Merchant Account Glossary

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ABA Routing Number:

This 9-digit number is assigned by the American Banker’s Association and is used to identify individual banks. When performing an ACH transfer from one bank account to another, this number is used to assist the electronic routing of funds.

Access Number:

An access number is a telephone number used by the modem in a computer to communicate with an Internet Service Provider allowing for online access.

ACH (Automated Clearing House):

A processing organization networked with others to exchange (clear and settle) electronic debit/credit transactions (no physical checks).

Acquiring Bank:

This is the status of a Visa/Master Card member bank that establishes and maintains the merchant relationship and processes all merchant transactions.

Address Verification Service (AVS):

AVS is a tool for merchants to reduce the risk associated with card not present transactions, such as mail order, telephone order or Internet transactions. The billing address given by the customer is passed in the transaction and it is checked against the billing address on file at the customer’s card issuing bank.

Annual Fee:

A fee charged to Merchants, which can be used to lower the discount rate.

Application Fee:

This is a fee for processing the paperwork and setting up the account.

Arbitration:

The procedure a member can use to resolve a chargeback-related dispute between two members. MasterCard or Visa resolves the dispute between members and decides responsibility for the fines that may be assessed to the participating members.

Authorization:

This is a process where an issuing bank or authorized agent approves a transaction for the specified amount. This process takes place by the merchant via telephone or terminal before the transaction is completed.

Authorization Code:

This code is given by the credit card issuer and authorizes a specific transaction. This number should be saved for future reference.

Authorization Fee:

A communication charge for each transaction (Sale, Credit, Void), and each time a merchant closes a batch of transactions.

Authorize.net:

Authorize.Net is a payment gateway service provider allowing merchants to accept credit card and electronic checks payments through their Web site and over an IP connection. With a userbase of over 160,000 merchants Authorize.Net is the largest payment gateway service provider. Every major and virtually every minor shopping cart supports Authorize.net’s Advanced Integration Method by default.

Automated Response Unit (ARU):

An ARU allows the manual keyed entry and subsequent authorization of a credit card over a cellular or land-line telephone. A business typically imprints their customer’s card with an imprinter and then processes the transaction instantaneously over the phone.

Average Ticket Size (AVT):

The average Visa/MasterCard dollar amount of each transaction the merchant anticipates processing or actually processes over time.

Bankruptcy Notification Service:

This service is a joint effort between MasterCard and Visa. Bankruptcy filings and cases are gathered from all the bankruptcy courts and sent to the credit bureau for account numbers. Bankruptcy information is routed daily to appropriate members.

Basis Points:

1/00th of a percentage point is a basis point. In merchant processing terms there are three distinct categories: Qualified, Mid-Qualified, and Non-Qualified. Concerning the discount rate, there is an increase of basis points from Qualified to Mid-Qualified and an increase from Mid-Qualified to Non-Qualified.

Batch Processing:

The credit card transactions remaining on a merchant’s terminal are stored in an “open” batch. They will remain there unless the merchant “batches out”. Once the merchant batches out, the daily sales are submitted for processing, and the batch is now “closed” or “settled”.

Business Financials:

Business Financials are a set of reports including a: Profit and Loss Statement, Balance Statement, and Statement of Cash Flow.

Card Issuer:

The financial institution or company that has provided a card to a cardholder.

Card Present:

A transaction evidenced by the action of swiping a card through a terminal or by an imprinted and signed credit card draft.

Cardholder:

The person who the credit card is issued to and whose name is embossed upon the face of the card.

Cash Advance:

A transaction in which only a bank or financial institution can submit, for cash to a cardholder. The transaction is posted against the cardholder’s bankcard account. Interest fees for cash advances are charged from the day of the transaction.

Charge-Off:

The situation in which the issuer is faced with a delinquent loan of such severity that it must absorb the amount of the debt, at least temporarily, in order to clear the amount from its ledgers. The issuer may still attempt to collect some or all of the amount owed through the recovery process.

Chargeback:

A chargeback is the result of an action taken by a cardholder who disputes a credit card transaction through their credit card issuer. The card issuer initiates a chargeback against the merchant’s account. The sale amount of the disputed transaction is immediately debited from the merchant’s bank account. Merchants have 10 days in which to dispute the chargeback. This may be accomplished by providing the card issuing bank with a proof of purchase by the cardholder. This could be a signature or proof of delivery. A chargeback fee is generally assessed to the merchant account by the merchant bank for the handling of this process.

Checklister:

A system that acts as the gatekeeper of merchant processing. Applications are entered into the system, checked for completeness, and are summarized to quickly determine the status of a file.

Contingent Liability:

Contingent Liability refers to a situation created when a merchants processes transactions before the date a cardholder receives the goods or services purchased. Travel agencies and mail order / telephone order merchants pose contingent liability risks to the bank.

Corporate Resolution:

A document used by a corporation that designates individuals to allow them to act as signers on behalf of the company.

Credit Card:

A plastic card having a magnetic strip, issued by a bank or business authorizing the holder to buy goods or services on credit. Also called charge card.

Credit Card Fraud:

Credit card fraud is a kind of fraud where a merchant (business, service provider, seller, etc.) is “tricked” into releasing merchandise or rendering services, believing that a credit card account will provide payment for goods/services. The merchant later learns that they will not be paid, or the payment they received will be reclaimed by the card’s issuing bank.

Credit Card Processing:

Obtaining immediate authorization of a credit card purchase when ordering online. The card processing company notifies the merchant, and the merchant confirms or denies the order with the customer.

Credit Card Processors:

Merchant services providers that handle the details of processing credit card transactions between merchants, issuing banks, and merchant account providers. Web site operators usually must first establish their own merchant account before contracting for credit card processing services.

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.

Credit Report:

A credit report is run on every signing principal on the merchant account application and is used to make approval decisions.

