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MERCHANT ACCOUNT BASICS
This section is provided for
information purposes only. Payment Gateways are separate from your merchant
account. The terms and conditions of your merchant account are between you
and your bank or merchant account provider, and should be consulted for specific
information related to your merchant agreement with your bank or merchant
account provider.
A merchant account is required to
accept credit cards, Visa & MasterCard. A merchant account is a special
account with a bank that is a member of the Visa and MasterCard
associations. Such a bank has been certified by Visa and MasterCard
associations and can provide you, the merchant, with all of the services
related to your merchant account. Once your merchant account is setup and
"live" on the credit card system, you can accept credit cards
from customers generally as follows:
- A customer presents their
credit card for payment
- Using their credit card number,
you submit an electronic request to the processing network for
"authorization to capture funds" from the cardholder's
credit card account in the amount of the purchase. Traditionally, one
would submit this request by swiping a credit card through an
electronic transaction terminal provided by the merchant account
provider. With Payment Gateways,
this request is provided electronically to our payment gateway
servers, which then route the request along the processing network.
- The processing network
immediately receives your electronic request and determines if the
cardholder's account is valid and if the funds are available. If they
are, the processing network returns an electronic response to your
terminal or computer. This response is called an "authorization
code", and is your guaranteed authorization to capture the funds.
Typically, this code is a six-digit number. The transaction and its
associated authorization are stored in a "batch", where
other transactions for that day reside.
- You print a receipt for the
customer using the electronic terminal or your computer and the
customer signs the receipt. As far as the customer is concerned, the
transaction is complete. As far as you the merchant are concerned,
there is one more step to complete the transaction.
- At the end of your business day
(usually), you submit a final request to the processing network to go
ahead and "capture the funds" that you obtained
authorizations for during the course of business that day. This is
called "settlement" or "settling your batch". This
request is also submitted using the electronic terminal or your
computer. The processing network immediately receives your response
electronically and determines if the capture amounts contained in your
request match the authorizations for each item. If so, the request is
granted and an "Accepted" response is returned to your
electronic terminal or computer. A settlement report can be printed
showing the grand totals by card type (Visa, MasterCard, American
Express, Discover, etc) for the settled batch. Note: any corrections
to your batch, such as voiding a transaction, must be made prior to
settlement.
- Within 48 to 72 hours
(usually), the funds associated with the batch you settled are
deposited electronically into your business bank account. Typically,
the discount rate you pay to your merchant account provider is
deducted from the deposit before it is transferred to your bank account,
resulting in a "net deposit" of funds.
- At the end of the month, your
merchant account provider will mail a statement to you, detailing the
credit card activity for the month and the associated fees you have
been charged.
Now that you understand the basics
of how a credit card merchant account works, you can see the role that
Payment Gateways have in the processing of your credit card transactions.
Understanding your merchant
providers rates and fees
All banks and merchant providers
require "transaction fees" from you for accepting credit cards.
Typically, these fees are broken down into 3 categories: a discount rate,
a transaction fee, and monthly fees. For the bank's purposes, a
transaction is usually defined as any communication between you and the
processing network. A "credit" transaction is treated the same
as a regular transaction. Settling a batch is usually considered a
transaction as well, as it involves communication with the processing
network.
Discount Rate
This is the percentage of the
total transaction amount that the bank will usually deduct prior to
transferring your deposit into your bank account. Typical discount rates
range from 1.5% to 8%, depending on your type of business and other
factors. A higher rate may be charged on individual transactions if the
transaction doesn't conform to certain qualifications, as described by
your bank or merchant provider. For instance, accepting a "Visa
Business Card" credit card may cost you 1% more than regular
transactions. The reasons for these non-qualified transaction surcharges
and complete details on all transaction qualifications should be discussed
with your bank or merchant provider. Address Verification (AVS) may also
fall into this category when not used properly. For more information
click here.
Transaction Fees
This is a flat amount that you pay
for each transaction. Typical transaction fees range from 20 cents to 50
cents per transaction.
Monthly Fees
These are fees charged for
other account related services, such as customer service, your monthly
statement, network access fees, and minimum monthly fees.
All the fees and charges are required to be disclosed to you prior to
your commitment to the merchant agreement between you and your bank or
merchant provider, and are usually enumerated carefully to you in the
merchant agreement itself.
Merchant Account Providers / Processing Networks
E-Commerce Exchange
uses the following Merchant Account Providers and their corresponding
Processing Networks.
iPayment
offers
FDR Nashville, FDR Omaha,
Vital/Visanet, Paymentech and Global Payment Systems.
IMS
offers FDR Omaha,
FDR Nashville and
Global Payment Systems.
Optimal
offers FDR Nashville, FDR Omaha. Vital/Visanet, Paymentec and Global
Payment Systems.Worl dPay
has its own proprietary
network that only works with Worldpay Gateway.
*
This special
limited time offer represents the average pricing for most
merchants. If you feel you justify lower pricing due to previous
processing history, credit, volume, a
special offer through one of our Partners or other, please
contact one of our Sales Consultants/Agents.
** Merchant Accounts
will work with any kind of equipment or software.
For those that don't
qualify for a US Merchant Account, Click for an International Merchant
Account and/or Payment Gateway and pricing will be displayed before you
complete the application based on your country and other factors
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E-Commerce Exchange, a wholly owned subsidiary of iPayment, Inc., is a Registered ISO/MSP of the following FDIC Insured Bank:
Wells
Fargo Bank, N.A.,
Walnut Creek, Ca.
Credit Card Processing services also provided by WorldPay, a part of the Royal Bank of Scotland Group.
Innovative Merchant Solutions, an Intuit Company, is a Registered ISO/MSP of the following FDIC Insured Banks:
WestAmerica Bank, Santa Rosa, CA and JPMorgan Chase Bank, Columbus, OH.
and Optimal Payments, a registered ISO of JPMorgan Chase Bank, Hicksville, NY and a registered ISO/MSP of Merrick Bank, South Jordan, Utah
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© 2005 E-Commerce Exchange |
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