A merchant account allows a business to accept credit cards, debit cards, gift cards and other forms of payment cards. This is also widely known as payment processing or credit card processing.

Merchants, or business owners who receive credit card payment for their goods or services, must apply for a merchant account typically through a merchant bank or MSP (Merchant Service Provider). The merchant account will typically be established based on several factors. Merchants who own businesses with poor or no credit may find it difficult to establish a merchant account through traditional routes.

Qualified Credit Card Processing Rate

Mid-qualified Rates

Also known as a partially qualified rate, the mid-qualified rate is the percentage rate a merchant will be charged whenever they accept a credit card that does not qualify for the lowest rate (the qualified rate). This may happen for several reasons such as:

A consumer credit card is keyed into a credit card terminal instead of being swiped

A special kind of credit card is used like a rewards card or business card

A mid-qualified rate is usually 1.50% - 2.50% higher than a qualified rate. Interestingly, the kinds of transactions that are usually grouped into the Mid-Qualified Tier only cost 0.30%-0.50% more in interchange costs, so the merchant account providers make much of their profit from these transactions.

With the prevalence of rewards cards it is not uncommon for 15-40% of transactions to be mid-qualified.

Non-qualified Credit Card Processing Rates

The non-qualified merchant account rate is the highest percentage rate a merchant will be charged whenever they accept a credit card. All transactions that are not qualified or mid-qualified will fall to this rate. This may happen for several reasons such as:

A consumer credit card is keyed into a credit card terminal instead of being swiped and address verification is not performed

A special kind of credit card is used like a business card and all required fields are not entered

A merchant does not settle their daily batch within the allotted time frame

A non-qualified rate is usually 1.50% - 2.50% higher than a qualified rate (and only cost 0.50%-1.50% higher in interchange costs).

What iS a Payment Gateway

Basically, a payment gateway is a secure connection to the processing networks. As far as processing networks go, they are very complex networks that connect directly to the back-end processors and they also connect to the card issuing banks. The processors have a series of platforms under them that the payment gateways connect to. Here is a really simple article and diagram to help understand processing platforms.

Now as far as why you cant connect directly to the processor and process through them. There are several reasons. First off, they flat out don't allow it. The processors in no way want to deal with millions of customers trying to connect servers directly to them to process credit cards. Apart from being a technical support nightmare, there are so many ways that servers could connect to them, that it is just way more than they want to deal with. By using payment gateways, they know exactly what data is going to them which is great for control and fraud screening. Secondly, some ecommerce sites do connect directly to them, but these would be the ones doing hundreds of millions per year in processing.

Why Accept Credit Cards Credit Card Terminal

A credit card terminal is a stand-alone piece of electronic equipment that allows a merchant to swipe or key-enter a credit card's information as well as additional information required to process a credit card transaction. A credit card terminal is a dedicated piece of equipment that only processes credit cards although it is common for related transactions including gift cards and check verification to also be performed. A credit card terminal typically must be plugged in to a power supply and connected to a telephone line. However, newer terminals may be powered by batteries and communicate over the Internet. Some credit card terminals are connected to the cellular network and communicate wirelessly. When a credit card is run through, it contacts the network to verify that the credit card can be charged. The actual billing of the charge is done at the end of day credit card processing batch where all sales from the terminal of the day are sent out.

Most credit card terminals in current use consist of a modem, keypad, printer, magnetic stripe reader, power supply and memory card.

A merchant accepting credit cards with a terminal in the United States will usually acquire that terminal in one of 4 ways. They may purchase the terminal, rent the terminal, lease the terminal or be offerred the terminal at "no cost" in return for` contractual obligations from a merchant processor.

As with computers, there is a wide range of memory capacities and other features like built-in printers and debit card pinpads that affect the manufacturing cost of a credit card terminal.

Because of the general lack of knowledge regarding the cost of a credit card terminal, a business owner would be wise to make sure they are paying a fair price or making an acceptable contractual agreement before making a written commitment for procesing and/or a credit card terminal.

When a terminal is leased there is usually a 3rd party leasing company involved and it is not uncommon in many U.S. states for these leases to be non-cancellable.

Online Merchant Account © Copyright Chargecentral.com 2006-2007, All Rights Reserved

We provide Internet credit card processing and merchant account to merchants. We take care of your merchant account, even high risk merchant accounts. Our merchant service includes a free one hour merchant account set up, free credit card processing fraud detection set up, free donation billing & recurring billing processing set up and many more.