Customer Satisfaction:

Customer satisfaction is an ambiguous and abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and product/service to product/service. The state of satisfaction depends on a number of both psychological and physical variables which correlate with satisfaction behaviors such as return and recommend rate. The level of satisfaction can also vary depending on other options the customer may have and other products against which the customer can compare the organization’s products.

CVV2:

(Card Verification Value2) A three digit security code that is printed on the back of most credit cards and is sometimes asked by the merchant along with the card information. This code helps aid in reducing fraud in a card-no-present environment and helps validate a genuine Visa / MasterCard credit card.

Data Capture:

The collection, formatting and storage of information in computer memory. Some point-of-sale terminals perform data capture functions. See EDC terminal.

Debit Networks:

A multitude of companies that honor card transactions by debiting the cardholder’s checking account for the purchase amount. Debit Networks are smaller than their credit based counterparts and are more numerous.

Deposit Account:

An account used by a customer to make deposits and withdrawals at a financial institution. Includes checking, savings and NOW accounts, etc.

Direct Mail Merchant:

Indicates merchants that submit actual sales drafts for payment (paper merchant) through the mail for payment

Direct Marketing:

Direct Marketing is a scenario where a merchant solicits business to people who did not ask to be solicited, otherwise know as “junk mail”. Direct Marketing is often confused with “Mail Order / Telephone Order”. A merchant that sends catalogs or brochures to their prior customers or current subscribers is not a direct marketer. A merchant that sends catalogs or brochures to everyone is a targeted area IS considered a direct marketer.

Discount Rate:

A percentage of each transaction that the merchant is charged by the Merchant Service Provider for facilitating a credit card transaction.

Doing Business As (DBA):

The DBA is the name the public sees, whether on a physical storefront or on the web. If the merchant has another business, then we would need a separate application for both.

Downgrades:

A downgrade occurs when the merchant does not meet the Visa/MasterCard requirements for a transaction and as a result the transaction is moved to a lower level of interchange. The merchant pays a higher rate for downgrades.

e-Commerce:

e-Commerce stands for Electronic Commerce. E-Commerce is the process of buying or selling goods or services via the internet. This is most commonly done though a merchant’s or service provider’s website and usually involves an online catalog and shopping cart. Payments are processed with an online gateway such as Authorize.Net. eBay is another form of e-Commerce.

EDC Terminal:

Also referred to as Electronic Data Capture terminal. A point-of-sale device that reads information encoded in the bankcard’s magnetic stripe, performs authorization functions, stores transaction data and batches and transmits that data to the acquirer for processing.

EFTS:

Electronic Funds Transfer System-An electronically-based system that eliminates the need for paper (such as a check) in the movement of funds, e.g., ATM withdrawal or a pay-by-phone transaction.

Electronic Ticket Capture (ETC):

An ETC system reaches out and “grabs” sales ticket information electronically. Buyer information is contained on the magnetic strip on the back of the credit card. The merchant “swipes” the card through a terminal, and the buyer information is “read” by the computer system and merged with the sales information. It then processes the ticket just as if the merchant was making a manual deposit at a bank. This action is normally done in “batches” of tickets, such as at the end of the day.

Electronic Transactions Association (ETA):

ETA is the association for the electronic payments industry and serves the needs of organizations who offer transaction processing products and services. ETA is an international association with over 400 member companies spanning 7 different countries. The ETA holds an annual meeting and expo.

Embossing:

The process of printing data, in the form of raised characters, on the bankcard. Provides identification of the card and allows the imprinting of sales drafts.

Encryption:

The method used to scramble financial information for security purposes. For example, all Personal Identification Numbers (PIN’s) are encrypted when transmitted for authorization.

Face-To-Face:

In a face-to-face environment, transactions take place with the cardholder and merchant face-to-face. The cardholder either swipes the terminal or signs an imprinted sales draft. This type of transaction has the lowest discount rate as it is considered low risk.

Factoring:

The purchase of debts owed, or “accounts receivable,” in exchange for immediate payment at a discount. In e-commerce, the term is often applied to ISOs that offer to process credit card transactions through their own merchant account rather than through an account established by the merchant, in exchange for a percentage of the transaction or other fee. Factoring of credit card debt is illegal.

Federal Tax ID Number:

This is a 9-digit number assigned by the IRS and is used to track business taxes. All applications are required to specify their Federal Tax ID number. Some smaller merchants who are sole-proprietors may use their personal Social Security Number in place of a Federal Tax ID number.

First Data Corporation (FDC):

This company processes a portion of our merchant’s credit card transactions. First Data is based in Omaha, Nebraska. They are formally known as First Data Resources (FDR). The two names are mistakenly used interchangeably.

Full Business Name:

The full name of a business, which directly corresponds to a Federal Tax ID Number. When submitting an application to Ballistic Merchant Services a merchant must use their full business name.

Gateway:

This is a service which connects the shopping cart with the card processor. Essentially, the gateway accepts the data in the shopping cart’s format, translates it to the card processor’s format and sends it to the card processor. It then does approximately the same thing, but in reverse, when it returns the authorization and other codes to the shopping cart.

Global Payment Systems:

The primary data transport communications facility that links all MasterCard customers and MasterCard data processing centers into a single on-line financial network (also called a packet-switching network.) Global Payment Systems separates communications processing from financial applications to transmit messages over a single communications network. Used to be referred to as Banknet.

Guarantor:

A personal guarantor is somewhat like a co-signer. The guarantor agrees to personally guarantee any processing losses Ballistic Merchant Services incurs as a result of doing business with the merchant. A personal credit report may be ordered for review by our underwriters.

Highly Suspect Merchant:

The primary data transport communications facility that links all MasterCard customers and MasterCard data processing centers into a single on-line financial network (also called a packet-switching network.) Global Payment Systems separates communications processing from financial applications to transmit messages over a single communications network. Used to be referred to as Banknet.

Holdback:

A portion of the revenue from a merchant’s credit card transactions, held in reserve by the merchant account provider to cover possible disputed charges, chargeback fees, and other expenses. After a predetermined time, holdbacks are turned over to the merchant. Note: Merchant account providers almost never pay interest on holdbacks.

