Credit Card Processing Blog

The world of credit card processing is confusing when it comes to the cost structure of various merchant accounts.  Unfortunately, paying for the ability to process credit card payments from your customers is not as easy as paying the cable bill – you may not even understand what all the various fees are.  Just to give you an idea, Visa has over 120 rate categories used to charge merchants based on how they accept payment and the card type while MasterCard has over almost 290 different rate categories!  These rate categories among both credit card processing giants are called the “Interchange”.

Interchange Plus Pricing

The most common method credit card processing companies use is the Interchange Plus pricing model.  If this is the credit card processing fee you accept, you’ll agree to pay a fixed rate on top of the interchange rate for each credit card you process for payment.  For example, if your rate category with Visa or MasterCard is .2%, and your “plus” rate, the rate above the interchange, is .5%, you’d be paying .7% on every credit card transaction.

3 Tier System

The second most commonly used credit card processing fee structure is the 3 tier system.  The first tier is the qualified rate, which is when an individual swipes their credit card in your retail location in person.  This is the best rate, and is usually the one advertised by merchant providers to small businesses to show off their best rates.

With a 3 tier system, if a customer is using a rewards credit card or if the card is keyed into your cash register or computer instead of being swiped, then you get charged at the second tier, or the Mid Qualified Rate.  In this situation, you would be charged the regular qualified rate, PLUS the mid qualified rate.

If your customers give you a corporate credit card, or their address and zip code don’t match what’s on file, or your sales aren’t sent through the terminal within 24 hours – you are likely to be charged the third tier pricing, which is the Non Qualified Rate.  Again, you add your Non-Qualified Rate to the first tier rate (Qualified Rate) in order to get the full cost of processing cards that fall in this category.

Which Merchant Account Bill Structure Do You Want?

Now you know the two primary billing structures for credit card processing, which one is best for your business?  Will you save money with the Interchange Plus Pricing or the 3 Tier Pricing methods?

One way to decide is to show your recent merchant account statement to a new provider to see if their pricing structure would have cost less to process the credit cards on the statement.  In fact, this is the only real way to decide if another credit card processing company can save you money; or to decide whether the Interchange Plus pricing schedule or the 3 Tier pricing schedule would work best for your business.  Quotes given over the phone are meaningless because it matters what kind of credit cards you process most often within your business, and how those cards would be charged by your credit card processing company.

As more and more consumers realize the benefits of shopping online, it becomes increasingly important to know how to make secure transactions.  Secure credit card processing for online payments relies on both the buyer and the seller understanding how to protect the information that is sent electronically.  Without the physical connection of dealing with an individual face-to-face, vendors must make sure that they are providing their customers with a secure method of paying for products and services.  Consumers can benefit from the following online shopping tips that will ensure their e-commerce experience is a positive one.

  • Check website security-  The first thing to look for before you enter credit card information online is some sign that the website which you are visiting is secure.  This can be done fairly easily and can prevent a lot of headaches down the road.  Look for a closed padlock or unbroken key displayed at the bottom of your screen.  You can also tell if a website is secure by looking at the URL; it should read https:// instead of http://.  The “s” indicates the website is secure.
  • Read all terms, conditions, privacy and security policies-  Once you enter your credit card information and submit an order, it may be too late to reverse your actions.  For this reason you must be sure you understand how the credit card will be processed, who has access to the information you have submitted and what type of terms and conditions you are agreeing to.  By confirming this information prior to entering your credit card number you can rest assured your information will be protected.
  • Credit cards are best for online shopping-  If you are debating between using a credit card, debit card or some other form of payment, understand that credit cards are the safest form of payment.  While many people are leery to use their credit card online, the very act of credit card processing gives customers added protection.  When you use a credit card to make a purchase you have more options available to you should you need to dispute the charge or if you fail to receive the products you have ordered.
  • Avoid giving too much information-  To process your credit card the online merchant will have to have certain information.  This will generally include your full name, address and credit card information.  The merchant does not need your social security number or other personal information to process the order.  Do not offer this information to anyone online either via a website or email.
  • Cancellation, return and complaint policies-  Before you place your online order, learn these policies in the event you have to cancel or return merchandise.  You also want to know who to contact should you have a complaint.  These policies spell out your rights should you need to cancel the order, return the product or are dissatisfied with the product you receive.

Shopping online can be an easy, convenient and cost effective way to buy merchandise.  When you know how to do this safely and how credit card processing works for online transactions you can reap the benefits of online shopping without the associated risks.

