Understanding what merchant services is all about
With “back-to-school” time in mind, this is a good time for business leaders to get a back-to-fundamentals review of merchant account services.
What is a merchant account service provider?
A merchant account provider, aka a credit card processor, is an entity that provides you with the ability to accept credit and debit cards, as well as other forms of electronic payment.
What is a merchant account statement?
A merchant account statement is a monthly statement that details the deposits to your payment processing account, as well as the fees you are paying for merchant processing services.
What is a merchant services account?
A merchant services account is an arrangement between you and a credit card processor that allows you to accept credit and debit cards from your clients or customers. There are two types of merchant accounts; one for card-present (CP) transactions and one for card-not-present (CNP) transactions.
Card-present vs. card-not-present accounts
An account for card-present transactions is utilized when the cardholder and payment card are physically present at the point of sale. An account for card-not-present transactions is used when neither the cardholder, nor the payment card are present at the time of sale (or they are present but electronic data is not provided during the transaction). An example of a CNP transaction is an order placed by mail.
Why does card-present and card-not-present matter?
The main reason it matters if a transaction is considered card-present or card-not-present is the method of processing can impact your costs. As a general rule, the interchange rates charged by the major credit cards are lower for card-present transactions than card-not-present transactions, because a card-present transaction is considered lower risk than one where the card is not present.
What is interchange?
Interchange is the fee assessed by the payment card issuing bank for every transaction. Typically, interchange accounts for the majority of the cost involved in processing a transaction. There are hundreds of different payment cards and thus hundreds of different interchange fees.
What is a discount rate?
In credit card processing, the discount rate is the percentage charged on each transaction you process. The rate varies depending on the type of payment card and the type of transaction.
What is a payment gateway?
A payment gateway is software on a third party provider’s server that facilitates the transmissions between your business and the payment network. Your business needs a payment gateway if you want to accept card payments online or via mobile devices.
What is a chargeback?
A chargeback occurs when a cardholder disputes a transaction; the disputed amount is withdrawn from your account until the matter is settled. The chargeback/dispute process has been evolving of late, with Visa® instituting a new global program in April 2018 that is designed to simplify the dispute process and resolve claims more quickly. For more information see the Visa Claims Resolution Summary.
What is PCI compliance?
If you are PCI compliant it means you are adhering to the Payment Card Industry Data Security Standards (PCI-DSS), which were created by the four major payment card brands to improve the security of electronic transactions. To learn more about the standards and how they are administered visit the site maintained by the Payment Card Industry Security Standards Council.
What is EMV®?
EMV cards include a micro-processing chip that generates a unique number (cryptogram) for each sale. An EMV card is “dipped” into the slot on an EMV-enabled terminal (as opposed to “swiped”), which improves security because the cryptogram changes with every transaction, making it almost impossible to use a cloned or lost/stolen card. Your business should be EMV compliant; businesses that are unable to support EMV cards may be held financially responsible if a fraudulent transaction occurs.
For more information,—including definitions to commonly searched terms—review the TSYS Merchant Services Glossary. Or give us a call at 410.828.4286.