept them, for quite some time yet. Although there are Smart Cards currently available to consumers for the purposes of retail purchases in the U.S., they are very limited and don't require the use of a Smart Card reader in order to be accepted. All major credit cards, without exception, that are issued with either the Visaâ or MasterCardâ logos as Smart Cards, with an encrypted microchip on the front of the card, will also include a magnetic stripe on the back of the card for use with a credit card terminal that utilizes a magnetic stripe card reader.

Although Smart Cards are becoming more prevalent in the private sector, such as the medical and insurance industries due to a microchip-based cards' ability to store vast amounts of information, they are definitively not becoming more prevalent in the retail consumer industry. In that the entire electronic funds transfer industry will need to re-tool both software and hardware for millions of merchants in order to make the use of microchip-based cards the standard card issued to consumers, it will be many more years before a merchant would not be able to accept one without a Smart Card reader. The moral of this story is a simple one; Upgrading to more efficient, newer model, and/or more cost effective credit card equipment is a normal part of being a merchant who accepts credit cards for purchases from their customers. However, it is not a normal part of being a merchant who accepts credit cards to upgrade to a new credit card machine simply because a sales person said that "a new terminal is needed in order to be able to accept the new Smart Cards that are coming out now". Words to the wise!

CREDIT CARD MACHINES: "SHOULD I USE AN INTERNAL OR EXTERNAL PIN PAD?

Many merchants have not yet begun accepting debit cards with an encrypted pin pad for their customers to use to enter their personal identification number (PIN) when making a purchase. Accepting debit cards in this manner is a financial benefit to the merchant due to the lower processing expenses (depending on size of the average ticket) associated with the flat rate charge that comes with having a customer enter their PIN into a pin pad when using their debit card. Using a debit card and PIN also benefits the customer from increased security and the quicker, easier chargeback procedures attached to debit cards in the event they become a victim of a fraudulent transaction with their debit card.

The only question that really remains is not whether using a debit card is a wise decision for either the merchant or the customer, but from the merchants' perspective, what equipment is the best to use having made the decision to accept debit cards from their customers by requesting the customer enter their PIN into an encrypted pin pad device. Remembering that which ever type of equipment is used the customer must have physical access to the terminal and/or pin pad in order for them to enter their PIN into the device. And thereby be charged a flat fee as a merchant, regardless of the transaction amount.

There are only two basic options available to merchants when acquiring an encrypted pin pad; the first is a POC countertop credit card terminal that includes an integrated (or internal) pin pad within the terminal itself. The benefit of using a credit card terminal that includes an internal pin pad is that it provides for only one piece of equipment versus two, with no cords laying around that attaches an external pin pad to the terminal. It also provides one small countertop footprint that takes very little counter space. For many merchants, that in and of itself (if counter space is at a premium) is benefit enough to use an internal pin pad. However using a credit card terminal with an internal pin pad requires that the merchant physically pick-up the terminal and hand it to their customer for them to enter their PIN into the terminal ten key pad. For some merchants, the idea of needing to hand their terminal to their customers, and the customer having access to the credit card terminals' control functions as they enter their PIN makes them uneasy. If a merchant normally positions their terminal at a location behind the countertop, it also makes the use of an internal pin pad unpractical due to the inability of easily handing the terminal to a customer for them to enter their PIN into the keypad.

The second option is to maintain a separate hand held encrypted pin pad hat attaches to the merchants' credit card terminal by use of a spiraled telephone handset type cord. This allows the merchant to simply hand the customer a small handheld device in order to enter their PIN. In that the cords for external pin pads are available in lengths up to 25 feet it is also provides for the ability to locate the terminal itself somewhere far behind the counter, and out of the reach of customers. However, using an external pin pad also requires two pieces of equipment versus just one, and will take up a little more counter space. Including an extra cord that attaches the pin pad to the credit card terminal. From a financial point of view, the overall cost to a merchant for choosing either a credit card terminal that includes an internal pin pad or selecting a terminal that utilizes an external handheld pin pad is relatively the same (depending on the model and manufacturer). As such, the real choice as to whether to use an internal or external pin pad should be based on the physical impact, of one or the other, on the countertop and space availability.

CREDIT CARD PROCESSING: BLENDED RATES VS. DISCOUNT RATE PLUS TRANSACTION FEE

A source of confusion for countless merchants is the question of transaction fees. Many merchants reel at the mere mention of paying a transaction fee in addition to the percentage-oriented discount rate found on most credit card processing statements. Instead they opt to include a blended rate into their merchant account that incorporates both the discount rate and transaction fee into a single percentage-oriented fee (discount rate) versus two separate fee sources.