Hypercom ICE 5500:

The Hypercom ICE 5500 is an affordable and flexible Web-enabled credit card terminal. The Hypercom 5500 also features a large, user-friendly LCD display, and provides all traditional credit card processing and transaction functions.

Hypercom Optimum T4100:

The Hypercom Optimum T4100 is a great machine to use with either an AMS retail merchant account or mail order merchant account. The Optimum T4100 is truly unique for our industry – the first terminal that cost-effectively combines performance, security, reliability, and ease of use. These elements are the cornerstone of our Optimum family.

Hypercom T7 Plus:

The Hypercom T7Plus is one of the most popular credit card terminals ever made. The T7 Plus is both compact and highly advanced. Merchant Warehouse offers the Hypercom T7Plus at the Guaranteed Lowest Price anywhere. The Hypercom T7 Plus is designed for merchants requiring a small countertop POS terminal. The terminal delivers a set of powerful features in an attractive, compact design. The Hypercom T7Plus is capable of accepting all magnetic stripe cards and provides fast transaction authorizations.

Hypercom T77:

The Hypercom T77 is a compact, high-performance terminal that supports a wide range of applications including credit, debit and stored-value cards, as well as check and proprietary card processing. Benefits of the T77 include savings on user training, reduced telephone line costs, and shorter processing and settlement times.

IC Verify:

This an ETC type 7 software that is marketed by CyberCash. It is widely used.

Imprinter:

A slide-type device used to create an embossed image of the credit cards characters on to a transcription slip. It is a necessity for all merchants to have a manual imprinter for special case where a physical imprint may be needed.

Independent Contractor/Independent Sales Organization (IC/ISO):

This is an acronym for a registered sales representative, people that have been contracted by a company to sell its merchant processing services throughout the nation.

Integrated Point of Sale (IPOS):

This acronym refers to conventional terminals that are “smarter” and more sophisticated in that they may be set-up to communicate with like terminals owned by the same merchant -even if they are located at different locations and with different merchant numbers.

Interchange:

The exchange of transactions between clearing members for Visa and MasterCard transactions, according to the associations operating rules and regulations. During this process transactions are routed to the appropriate card issuing bank.

Internet Merchant Account:

A Merchant Account is a relationship between a retailing company and a Merchant Bank, which allows the retailer to accept credit card payments from customers via the Internet.

Issuing Bank:

A bank or financial institution that is a licensed member of Visa and MasterCard that provides cardholders with a line of credit for cash advances or purchases, and is responsible for payments to an acquiring bank for purchases made by the cardholder.

Some of the largest issuing banks and financial institutions are:

Bank of America

Citi Bank

MBNA

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Keyed:

A transaction is “keyed” when the information from a credit card is manually typed into a terminal or computer. A transaction is keyed because either the card is not present at the time the transaction is entered or the equipment being used to process the transaction can’t read the card.

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Magnetic Stripe:

A stripe (on the bankcard) of magnetically encoded cardholder account information.

Magnetic Stripe Reading Terminal:

A point-of-sale terminal which reads the encoded information from the magnetic stripe when the bankcard is swiped through the terminal “slot.” The terminal automatically transmits account and transaction information to the authorizing agent.

Member Alert to Control High-Risk Merchants (MATCH):

As a way to control high-risk Merchants, MATCH is an alert system that uses an electronic bulletin board to track businesses and people when their merchant account has been reported “terminated” by an acquiring bank.

Merchant Account Provider:

Merchant account providers give businesses the ability to accept debit and credit cards in payment for goods and services. This can be face-to-face, on the telephone, or over the internet.

Merchant Accounting System:

The accounting system that transfers electronic funds from the Interchange to the merchant’s bank account via the Automated Clearing House (ACH) and sends the merchant monthly statements concerning the merchant’s credit card transfers.

Merchant Accounts:

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. Or an arrangement with a commercial bank or card issuer that permits a business to accept credit card payments and deposit those payments, less charges, to its bank account.

Merchant Identification Number (MID):

This is the number that the FDC assigns to a merchant to identify them along with the credit card processors that they use. It is not to be confused with a merchant processing account number or Terminal Identification Numbers (TIDs).

Monthly Volume (MV):

With Visa and MasterCard transactions, a merchant account is approved to process up to a maximum dollar volume. American Express, Discover, and any other card processing volumes are not included into the calculated monthly volume. This is a major consideration for the underwriter of the file and can determine the type of documentation that will be required for the file.

Nurit 3010:

The Nurit 3010 wireless credit card machine provides the ultimate flexibility to meet your point-of-sale needs. Whether dealing with a customer at the register or at a remote location, the Nurit 3010 lets you complete your transactions quickly and efficiently with a 5- or 9-hour UPS battery for wireless transactions and a speedy 12 lines-per-second printer.

Nurit 3020:

With the Nurit 3020, Lipman Nurit offers a compact, reliable credit card machine, from its family of reliable credit card processing equipment. The Nurit 3020 complies with universal industry standards for connectivity and data transfer.

Nurit 8000:

The Nurit 8000 is the premier wireless credit card processing terminal on the market. The Nurit 8000 operates on the reliable Cingular network allowing coverage throughout the country. With the Nurit 8000, you are always ready to accept credit cards.

Off-Line:

An operating mode in which terminals are not connected to a central computer. Responses are governed by guidelines, set by the issuer, which are housed in the terminal or in a supporting device.

Off-Line Transaction Processing:

Capture of order and credit card information for later authorization and transaction processing through a traditional card swipe terminal or through a computer.

On-Line:

An operating mode in which terminals are connected to a central computer and have access to the data base for authorization, questions and file changes.

Over the Counter:

Indicates merchants that submit actual sales drafts for payment (paper merchant) to a local bank for payment.

