Types of Credit Card Services for Payment Acceptance

Credit card services for payment acceptance are offered by Visa and MasterCard acquirers, usually through third parties, to commercial and non-profit organizations. These services are in fact a kind of credit line that the acquirer extends to the merchant to enable it to take for payment the card types and other payment forms that are mentioned in the merchant processing agreement.

How Do Credit Card Services for Payment Acceptance Work?

When a business or a non-profit accepts a customer's credit or debit card for payment, the transaction data are sent to the processing bank, which then pays the card acceptor the payment amount, after first subtracting the amount of the interchange fees and its own processing costs. Then the acquirer makes a payment request to the card issuer. The issuer, for its part, then credits the processing bank's account for the transaction amount, after first deducting the interchange cost, and includes the transaction on its cardholder's monthly statement. The customer finally pays the issuer at the end of the month to close the payment cycle.

Types of Credit Card Services

There are multiple different types of credit card services, however the most commonly used are:

• Physical retailer type. This type of credit card processing account encompasses all payment services that are based on physical credit card machines that "read" the account information from the magnetic stripe of the credit or debit card that is swiped through the terminal. Due to the fact that the business or non-profit can physically validate the card's validity (hence, card-present) as the payment is being made, these credit card services are generally seen as much less likely to generate fraudulent transactions and so their users benefit from slightly lower processing fees.
• Internet types. Encompassed in this sub-group are all credit card services where the payment information is key-entered into the acquiring bank's system, through either a web browser or a phone keypad. The card itself is not present during the transaction (hence, card-not-present). As the card acceptor can never physically inspect the card and the data are instead given to him or her, card-not-present transactions have historically been proven to generate higher rates of fraud, chargebacks and processing errors and are consequently processed at slightly higher rates. There are two main sub-categories in this group:
  
  • E-commerce merchant type. These card acceptance services are used by internet-based businesses and allow cardholders to key-enter their credit or debit card data into a payment form displayed on the merchant's own website. Once provided, the payment information is automatically sent, via a payment gateway, to the acquiring bank.
  • MO / TO merchant type. MO / TO (mail order and telephone order) credit card services enable businesses and non-profits to key-enter the payment information, as given to them by the cardholders, into a form on the acquiring bank's server or, through a phone keypad, to call the transaction data into the processor's payment system.