Here are 12 key terms to know before you sign a new contract for Merchant Services. If you have any questions on these, please get in touch!
1. Contract Term
First, a contract is unnecessary – TransAct never requires client to sign a contract, if you are not satisfied, you can change at any time, take the equipment you purchased and go anywhere else.
Second, if you have a contract, most are 2 years while some are 3 or more to align with lease terms.
In our opinion, anything longer than zero to 3 months is too long.
2. Rate – the percentage at which the cost of the transaction is based
Rates vary by the type of card and how it was processed. Visa and MasterCard or “bank cards” are typically less than Discover and American Express as well as those that are associated with rewards programs. Debit cards, processed as Credit typically have a higher rate assessed than if the card was run as a debit to the bank account using the pin code.
3. Item Fee – the amount charged, per transaction
This is typically between 0.15 and 0.30 per transaction, and depends on the type of card or the way it was processed.
4. Batch Fee – the amount charged whenever the latest group of charges is subtotaled and uploaded to the processing center.
Batching is typically done once a day at the end of the day. Some retailers and restaurants will “force batch” at the end of a shift – the “batch” has an associated subtotal amount that will be deposited to the bank account, less the fees assessed with the payments processed.
5. Statement Fee – the amount charged at the end of each monthly cycle to receive a paper statement.
Note, some processing companies charge an online statement fee. Some will assess a statement fee if the information is exported to be uploaded into accounting and bookkeeping software such as QuickBooks®.
6. PCI Compliance Scan Fee – the amount charged for failing a PCI Compliance Scan.
Most often these are quarterly scans and have multiple steps that can cause errors. The fee is assessed each subsequent month until the scan passes the PCI Compliance standards.
FYI – TransAct does not charge for scans.
7. Overall Cost – combined fees 2 through 6.
Keep this in mind when quoted a low rate, if it doesn’t include all of these, then that isn’t the only charge you will see and doesn’t reflect the overall actual cost for transactions.
8. Charge Back – the process by which a transaction is refunded to the customer, along with an additional fee, typically because the charge was “not authorized” by the card holder.
This is an area where the credit card companies tend to lean on the side of the cardholder, but sometimes, the chargeback is invalid and a customer forgot they made a purchase, they didn’t recognize the name of the company (d/b/a name vs. Corporate Name) or another household card holder made the purchase (spouse or child.) If you have signature on file, or a chip card was used, there is reduced risk for the company processing the credit card charge.
9. Captcha – an online tool to verify there is a real person entering the information on to a website.
10. SSL – Secure Sockets Layer – a security software for online information.
Formerly allowed for a method of security in regard to credit card processing. Online websites still use SSL as per Google search minimum standards, but TLS has recently replaced SSL as the minimum level of security for online shopping carts and e-commerce transactions. This was a mandate by the PCI Compliance organization.
11. TLS – Transport Layer Security a cryptographic protocol
The PCI Compliance organization requires a minimum of TLS 1.2 for security when processing credit cards online or via a cloud based terminal or POS system.
12. Tiered Rate Provider – Different percentage charged for Chip vs. Swipe vs Keyed PLUS a flat amount per transaction.
2.7% Chip, 3.1% Swiped and 3.5% + $0.15 keyed
2.9% + $0.30 invoiced
1% for cross-border transfers
BONUS Term: Independent Service Provider – also known as ISO or Independent Sales Organization is not a member of an association, but is authorized to provide services on behalf of the association.
TransAct is an ISO. We are unaffiliated with a bank and therefore can set our own policies while remaining compliant with the accreditation bureau. Being independent allows us to offer services, maintain lower fees which in turn offers a lower, overall cost and work to provide hands on training and support to our clients as part of our value-added service platform.
In the effort to continue to provide education, information and awareness about our industry, we hope that these 12 terms now make more sense to you. We hope that this information helps companies be more aware of the many aspects that go into payment systems and allow you, as a company, to collect income via credit card payments, e-checks, and recurring payment plans. If you would like to learn more, or would like a free assessment of your current systems, please reach out to us to schedule a 20-minute, one-on-one confidential consultation. We are happy to help.
~ Mary Ann