Payment Gateway:

A payment gateway is an e-commerce ASP service that authorizes payments for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar. It is the equivalent of a physical POS(Point-of-sale) terminal located in most retail outlets. Payment gateways encrypt sensitive information, such as credit card numbers, to ensure that information passes securely between the customer and the merchant.

Payment Gateway Provider:

A company that provides code and/or software for an e-commerce site to enable it to transfer information from its shopping cart to the acquiring bank, and on through the rest of the credit card transaction. See also payment gateway.

Payment Processor:

A company that provides the processing of credit card transactions. Payment Processors are to be distinguished from issuing banks which act as the recipient of the transaction proceeds.

Personal Identification Number (PIN):

This is the number that is assigned by the bank to cardholders for identification purposes. It can be used as an electronic signature so that ATM transactions and debit card transactions may take place without the card holder’s written signature. PIN numbers are also used in online payment processing.

Pin Pads:

This is a small box-type terminal attachment with a 10-key pad. They are used so that a cardholder may enter their PIN number and are commonly used for debit card transactions.

Point of Sale (POS) Terminal:

A small device that allows you to slide the credit card through to make a charge. This is what most retail stores have. It is fast, easy and accurate to make a charge on a customer’s credit card within seconds. It is also known as a terminal machine.

Purchase Cards:

Government agencies or corporations may issue their employees Purchase Cards. A Purchase Card is a credit card, but unlike a regular credit card it can only be used at certain types of merchant locations.

Qualified Discount Rate:

When conditions are optimum a Qualified Discount Rate is given to the merchant. This means that retail transactions are card-swiped and the merchant does an electronic batch settlement (batches-out) at the end of everyday. For Keyed or Internet merchants to receive a Qualified Discount Rate they can obtain an AVS response and an order number. They also need to batch-out.

Questionable Merchant:

A merchant location at which an excessive number of confirmed fraud transactions have occurred within a specified period.

Refund Policy:

Refund Policies depend on the merchant. The merchant decides how and to what extent they can guarantee their products or services to cardholders. Refund or return policies that are very liberal can do a lot to reduce the number of charge-backs that a merchant receives.

Recurring Transaction:

A transaction charged to the cardholder (with prior permission) on a periodic basis for recurring goods and services, i.e., health club membership, book-of-the-month clubs, etc.

Retrieval Request:

A request by the issuer to the acquirer for a copy of the actual ticket of a transaction. The initial step that the issuer takes in the event that either the issuer or the cardholder disputes a transaction.

Setup Fee:

An initial fee paid to the Merchant Service Provider for establishment of an account and for processing and reporting tools.

Shopping Cart:

When used for internet shopping, a customer can use a shopping cart as they would in a grocery store by placing items inside for eventual purchase. A shopping cart groups the chosen items so that only one online credit card transaction is needed to complete their purchases.

Standard Industry Code/Merchant Category Code (SIC/MCC Code):

These are four-digit, numeric codes that identify merchant business types. There are thousands of SIC codes and all of them are defined by VISA International in the Visa USA Merchant Data Manual.

Statement Fee:

The statement fee is a monthly fee associated with the monthly statement that is sent to the merchant at the end of each monthly processing cycle. This statement shows how much processing was done by the merchant during the month and what fees were incurred as a result.

Swipe:

This is physical act of sliding a card through the credit credit card processing. The machine then reads the magnetic strip on the back of the credit or debit card. An alternative way to accept the credit card, or debit card would be to manually key in the information. However, swiping a card is far more beneficial because it documents the physical presence of the card at the point of sale. All swiped transactions are face-to-face which lessons the chances of credit card fraud.

Tellan Software:

This is software that works using land phone lines rather the internet. It works like any regular credit card terminal in how it processes. The program works with any PC or Macintosh computer via PCAuthorize and MacAuthorize.

Terminal Provider:

A terminal provider supplies the software on which a terminal operates.

Terminal Identification (TID) Number:

The unique number assigned to each point of sale terminal that tells the Host which merchant a transaction came from and where an authorization is to be sent.

Thales Talento EFT:

The Thales Talento EFT is a flexible and secure solution for the retail and restaurant industry. The Thales Talento EFT Credit card terminal offers fast transactions and user friendly features.

Trade Reference:

Trade references are the businesses that extend credit or have business relationships with an applicant. These are needed to see if an applicant makes bill payments in a timely manner and also purchases goods and services from outside sources. Ballistic Merchant Services requests Trade References from all of our MOTO merchant accounts.

Transaction Fee:

The fee charged to a merchant as payment for a transaction.

Underwriter:

An underwriter is an intermediary between buyer and seller who is trained to evaluate risk and liability and assign appropriate classifications to a proposed business relationship.

Unique Transactions:

A transaction that cannot be categorized as a retail sale or a cash advance, and for which there are special merchant classification codes. An acquirer with such merchant activity must have written approval from MasterCard and/or Visa for a bankcard relationship with the merchant.

Unsecured Credit:

Credit extended without collateral, i.e. without the ability to attach specific borrowed assets in the event of default.

VeriFone:

VeriFone is a company that manufactures electronic payment equipment. Some of their well known processing terminals include the Tranz 380, Tranz 330, Tranz 460, also the P250 Printer and the PinPad 1000.

VeriFone Omni 3200:

The Omni 3200 terminal has a user interface with screen addressable buttons, and can display up to 8 lines of text! It has a high-speed silent printer that silently prints 12.5 lines per second. The Omni 3200 terminal has a totally upgradeable operating system, so you never have to buy another terminal. It also has a three-track reader for driver licenses.

Verifone Omni 3750:

The VeriFone Omni 3750 Credit Card Terminal offers everything one would need in a credit card machine including optional IP bases processing for faster transactions. The VeriFone 3750 covers your credit card processing needs for today and tomorrow.

