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Thread: Merchant account Guide
08-31-2004, 04:44 PM #1
- Join Date
- Dec 2003
Merchant account Guide
This article is written by Corey Bryant from http://www.merchantaccounts4less.com/ for WHC as pixelation requested. This is very good article about merchant account info.
There can be as many as six parties participating in every credit card transaction
The Issuing Bank
The issuing bank extends a credit card account to a customer after verifying the applicant’s creditwortwill eventually come from t
hiness and “issues” the consumer a credit card (bankcard). The merchant’s payment The Consumer
The consumer makes the purchase by presenting their credit card at the Merchant location. They use a bankcard (credit card) from an issuing bank and provide t
his information to the Merchant by the Merchant swiping the card on a credit card terminal, or in the case of a phone / mail order by the Merchant keying the transaction.
The Merchant offers goods or services for sale. A Merchant needs both a Merchant Account(w
hich means they have been approved for the chargeback risk) and a method o f communicating the credit card information with a credit card terminal, PC based software, or internet based software. The days of taking batched credit card slips to your bank are essentially over.
The Merchant Bank
The merchant bank provides merchants with an online Merchant Account (to accept “card present” transactions with a terminal or “card not present” transactions). T
his bank may contract with an Acquiring Processor to move the credit card transaction through the payment process, or it may function in t his capacity itself. The Merchant Bank and the Acquiring Processor may also contract with an Independent Sales Organization (ISO) to find the Merchant in exchange for a part of the processing fees.
ISO (Independent Service Organization):
A firm or organization w
hich solicits offers to process non-cash and credit card transactions, usually in exchange for transaction fees or a percentage of sales.
The Acquiring Processor
The Acquiring Processor routes the transaction through the electronic financial networks for processing and settlement, delivering the payment to the merchant’s online account once it has been obtained from the credit-card holder’s account with the issuing bank.
Getting a merchant account is very easy – understanding it is a different story. There can be a lot of different fees associated with a merchant account*:
Discount rate (Visa / MasterCard): usually 2.39%
Transaction Rate (usually $.25-.30 per transaction)
Batch Fee(usually $.25-.30 per batch)
Address Verification Service (AVS) (usually $.05 per transaction)
Electronic Gateway Fee ($10-$30 monthly)
Statement Fee ($0 - $20)
Customer Service Fee ($0 - $20)
Monthly Minimum ($0-$50 – for example, if your discount rate is 2.5% and you sell $1,000 that month, your charge is $25.00. If you monthly minimum is $25.00, you have met that requirement, and should not be responsible for that amount)
Application Fee ($0-$1,000)
Merchant Account Set-Up Fee ($0-$1,000)
Electronic Payment Gateway Set-Up Fee ($0-$1,000)
Membership or Annual Fee ($0-$1,000)
Virtual Terminal ($0-$25 monthly)
As you can see, there can be a lot of charges. The two basic components of an internet merchant account are a credit card processor and an electronic payment gateway. The electronic payment gateway is similar to the point-of-sale (POS) terminal in the grocery store. The main
gateways are LinkPoint, Authorizenet.com, and Verisign. All three of these companies cannot process credit cards without the aid of a credit card processor. lace>U.S.lace>
A few things to ask a merchant account provider:
Do they provider 24 hour customer support?
What are the charges of a transaction and monthly charges?
Whatever they tell you on the charges – when you sign the contract, make sure that those charges are spelled out on the contract. This is what matters. Also read the print to see how long the contract is good for. They are either usually 6 months, 12 months, 24 months, or 36 months. Twelve months might be a good start because if Visa / MasterCard decide to raise the interchange rates, your rate will be guaranteed for the amount of that contract. Usually once the contract has expired, it will be month-to-month.
Do your due diligence. Let’s say you sign up with a 2.39% discount rate, $.25 transaction fee / batch fee, $.05 AVS, $15.00 monthly electronic gateway fee, and $10 customer service fee.
Many thanks to Corey Bryant http://www.merchantaccounts4less.com/
Copy Rights 2004
08-31-2004, 05:01 PM #2denisGuest
Very good article!
09-04-2004, 12:12 PM #3
- Join Date
- Feb 2004
Very good article on some of the financial backend that sometimes gets overlooked in the world of web hosting.The Web Hosting Show - The Voice of the Web Hosting World
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