Photo via Vidilia

As a small business owner, you have a few different options for your credit card processing solution.  You can choose the professional, comprehensive credit card processing solutions, or you can go with a simplified solution like  Here are 6 reasons to consider PayPal to process credit card payments from your customers:

1. Easy to Set Up and Start Accepting Credit Cards Right Away

With merchant accounts, you have to first get approved by the bank before you can start accepting credit cards. This can sometimes take awhile for the bank to check your credit and determine whether or not your risk is low enough to give you a merchant account. Not everyone will have a strong enough credit history to qualify for a typical merchant account. With PayPal, almost everyone is approved, and you can set up your account quickly.  Your customers then have the option of paying with credit card or their own PayPal accounts. Even a technophob can easily get started with PayPal.

2. Flexibility

PayPal allows you to accept payments in six different currencies.  You can see digital or physical products.  You can also use PayPal to set up subscriptions with recurring payment plans according to the schedule you specify.  PayPal can be used both online and with offline retail set ups.

3. Low Fees For Credit Card Processing With PayPal

There are no set up fees, monthly fees or annual fees to use PayPal to process credit card payments from your customers.  You only pay when you use the account to process credit cards. The fees are 2.9% of your sales plus a flat rate of 30 cents per transaction, but the rates may vary a little depending on what country you live in or the amount of sales volume you process.

4. Association with eBay

If you set up a store with eBay or use eBay auctions to sell your products, PayPal is extremely convenient and integrates well with eBay (they’re owned by the same company).  Invoices are automatically generated when people choose to buy your items on eBay with PayPal, which means you can watch for the payments to come in and ship out your products with little administrative work on your end.

5. Merchant Tools

Included with your PayPal account are a number of merchant tools that help you generate financial reports and summaries, calculate shipping or add in sales tax to purchases.  Each month you can review or print a report of sales transactions, refunds, and fees paid.  Print it out and keep it in a binder and you’re well on your way to being organized for the tax filing season!

6. Protection and Fraud Detection for Business Owners

PayPal offers a protection policy for people using the system for credit card processing.  They work hard to prevent fraud and will work with you to recover from any fraudulent purchases.  They also offer Buyer Protection to consumers using PayPal to make payments, which may give your customers additional peace of mind purchasing from you if they can use PayPal.

Photo via cruisingdownthestreetinmy64

This rectangular piece of plastic has the capacity to provide us with all the luxuries of life and simultaneously spiral us farther and farther into piles of debt. Here are some facts every credit card user may find interesting… or possibly frightening.


The economy may have brought to the forefront the dangers of using credit cards irresponsibly, however consumers are not likely to give up the convenience and ease of use associated with credit cards anytime soon.  For this reason, credit card processing services will continue to be something that merchants look to in order to accept credit cards for products and services.

Some merchants are considered high risk as a result of the type of industry in which they operate.  For those businesses, credit card processing may pose a higher risk than your “normal” vendor, therefore special steps must be taken to ensure credit cards can be accepted safely

What makes a business “high risk”?

Businesses that have a very large volume of sales and transactions may be considered high risk.  If that business also operates in an industry that is particularly vulnerable to fraud, they are also considered high risk.  Here are a few examples of businesses that would be considered high risk and therefore require a special merchant account and credit card processing.

  • Travel services
  • Gaming and gambling services-online services especially high risk
  • Adult services or products
  • Telemarketing services
  • Collection agencies
  • Shopping clubs
  • Lotteries
  • Escort services
  • Check cashing services
  • Home based business
  • Online services; tobacco and cigarette vending, auctions, debt, dating and detective are just a few of the online services that are consider high risk.

The type of businesses you see here are just the tip of the iceberg of businesses that find it difficult to open a standard merchant account.

Why do high risk merchants have trouble getting a merchant account?

Any business that is considered high risk by domestic banks or traditional merchant account providers will have more difficulty opening a merchant account than a business that is not considered high risk.  Any usage of online services increases the risk of fraud due to the unpredictable nature of the web environment.  While there are dozens of ways for a business to safeguard against fraud, many conventional merchant account providers simply are not willing to get involved with a high risk business.

Where do high risk merchants turn?

Regardless of the nature of their business, those who are considered high risk still want the benefits resulting from credit cards as a method of payment.  Credit card processing is not impossible for high risk merchants, however finding a merchant account provider and credit card processor requires a bit more diligence.  There are companies out there, many of which are found offshore that specialize in high risk merchant accounts.  Understanding the unique situation high risk merchants face, these companies offer credit card processing services to companies that would otherwise find it impossible to do business with customers who pay by credit card.  It is important to carefully review high risk merchant account providers for the same reasons you would a regular merchant account provider.  Who you choose to do business with and entrust with your credit card processing can make the difference between increased profit or increased problems when dealing with credit card transactions.

Photo via bloo_96