VeriFone Tranz 460:

The VeriFone Tranz 460 is a compact credit card terminal and printer combo, perfect if your counter space is limited. The VeriFone 460 offers great value by giving you a terminal and printer in one. The VeriFone Tranz 460 combines a VeriFone terminal with a 2 3/4″ wide impact printer. It features a small footprint that saves valuable counter space and eliminates messy printer cables and clutter. With only one power cord the VeriFone Tranz 460 frees up outlets and reduces the number of cords under the counter.

Virtual Terminal:

A virtual terminal is an application that is usually bundled with a gateway that enables a merchant to process credit card transactions securly over the Internet.

Vital Processing Services:

Formerly known as Total Systems. A joint venture of VISA USA and Total Systems Services, Inc. that combines the TSYS merchant accounting system with the Visanet terminal product line.

Voice Authorization:

A merchant performs a voice authorization when they call the authorization center to obtain an authorization code.

White Plastic Fraud:

Merchant fraud committed when legitimate account numbers (such as obtained from discarded sales draft carbons) are embossed on blank or altered cards. Fraudulent sales drafts are then imprinted from the cards and deposited to the merchant’s account.

Wireless Fee:

A fee charged on a wireless merchant account by a wireless service provider to administer communication services for a portable point of sale terminal (POS).

Advertising information

By ALAN FRAM, Associated Press – Wed Jun 8, 9:16 pm ET

WASHINGTON – Merchants triumphed over bankers in a battle for billions Wednesday as the Senate voted to let the Federal Reserve curb the fees that stores pay financial institutions when a customer swipes a debit card. It was murkier, however, whether the nation’s consumers were winners or losers.

As a result of the roll call, the Fed will be allowed to issue final rules on July 21 trimming the average 44 cents that banks charge for each debit card transaction. That fee, typically 1 to 2 percent of each purchase, produces $16 billion in annual revenue for banks and credit card companies, the Fed estimates.

The central bank has proposed capping the so-called interchange fee at 12 cents, though the final plan could change slightly.

Victorious merchants said the lowered fees should let them drop prices, banks said they could be forced to boost charges for things like checking accounts to make up for lost earnings and each side challenged the other’s claims. Consumer groups were not a united front, either: While the consumer group U.S. PIRG said consumers would benefit, the Consumer Federation of America took no formal stance but said it was concerned about what both industries might do.

Travis B. Plunkett, the consumer federation’s legislative director, said the amount of savings that stores pass on to consumers would depend on how competitive their markets are. He said he also worried that the Fed’s current proposal might be too restrictive, which might tempt banks to “use that as an excuse to increase charges on customers they value the least, low- to moderate-income customers.”

In Wednesday’s vote, senators trying to thwart the Fed’s rules needed 60 votes to prevail but fell six votes short, 54-45. That delivered a victory for Sen. Richard Durbin, D-Ill., the Senate’s No. 2 Democrat, who muscled the provision into last year’s financial overhaul law requiring the Fed’s action.

Durbin’s support on Wednesday represented an erosion from last year, when the Senate included Durbin’s provision in the overhaul bill on a 64-33 vote. Much of the drop was explained by a dozen senators — including nine Democrats — who switched from backing Durbin in 2010 to voting to delay the Fed action on Wednesday.

Of the 12, just four are seeking re-election next year: Sens. Kirsten Gillibrand, D-N.Y.; Ben Nelson, D-Neb.; Debbie Stabenow, D-Mich.; and Roger Wicker, R-Miss.

Thirty-five Republicans joined 19 Democrats in backing the unsuccessful effort to block the Fed. Thirty-two Democrats, 12 Republicans and an independent voted to let the central bank move ahead, while Sen. Joseph Lieberman, I-Conn., did not vote.

Wednesday’s roll call shot down a proposal by Sens. Jon Tester, D-Mont., and Bob Corker, R-Tenn., that would have delayed the Fed rule for a year. In the meantime, the Fed and three other agencies would have studied whether the Fed’s current proposal is fair and rewritten it if at least two agencies decided it wasn’t.

Edmund Mierzwinski, consumer program director for US PIRG, which represents state public interest research groups, said some banks might curtail the rewards programs that many attach to their debit cards, such as awarding cash back or airline miles. But he said checking account fees would not rise.

“There will be competition,” Mierzwinski said. “Banks will be forced to come up with innovative ways to lower costs in their card networks.”

Camden R. Fine, president of the Independent Community Bankers of America, challenged that, saying the Senate vote would mean that “consumers of lower socio-economic status will get hammered” because bank fees would rise.

“Where do people think banks get the money to subsidize these products” like free checking accounts, he said. He also challenged assertions that stores would pass the savings from lower fees to customers.

“Does anybody not smoking dope believe merchants will pass some big windfall to consumers?” he said, adding later, “I mean, what are they going to cut prices by, a penny?”

Merchants, however, argue that they will be forced to lower prices to reflect the curbed debit card fees.

“The retail industry is the most competitive business environment going today,” said Brian Dodge, spokesman for the Retail Industry Leaders Association, which represents many large merchants like Target and Home Depot. “There is no doubt competition would drive any interchange savings out of the system, which would be reflected by lower prices.”

Affirming that was Dennis Lane, who has owned a 7-Eleven store in Quincy, Mass., for 37 years. He said he pays $7,000 to $10,000 annually in credit card swipe fees.

“Whenever I can reduce my cost of doing business, any responsible retailer reduces costs to the consumer,” he said. He also said those savings could allow him to hire summer workers.

On the other hand, the head of a credit union in Mountain Home, Idaho, said slashing debit cards fees would have a huge cost for his business.

Curt Perry, president of Pioneer Federal Credit Union, says cutting the fee to 12 cents per swipe would cost him $780,000 a year. The new fee system would not take into account such expenses as covering fraud, which he said cost him $170,000 last year, leaving him considering options like charging a fees for debit cards or checking accounts.

“We’d have to pass that on, we’d need to generate that revenue from somewhere,” he said.

___

AP reporter Laurie Kellman contributed to this report.

