Business Types Unqualified for Credit Card Merchant Services

Merchants operating in certain industries are barred from setting up merchant credit card processing services in the United States. Other businesses are greatly restricted from the ability to take credit cards but are allowed. In order to qualify, the latter group must produce a heap of documents, in addition to the paperwork that is required anyway during the application process. To top it off, such businesses and their owners must have a very solid credit history.

Who Makes the Qualification Decisions?

The decisions on who will be included in the so-called "black lists" of unqualified card acceptors are made by the merchant services providers, who are after all the ones that bear the ultimate liability for any financial losses, resulting from their merchants' activities. When making their qualification decisions, credit card merchant services providers to a large degree implement rules created by Visa and MasterCard, the two credit card payment networks.

You also need to understand that "black lists" change over time. Most of the time the changes involve adding new entrants, however on occasion a lucky merchant type does get out of them.

How Are Qualification Decisions Made?

Even though black lists are not immutable, there definitely are a couple of firm rules that credit card merchant services providers follow when making their decisions, which all but prevent some businesses from ever leaving these lists. These two qualification criteria are:

1. Whether or not the operations are legal. Needless to say, if a card acceptor engages in an illegal activity, it will not be allowed to accept cards.
2. What the merchant's chargeback level is. Some industries have historically produced excessive levels of chargebacks and therefore are designated as unqualified. Excessive levels are defined as chargeback rates in excess of one percent of the card acceptor's transaction count for any given month.

To make things even more complicated, once the credit card merchant services account is set up, the payment activity is monitored on monthly to ensure adherence to the above requirements. If found in breach with the rules, your account will be suspended or directly terminated, depending on your offense's gravity.

Unqualified Credit Card Merchant Services

Following is a list of the business types that will most definitely be on everyone's black list:

• Merchants engaging in illegal activity.
• Businesses offering advanced payments greater than 1 year.
• Any adult-oriented types of products and services.
• Cash advances and cash gifting.
• Charities lacking evidence or proof of 501( C ) (3) status.
• Check cashing establishments.
• Collection agencies or firms engaged in recovering and / or collecting past-due receivables.
• Companion and / or escort services.
• Credit card protection or identity theft providers.
• Credit repair and / or restoration offers.
• Debt consolidation or reduction services.
• Drug paraphernalia of any form.

Payment Processing with Authorize.Net Merchant Account

An Authorize.Net merchant account enables its users to accept credit and debit cards for payment. It is a payment processing service that uses a payment gateway to securely transmit transaction information between the card acceptor and the acquiring bank. Authorize.Net is the world's most widely used payment gateway. It functions through integration with an e-commerce website's shopping cart. Businesses can get an Authorize.Net account directly from the company that makes it or through a processor as a package with the merchant account.

What Authorize.Net Does and Does Not Do

In addition to facilitating payments online, Authorize.Net provides users with a browser-based interface that allows for batches to be reviewed and the whole account to be securely managed from anywhere internet connection is available.

Although it seems obvious, experience has taught us that it is worth repeating that a payment gateway cannot actually be used for processing swiped transactions, for the simple reason that it is a virtual tool. Rather, when you need to do it, you will process card or check payments by key-entering the payment information through a service we call virtual terminal, which comes as a part of the Authorize.Net gateway package and you don't have to pay anything additional for it. The virtual terminal can perform all functions its physical counterpart does, including, but not limited to, authorization, authentication, capture, refunds and voids.

E-commerce merchants use virtual terminals quite often, especially when customers are calling in their orders and paying over the telephone. Moreover, the virtual terminal is the service you use to process a refund.

Authorize.Net and its major competitors all support the most commonly used fraud detection services, including the AVS and security code validation.

Why Use Authorize.Net Merchant Account?

Well, the single biggest advantage Authorize.Net exerts over all other payment gateways is that it is the default setting for just about all major shopping carts (actually most minor ones I am aware of too), which means that it is incredibly simple to implement. When a merchant sets up a processing service, the acquirer provides a download sheet, which lists several numeric codes. Once these numbers are entered into the appropriate fields in the gateway's account interface, the merchant is ready to start accepting payments.

Pricing Considerations

E-commerce merchants need to be prepared for the higher costs associated with web-based payment processing services, compared with the ones designed for retailers operating physical stores. The reasons are several, but the additional cost of using gateway account is certainly on top of the list. All Authorize.Net fees, including the per-authorization fees, are on top of your merchant account charges.