Whether a blended rate or a separate discount rate and transaction fee combination is the best choice to use when opening a new merchant services credit card processing account is dependent on the merchants' average ticket dollar amount. The general rule of thumb states the higher the average ticket, the less concerned the merchant should be about the amount of the transaction fee. Of much more importance in this scenario is the amount of the discount rate. Contrarily, merchant accounts' that maintain a very small average ticket are much more concerned with the amount of the transaction fee than the size of the discount rate.

Blended rates provide merchants with a discount rate that includes the transaction fee so that no additional per inquiry fee is charged when conducting transactions. Merchants interested in opening merchant accounts using a blended rate tend to be those with very small average tickets, that will do several hundred to several thousand transaction per month. By paying a slightly higher discount rate on very small dollar tickets with no transaction fee attached, the overall credit card processing fees the merchant pays each month tends to be far less than if they were paying $0.20 or more on several thousand $5 to $20 sales.

When going through the steps involved with opening a new merchant services credit card processing account it is highly advisable to not solely rely on the recommendation of the merchant services representative handling the new account. But rather, inquire as to the specifics of both the blended rate and separate discount rate and transaction fee options offered by that specific credit card processor. Then, merchants should do the math for themselves, based on their own average ticket, to determine which option provides the more cost effective merchant account to open.

MERCHANT SERVICES CREDIT CARD MACHINES AND SELECTING THE RIGHT CREDIT CARD TERMINAL

Any merchant who is either opening a merchant account for the first time, or who simply needs to replace or possibly upgrade their current countertop credit card terminal, is faced with a virtual mountain of possible credit card equipment choices. Normally, the best basic strategy to follow when selecting credit card processing equipment is to first consider what different types of electronic funded card transactions that need to be accepted (V/MC, online and/or offline debit, check verification, gift cards, etc.) in relation to those transactions are going to physically being accepted (will the cardholder be present or not present, etc.)

There are three basic countertop credit card terminal configurations; terminals with no printers (normally used with MOTO accounts when card account numbers are taken over a telephone call), terminals using a separate printer attached by a printer cable, and terminals with integrated printers. Additionally, terminal printers are available in both a friction printer format requiring use of two part NCR receipt paper rolls and printer ink cartridges, and thermal printers that require no printer cartridges and utilize thermal calculator type paper rolls.

Credit card terminals with friction printers (whether a stand alone unit or integrated printer) have been in use for quite some time and are considered out of date with current technology. The operational cost of using a terminal with friction printer is also much higher than one with a thermal printer due to the need of periodically replacing printer cartridges and the higher costs of two-part NCR paper rolls. As such, it's normally best to avoid selecting a terminal with friction printer combination regardless of any other merchant account requirements.

Additionally, the cost of terminals with integrated high-speed thermal printers have been significantly reduced in recent years to the point they're not much more expensive than their stand-alone terminal and separate printer combination counterparts. And require much less counter space with fewer connection cables to contend with. For most merchants the only circumstance that would dictate selecting a terminal other than one with an integrated thermal printer (and preferably internal pin pad) would be when using a card not present mail order or telephone order merchant account and doesn't require credit card transaction receipt apart from the purchase receipt or invoice they receive as part of their overall purchase for the merchant.

In that credit card terminal costs have in fact come down so much in recent years it's normally advisable for merchants to select a credit card terminal that provides the most recent technological improvements and features available. This will provide the merchant with the ability to take advantage of the additional features of the terminal such as gift/loyalty cards, check verification, and online debit transactions (for example) at a later date, as their business and product offerings grow beyond current levels.

MERCHANT ACCOUNT FRAUD PROTECTION

In many cases, the credit card itself will offer the most obvious clues that a customer is attempting an illegal transaction. Often, if you look at these credit cards closely you can determine if they've been altered. Help protect your merchant account by reviewing the tips below:

Altered Magnetic Stripe:

• Does the card number on the printed receipt and/or register display match the number embossed on the front or imprinted on the back of the card?
• Does the name printed on the receipt match the name embossed on the front of the credit card?

Overall Appearance of the Credit Card:

• Does any part of the card surface look dull when compared to the rest of the card? American Expressâ Cards for example of a high-gloss finish.
• The card surface should not be bent around edges.

Front of Credit Card:

• The black ink on the raised card account number or card-member name should not be smudged or messy.
• The embossed credit card account numbers should in no way appear crooked or unevenly spaced.
• The card number or card-member name should be printed in the same typeface as all other printed information on the card.
• Check to make sure the "halos" of previous account numbers do not appear under the embossed credit card account number.

Back of Credit Card:

• Is the magnetic stripe deliberately scratched or destroyed, making it necessary to manually hand-key the account number into the merchants' credit card terminal.
• The card account number printed o the back of the card should not be different from the account number embossed on the font of the credit card.
• Make sure the account number shown on the back of the card has not been covered up or otherwise "chipped", or altered.
• The signature panel on the back of the credit card should not be whited-out with correction fluid, taped over, or erased.