 

 

Visa and Mastercard Interchange Reimbursement Fees are update and published on their respectivewebsites twice a year in April and in October.  Visa and MasterCard Interchange Reimbursement Fees are the wholesale rates that are charged to your service provider and ultimately passed onto you as the merchant. There are now about 400 different categories with associated rates and transactions fees between Visa and Mastercard.  The rate that Visa and MasterCard charge is based on the type of card your customer uses to pay you and also how you are processing the transaction (swipe vs. keyed vs. ecommerce (MOTO).   These rates published by Visa and MasterCard are the same for all service providers, whether you work with your bank or a direct Independent Service Organization (ISO).

 

Here are the links to the Interchange Reimbursement Fees published by Visa/MasterCard:

http://usa.visa.com/merchants/operations/interchange_rates.html

http://www.mastercard.com/us/merchant/support/interchange_rates.html

 

 

 

 

VIEW FULL PRESS RELEASE:

American Express Announces ServeSM, the Next Generation Digital Payment Platform

Serve Offers Person-to-Person, Online, Mobile, and Traditional Card Capabilities in a Single Account

NEW YORK–(BUSINESS WIRE)–American Express (NYSE: AXP) today unveiled ServeSM, a digital payment and commerce platform that gives consumers a new way to spend, send and receive money with services that go beyond the existing global payment networks.

With Serve, consumers can make purchases and person-to-person (P2P) payments online (serve.com), via mobile phones, and at millions of merchants who accept American Express cards. Serve unifies multiple payment options into a single account that can be funded from a bank account, debit, credit or charge card, or by receiving money from another Serve account.

Serve is an easy-to-use, digital alternative aimed at consumers who currently rely on cash, check and debit card. Serve accounts can be accessed via Serve Apple iOS and Android applications, at Serve.com and through Facebook. Through Serve, American Express aims to expand into new segments of the market that do not rely on traditional charge and credit cards to manage their day-to-day finances.

“Serve is a new type of payment platform that isn’t tied to a single card or mobile operating system. It’s a flexible, easy to use platform, which from day one brings tremendous assets to the alternative payments space and gives consumers an option to shop on-line and off-line at millions of merchants who accept American Express,” said Dan Schulman, Group President, Enterprise Growth, American Express.

“We intend to quickly evolve the Serve platform by adding new features and functionality as we learn from consumer and merchant experiences. To encourage a broad cross-section of people to experience the benefits and convenience of Serve, we are working with a range of partners to integrate Serve as a payment method and deliver customized offers, and we will waive most consumer fees for the next six months,” said Mr. Schulman.

How it works

Consumers set up an online account at Serve.com or through a smartphone app. Funds can be added from bank accounts, debit cards, credit and charge cards, or other Serve accounts. Customers can use those accounts to send and receive money to friends, pay bills and make purchases online. Serve bridges online and offline commerce – each customer will be issued a Serve reloadable prepaid card linked to their Serve account that can be used at any merchant or ATM that accepts American Express cards.

Unlike traditional debit card accounts, Serve offers users the ability to easily create, manage, and specify sub-accounts for their friends, family members or colleagues. Sub-accounts are linked to the master account and allow users to set spending profiles for everything from children’s allowances to dog walker fees.

The Serve platform evolved from technology obtained through the acquisition of Revolution Money in early 2010.

Serve is available immediately to anyone in the U.S. and is expected to launch into other international markets over the coming year. American Express will continue to evolve the features and functionality of Serve based on market feedback. To gain consumer and merchant insights about Serve and to help shape upcoming releases, a marketing pilot will also be conducted in Eugene, Oregon.

Partnerships

While payments are the foundation of the Serve platform, American Express is also announcing a number of partners who will use the platform to deliver relevant offers that drive spend and build loyalty. Three of the first partners are Ticketmaster®, Concur® and Flipswap.

“A cornerstone of the long-term vision for Serve is developing partnerships with commerce, gaming, entertainment, and social networking organizations,” said Mr. Schulman. Partnerships, with players such as Ticketmaster, Concur and Flipswap will introduce Serve to new customers and help build scale. These companies have loyal communities of customers, and we are thrilled to partner with them as we grow and expand Serve’s reach.”

Ticketmaster will offer Serve as a platform for customers to make and collect payments toward ticket purchases from other customers. Concur will utilize Serve as an expense management and reimbursement method for transactions processed via Concur’s small business expense reporting service, Concur Breeze. Flipswap will utilize Serve to issue refunds more quickly to consumers who sell or trade in their old mobile and cell phones for reuse or recycling.

Details around these and a number of additional partnerships will be announced over the coming months.

Giving Back Widget

Serve is also partnering with five major charities – Autism Speaks, Best Friends Animal Society, Malaria No More, Save The Children and Stand Up For Kids – to enable each organization to raise funds via a donations widget. Widgets can be downloaded on Serve.com and at facebook.com/paywithserve, and shared on other Web sites, including Facebook, to encourage donations. Serve will match all contributions via the widget up to $100,000 for each charity.

In the coming months, Serve will offer selling widgets that give customers the ability to sell items through their own social networks.

Highly Competitive Fees Waived for Launch

Serve consumer fees will be highly competitive. There are only two fees for consumers and we are waiving the fee to put money into the Serve account for the next six (6) months. The two fees are:

* Putting money into a Serve account: 2.9% + 30c/per load, discounted to 0% for cash, debit and ACH.
* ATM cash withdrawal (after first one each month free): $2.00

Unlike some other products in the market, Serve has no fees to open an account, no monthly fees, no fees for P2P transactions, no fees to set up sub-accounts (up to four accounts) and no fees to use the widgets.

Merchants who accept American Express cards will pay a prepaid discount rate for transactions made both in stores and online with a Serve prepaid card.

Investor Conference Call – Live Audio Webcast

A conference call with members of the investment community will be held today March 28, 2011, at 11:00 am EDT. The call will be hosted by Dan Schulman, Group President, Enterprise Growth, American Express.

