A merchant account allows retailers to accept debit and credit cards, regardless of the bank or financial institution that issued it. It serves as a legal agreement between a retailer and the bank that funds will be paid and processed in accordance with NACHA rules and regulations. If the retailer does business online, the account allows them to accept electronic payments from many different sources from credit and debit cards to gift cards and electronic checks. Fraud protection and chargeback reduction are standard features for most merchant accounts. Fully digital cash registers and small countertop processing units can take advantage of this protection.
There are two types of merchant account marketing methods. A financial institution can market its products and services directly to a merchant bank, or an authorized agent of an independent organization can handle the marketing and recruitment of new customers. Interchange fees vary, based on the amount of business that is done and the type of account that has been opened and the conditions of the transaction. Discount rates are available and they are based on price models that are used to bill merchants for the services provided. The most common and accepted pricing system is three-tier pricing.
Transactions through a merchant account are placed in three groups, or tiers based on established guidelines. The first tier is the percentage a merchant is charged each time a standard consumer credit card is used and processed. It carries with it the lowest percentage rate and is based on whether the merchant will be accepting the cards in a physical store or an online store. Tier two is the mid-rate. This is a higher percentage rate than tier one. It is charged when a credit card is manually keyed into a terminal rather than being swiped and if it offers user perks.
The third tier is considered a non-qualified rate. It carries with it the highest fees that a merchant will be charged when accepting a credit card. It occurs when a transaction does not fall into one of the other groups. Manually entered credit card numbers with no address verification is one of these transactions. Another reason may be that a special type of card is being used for the transaction without all required system fields being completed. This happens most frequently with business credit cards. Contact National Processing for more information on the requirements for opening a merchant account or call us at 877-458-3323.