In other words, in addition to the discount rate and any monthly service or statements fees, a merchant will also be charged a gateway monthly fee and gateway per-transaction charges. These costs can vary in a significantly wide range from one service provider to another, so you will have to request several proposals, prior to making a decision.

How to Accept Credit Cards in 5 Easy Steps at Your Retail Store

When you accept credit card payments in a face-to-face environment, you benefit for the lowest payment processing rates available. The reason is that such payments are typically more secure and tend to result in fraud much less often than non-face-to-face payments. By definition, card-present transactions are payments where both the card and the cardholder are physically present at the checkout. Card-present settings include checkouts at supermarkets, convenience stores, restaurants, etc.

Note that the requirement is for the customer and her card to be present, not the merchant. What this means is that payments where cardholders use unattended payment stations, such as POS terminals at gas stations, for example.

Businesses accepting cards in face-to-face settings are mandated to make all possible efforts to ensure that all payments are genuine. To achieve that, everyone working at the POS terminals must be very well versed in the transaction processing procedures.

However, whether the person manning the POS machine is experienced at the job or not, if they follow a few simple procedures for each transaction, they will be certain to achieve the targeted results every time a bank card is submitted by a customer.

So with that in mind, a typical face-to-face transaction goes through the following stages:

1. Swiping the card. The cardholder swipes her card through the POS terminal's slot to complete the payment. Be prepared to assist your customer when needed and show her how to do it if she is having difficulties swiping. When the swipe is accepted, take the card in your possession for inspection.
2. Inspect the card. After the swipe goes through, the information is sent to the card issuer for authorization and you typically have a few seconds before you receive the response. Use them to examine the card for signs of alteration. Take a look at the security features and make sure they are all valid and have not been tampered with. In particular, inspect the expiration date, card number and cardholder name.
3. Obtain your customer's signature. After the authorization approval is received, obtain your customer's signature on the printed transaction receipt. If your store policies do not require signatures on transactions below a certain amount, skip this and the next steps for these low amounts.
4. Check the signatures. Compare the signature placed by your customer on the transaction receipt to the one on the card.
5. Complete the payment. If your actions have not discovered anything suspicious, complete the transaction and give your customer a copy of the receipt, along with the purchased item. However, if you have a cause for suspicion, you will need to make a Code 10 call to your voice authorization center to receive instructions on how to proceed.

If you do this every time, you will receive the lowest available processing fees for all of your transactions.

How to Use Flat Rate Merchant Account Pricing

A brand-new pricing model has been making the press release rounds lately that can benefit merchants accepting payments in both card-present and non-face-to-face settings. It is known as flat rate merchant account pricing and we really like it and recommend it to our merchants.

Why a New Pricing Model

This is a perfectly legitimate question. Let me give you some background. We first began offering electronic payment services as a tiny three-person agent of one of the biggest merchant processing companies in the country a dozen years ago and we immediately realized that we had a huge problem explaining to applicants the way the two most dominant pricing structures work. In fact, we still do grapple with the very same issue.

See, it was that what we knew was the credit card processing pricing structure that was certain to save the most money for our clients – the cost-plus – was the most difficult one to explain. There was, to be sure, the odd sophisticated merchant who would explicitly ask for this model of pricing, but these were very few and far between. I have written extensively elsewhere about what interchange rates are and how the cost-plus structure works and still recommend that you can give it a try, if you want.

Even so, at the end we were forced to make the two-tiered pricing model our default option. We didn't love it so much – we still don’t – but it was somewhat simpler to understand. Then again, somewhat is the operative word. Even though a card acceptor who choose this plan had each of their transactions processed at one of only two tiers, the problem was to estimate with precision exactly how a given rate was chosen and merchants were understandably not happy with that.

I actually wrote a rather extensive post on how the cost-plus measures up to the two-tiered pricing model, so you can take a look at it as well, if you need to get a deeper perspective. Nevertheless, the bottom line was and still is that neither structure was satisfactory and our sales staff were spending most of their working hours answering questions about pricing. It was an unacceptable situation.

The Solution: Flat Rate Merchant Account Pricing

Enter flat rate merchant account pricing. We are convinced that it solves both of our issues by being at the same time cost-saving and very simple. Let me quickly go over its main features. Flat rate pricing works by:

1. Processing all card transactions at one single rate.
2. Eliminating the qualified, mid-qualified or non-qualified fee categories.
3. Charging no authorization fees.

So with flat rate pricing card acceptors know exactly how much they would pay for each transaction and can very easily estimate their total processing cost for any given time period, knowing only their total processing volume and the transaction count.