Live audio of the conference call will be accessible to the general public at http://ir.americanexpress.com. A replay of the conference call will also be available at the same Web site address.

About Serve

Serve, by American Express, is a next generation payment platform designed to deliver emerging payments and services to address the changing ways consumers interact and exchange money — with one another — as well as merchants. Learn more at www.serve.com and connect with us on www.facebook.com/paywithserve and www.twitter.com/serve.

About American Express

American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success. Learn more at www.americanexpress.com and connect with us on www.facebook.com/americanexpress, www.twitter.com/americanexpress and www.youtube.com/americanexpress.

Cautionary Note Regarding Forward-looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements contain words such as “believe,” “expect,” “anticipate,” “optimistic,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited to, the following:

* the willingness of consumers to use the Serve product, and in particular consumers that do not traditionally rely on charge and credit cards to manage their day-to-day finances, which will depend in part on their willingness to try the Serve product instead of competing payment products and their satisfaction with the operability, fee structure and other features of the Serve product;
* the ability of the Company to add new features and functionality and ease of use to the Serve platform on an accelerated basis that reflect the needs and desires of consumers, merchants and other participants in the payments space, which will depend in part on the Company’s ability to retrieve and effectively assess information from users and other parties on a real-time basis and then make the right judgments in how to build-out the existing Serve platform;
* the success of the Company in developing relationships with partners, both in and outside the U.S., who will effectively integrate Serve as a payment method for their customers, which will be critical in facilitating the Company’s ability to expand the scope and number of Serve users; and
* technology trends that will impact the environment within which Serve operates and influence how the Serve product will have to evolve to remain compatible and competitive.

A further description of these uncertainties and other risks can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, under Item 1A. Risk Factors and Cautionary Note Regarding Forward Looking Statements, and the Company’s other reports filed with the SEC.


Click here to see Terms of Agreement for Serve electronic payments platform

Saving money on your credit card processing is not all about the rates you negotiate with your service provider.  You can also save money by being a well informed merchant and taking control of  your credit card transactions.  How you handle your transactions and understanding the different levels of risks associated with each type of transaction can make the difference.  Here are three simple tips to help you save money by effectively managing the way you accept payments.

1. ALWAYS USE YOUR PINPAD.  If you don’t have one, get one!  And when your customer hands you a debit/check card to make a payment, simply put the PIN pad into their hands!  Companies like Target know this very well and don’t offer their customers the option to choose if you want to pay as debit or credit.  You need to do the same.  Just remember this, a pin-based debit transaction has the lowest risk of consumer fraud and that will translate into a lower cost for you.

2. SWIPE AS MUCH AS POSSIBLE. You will always pay less.  If you are currently keying-in all of your transactions manually (card not present), think about how you can possibly change the way you are accepting payments.  Is there any way that you can swipe your customer cards instead?

A great example:  A lot of on site service providers who see all of their customers face-to-face,  like plumbers and electricians for example will about half a percent by using a wireless terminal to swipe customer cards on location.  It may not sound like a huge savings but if your business is processing $40k/month and you’re able to realistically save 0.25%- 0.50% by swiping, you will save $100-200/month.   Is a $1200-$2400 annual savings worth thinking about?

3. MAKE SURE YOU ARE PCI COMPLIANT. Part of being a well informed merchant has to do with monitoring your merchant statement on a regular basis.  If it’s been a while since you’ve reviewed your last merchant statement, you might notice a new “PCI Non-Compliance” fee that may cost you up to $30/month. Call your service provider and find out what you need to do to become compliant to the payment card industry standards.  It may be as simple as completing a self assessment questionnaire. Make the call!

[UPDATED MARCH 29, 2011]

There are actually 38 iPhone credit card processing apps on the App store today.  How do you decide which one to use?  Well that depends on a couple of things.  The majority of the iPhone credit card processing apps (the free ones) on the app store work exclusively with their own merchant services company (or one they are partnered with).   So if you have an existing merchant account with a provider you know and trust, most of these apps are not for you.

If you don’t have an existing merchant account with a direct Visa/MasterCard processor, you can check out the free applications but at your own risk.  These companies all have different rates, contracts and monthly minimum requirements.   My suggestion to you is to choose an iPhone credit card processing app that has the flexibility to sync with any merchant services provider.  If you ever become unhappy and decide to switch service providers, you can still use the same application without any additional costs or hassle to learn a new user interface.

The next thing you’ll want to consider is whether or not you want the capability to “swipe” (vs. key-in)  your transactions and if your processing volume will be high enough for it to be worth the initial investment of the hardware.  When you “swipe” your transaction, you will generally pay about half a percent less than if you manually “key-in” your transactions.   So if you’re processing $10,000 per month, you’ll pay about $50 more per month than if you were to swipe.   The hardware you’ll need will cost you between $75 – $150 and some companies (like Verifone) will also charge about $10/mo and $0.10 per transaction in addition to whatever your merchant services provider is charging you.  You can do the math to make your own decision.

The app that’s been getting the most attention is the Square, which was developed by the creator of Twitter.  Production of this application and hardware combo has been indefinitely delayed because they are still “finalizing their underwriting paperwork” as stated in a letter from Jack Dorsey himself.  Nobody is sure of what that really means.  An article from AmericanBanker.com was published today stating that Square will be “willing to talk to merchant services sales agents and other distributors, but just not yet.”

This sounds like they are having trouble launching a PayPal style ewallet and considering to work with independent merchant service providers to make this work.  If this is the case, The pricing of the Square and the services will change.  I will let you know more about this when we hear some news from Square.

My top three countdown (not including the Square) is based on the flexibility, functionality and cost.  Here you go!

Top 3 iPhone Credit Card Processing Apps:


#3: ProcessAway iPhone Application

This application is very easy to use and and can be set up in minutes to sync with any merchant service provider.

