General Information
Thanks to Darrin Ginsberg of Free Credit Card Processing.com for sharing his knowledge and information. It is a great resource for Merchants

1. Can you explain what a merchant account is and why I need one?
2. Are there other options I can consider?
3. Do I really need to accept credit cards?
4. How do I get the money from a credit card sale?
5. Can I go to a bank to get my merchant account?
6. How do I find the right merchant service provider for my business?
7. What do I need to open a merchant account and get set up to take credit cards?
8. What makes a business risky to the processor?
9. I am starting to understand how all this works but I am going to open an online Internet stor. What do I need to know?
10. Will I also be able to accept checks payments on my web site?
11. While I now understand the components involved with online credit card payment processing, how do I actually implement this on my web site?

Risks/Safety

1. I hear it is risky to accept checks but a lot of people do not use credit cards and prefer to write checks? Should I accept checks?
2. What else do I need to know about accepting checks?
3. Will I also be able to accept checks payments on my web site?
4. Is it safe to process credit cards over the Internet?
5. I hear so much about fraud and merchants losing money by accepting bad credit cards. What can I do to reduce the risk to me?

More Info

1. What if I already have a terminal? Can have it programmed to work with the new processor?
2. Tell me about Government, Corporate credit cards, and Foreign Issued Credit Cards. Can I take them?
3. What about debit or check cards? I hear this is a good idea if I have a retail store?
4. I keep hearing about electronic terminals, software and real time processing software on the Internet. Can you explain these things?
5. What is a virtual terminal?
6. Can I use a virtual terminal to accept checks?

1. I hear it is risky to accept checks but a lot of people do not use credit cards and prefer to write checks. Should I accept checks?

You should absolutely accept checks from your customers. You do not want to lose a sale because you do not accept checks. Checks are still widely used by a large portion of the population and many people are over their limits on their credit cards. There are several services you can take advantage of when accepting checks both in person or over the phone or via the internet.

The first is check guarantee. Check Guarantee companies will reimburse you if a customer writes you a check and it bounces for any reason. Your terminal or online software will allow you to enter some basic information about the check writer, usually their driver’s license number. Check guarantee companies compile large databases of bad check writers and process this information quickly. If the check writer has written bad checks to other merchants before you, they will usually decline the transaction and you should not accept the check from this check writer. Ask for another form of payment such as a credit card or cash. Now assume the check receives an approval code from the check guarantee company. This does not mean there is money in the checking account of your customer. It just means the check writer does not have a history of writing bad checks. The check can still bounce but the check guarantee company will reimburse you and they will pursue the bad check writer. Consider it insurance for checks. This service costs approximately 1-3% of the sale and is very comparable to your discount rate for credit card transactions.

Another method is called Check Verification. This is not a guarantee but still verifies through the same databases to see if the check writer has a history of writing bad checks. The difference between check guarantee and check verification is if you use the verification system and the check bounces the check verification company will not reimburse you for the bad check. Some merchants prefer the verification system because it is less expensive but riskier if you do get a bad check. This service usually cost less than 50 cents per transaction.

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2. What else do I need to know about accepting checks?

There a few fees associated with either service but consider the consequences of having a check bounce with no recourse. It is worth the investment. Here are the fees.

» Equipment cost - The price varies depending on the quality of the check conversion equipment offered but will be at least several hundred dollars. Most merchants do not use a separate piece of equipment; rather they have a software program downloaded into their terminal or online software. This is less expensive and your ISO can do the programming for you usually for free.

» Cost per transaction - When it comes to processing checks, industries are classified according to risk. Rates should be comparable to credit card processing fees for Check Guarantee and significantly less for Check Verification only. Your ISO can identify your exact rate for your type of business.

» Monthly service fee - Regardless of the terminology, you will incur a monthly expense when you use check processing. This is similar to a customer service fee and is usually $10 to $20 per month. You should also be aware that you may have to pay a little extra on the application/set-up fee, and the monthly rates (e.g., statement fee, customer service fee, etc.) to process both credit cards and checks as opposed to just credit cards. However, it still makes prudent business sense to offer both payment options.

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3. Will I also be able to accept check payments on my web site?

Yes, make sure that the merchant service provider knows your interest to offer this important payment option to your customers, and can accommodate this service. On the web page order form, you can have one section where the customer may put in his/her credit card information and another section where the customer may put in the check information required (e.g., routing number, account number, etc.). The merchant service provider can tell you all the checking information that is necessary to collect from your customers. The checking information goes through the payment gateway just like the credit card information travels.

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Free Credit Card Processing.com

4. Is it safe to process credit cards over the Internet?

Yes, it is safe for you and for your customers. However, the following precautions can reduce the risk.

Use the state-of-the-art Secure Socket Layer (SSL) systems that requires that credit card data be transmitted from your (or your ISP's) secure server in encrypted form. This ensures that no one can intercept the transaction and obtain sensitive information.

Use all other preventive tools to reduce fraud including AVS and CVV2. Now that you see the basic steps of a real-time Internet credit card transaction, you are then in position to understand what you need to implement it. You must have the following:

» Secure server with certification - When your customer enters his/her credit card information, it is sent in plain, unencrypted text form to the server hosting the website. As it is possible to intercept this data, you must use SSL encryption (typically 128-bit) ensuring individuals do not intercept this information. A secure server utilizing this SSL encryption must reflect this with a certificate. (The certificate also ensures the authenticity of the website including who owns it and the site owner’s physical location.)

» Order Form - Obviously, your customers need a place where they can input their personal information and either banking or credit card information. The order form is the place to do it, and the form – as you should remember – must be on a secure server.

» Gateway - As mentioned previously, this is the “tunnel” that allows for the authorization, processing and management of your credit card payments. The mechanism transfers your customer’s vital information to the processor resulting in you receiving funds. If you intend to or already have a shopping cart – software that enables you to have an e-commerce, online store where purchases calculated for you – make sure that the gateway you use is compatible with the shopping cart. Fortunately, most gateways work well with the great majority of shopping carts. How do they work together? The total dollar amount is calculated once the customer has completed the order by the shopping cart. Your web site order form receives this information. When the customer inputs his/her personal and banking information, the order form submits data via SSL (secure server) to the gateway for sales processing. If you do not have a shopping cart, the customer can enter his/her purchase on the order form by using SSL technology.


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5. I hear so much about fraud and merchants losing money by accepting bad credit cards. What can I do to reduce the risk to me?

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