App Price: $29.99

Hardware Costs: n/a

Transaction Type Supported: Keyed-In

Key Features:

-Digital Signature Capture attached to Email Receipts

-Automatic Reoccurring Billing Capabilities

-Customer/Order/Shipping Information Tracking

-Add Tip/Gratuity

-AVS (Address Verification Service)

-Records GPS Location of Sale

- Supported Bluetooth Printer to print physical receipts (Retail Price: $289.00)

Additional Costs:

There are no additional monthly charges or costs per transaction from ProcessAway. There may be additional costs incurred from your gateway provider depending on the company you are working with.

Here is a quick demo of the ProcessAway iPhone credit card processing app:

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#2: iPay POS iPhone Application (w/ swipe capability via iMag )

This application can be downloaded for free on the Apple App Store for you to sync up with any merchant service provider. Your first 10 transactions for free and then you will pay $0.10 per transaction moving forward or you can just pay $29.99 for unlimited transactions.  This is a great option if you are looking to test out the user interface before the purchase.  It also syncs with the iMag Card Reader to accept “swiped” transaction.  iMag costs only $75 and does not have any additional service fees.

App Price: FREE

Hardware Costs: $78

Transaction Type Supported: Keyed-In, Swipe

Key Features:

-Supports iMag Card Reader for “swipe” capability

-Digital Signature Capture attached to Email Receipts

-Automatic Reoccurring Billing Capabilities

-Customer/Order/Shipping Information Tracking

-Tip/Tax

-AVS (Address Verification Service)

-Records GPS Location of Sale

- Supported Bluetooth Printer to print physical receipts (Retail Price: $289.00)

Additional Costs:

There are no additional monthly charges or costs per transaction from iPay POS. There may be additional costs incurred from your gateway provider depending on the company you are working with.

Here is a link to the hardware manufacturer:

http://www.idtechproducts.com/products/mobile-readers/105.html

———————————————————————————————–

#1: SWIPE iPhone Application

This application is clean, easy to use and super easy to set up.  App Ninjas, the developers of this app have a business model to acquire new merchant accounts like all of the free apps you’ll find on the app store but they also allow third party merchant service providers to sync as well.  The user interface is really nice and the digital signature quality is the best I’ve seen yet (see video).  Considering the low cost, easy-to-use user interface, customizable email receipts and flexibility to sync to any service provider,  Swipe takes  the cake as my #1 recommended app to process credit cards on your iPhone.

App Price: $0.99

Hardware Costs: $75 (optional)

Transaction Type Supported: Keyed-In, Swipe (via iMag)

Key Features:

-Digital Signature Capture attached to Email Receipts

-Customizable Email Receipts

-Customer/Order/Shipping Information Tracking

-Add Tip/Gratuity

-AVS (Address Verification Service)

-Records GPS Location of Sale

Additional Costs:

There are no additional monthly charges or costs per transaction from Swipe. There may be additional costs incurred from your gateway provider depending on the company you are working with.

Here is a quick demo of the Swipe iPhone credit card processing app:

Here is a video demo with the iMag swipe hardware with the Swipe Application:

Please give me your feedback or comments below!   I hope this was helpful for you!

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There must be tens of thousand of people catching wind of the social media revolution on a daily basis and rightfully so.   When you see headlines like  “Facebook User Base Surpasses 500 million Users” you would probably feel crazy for not wanting to pay attention.   So you sign up for a Twitter and Facebook account because you hear you  can grow your business.  Now what?

In learning and experimenting on how to building my business through my own personal brand,  I’ve come across a great book called “Crush It” by Gary Vaynerchuk.  Gary is best known as the host of WineLibrary.TV and growing his family liquor store into a $50M/yr business with his passion and use of social media.   He has also been featured in Time Magazine, The Wall Street Journal, CNN, The New York Times and has even been seen on Late Night with Conan O’Brien because of his success.

His book “Crush It” was named one of the top books for business owners in 2009 by INC. Magazine and needless to say, I decided to find out what all the hype was about.  I purchased his audiobook (highly recommended by the way) and started listening right away. This guy is on FIRE!  It shines through in his voice and in the fact that he takes his audiobook off script every five minutes because he is soo pumped about what he is talking about.    His passion and authenticity are the secrets to his success as a social marketeer and I believe it can be ours too.

Here is Gary’s video explaining why he wrote the book along with his action checklist below:

————————————————————–

THE “CRUSH IT” CHECKLIST TO BUILDING YOUR PERSONAL BRAND:

1. Identify your PASSION

2. Make sure you can think of at least 50 awesome different blog topics to ensure “stickiness”

3. Answer the following questions:

Am I sure my passion is what I think it is?

Can I talk about it better than anyone else? (Or at least the top 10)

4. Name your personal brand.  Have a clear idea of what it is.

e.g. The no BS real estate agent, the connoisseur of cookware

5. Buy your username:  .com, .tv

6. Choose your medium: Video, Audio, Written word.

7. Start a WordPress, Tumblr blog, or a Six Apart or Blogger Product.

8. HIRE A WEB DESIGNER

9. Include a facebook connect link, call to action buttons, share functions and a button that invites people to do business with you in a prominent place on your blog.

10. Create a facebook fan page

11. Sign up for a Ping.fm or Tubemogul Account  and Select all the platforms  that you want to distribute your content.  Twitter and Facebook are a must.  the rest are selected according to your needs and preferences.

12. Post your content

13. Create your community by leaving comments on other people blogs and forums and replying to comments on your own blog (use blogsearch.google.com)

14. use twitter search:   www.search.twitter.com to find as many people as possible talking about your topic and communicate with them.

15. use blogsearch.google.com to find more blogs that are relevant to your subject matter.

16. Join as many active facebook fan pages and groups relating to your topic

17. Repeat steps 12-16 over, and over and over and over and over and over and over again.

18. Do it AGAIN.

19. And AGAIN!

20. When you feel your personal brand has gained sufficient attention and stickiness.  Start reaching out to advertisers and begin monetizing.

21. ENJOY THE RIDE!  – “The process is greater than the results. The process is greater the things you buy.”

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