Merchant Accounts - 'Card-Present' vs. 'Card-Not-Present'
Posted by Jeff Shavitz on Thu, Oct 15, 2009 @ 08:25 AM
Merchant processing, like any other financial service, is based almost totally on the assessment of risk. When a merchant charges a customer's credit card, the processing or acquiring bank gives the merchant money based almost entirely on the assumption that the merchant has delivered the products or services that they've promised.
There are two basic types of merchant accounts that are generally referred to as 'card-present' and 'card-not-present' -each carrying different levels of risk that is used when assessing the rate for the merchant account.
A card-present merchant account is any merchant account where the credit card and the customer are present during the transaction, and the merchant is able to swipe the customer's credit card through a magnetic card reader to perform an electronic data capture. One common type of 'card-present' merchant accounts is a Retail Merchant Account - A retail merchant account is a card-present account where the majority of credit card transactions are processed by swiping the card through a credit card machine or magnetic strip reader that is connected to a physical phone line. Retail merchant accounts are considered low risk and are granted the lowest merchant account fees and rates.
Any retail business that expects to process a significant amount of keyed-in transactions should strongly consider opening both a retail merchant account and a mail order merchant account (card-not-present) so that they are able to obtain the lowest discount fee possible for both types of transactions. This is especially true for retail stores that also have a website or mail order catalog.
A "card-not-present" merchant account refers to any merchant account where the credit card and the customer are not present when a transaction takes place. Any account where this is not possible the majority of the time is considered to be a card-not present merchant account.
Card-not-present merchant accounts are considered to be higher risk by acquiring banks and are therefore charged higher processing rates and fees. When reviewing merchant account quotes you should not expect a card-not-present merchant account to have the same rates and fees as a card present merchant account. The rates and fees will always be higher for a card-not-present merchant account than they are for a card present merchant account. An Online merchant account, touchtone telephone merchant account, and mail order merchant account are all examples of card-not-present accounts.
For more information on merchant processing or to find out if you are paying the best rate on your current merchant account, click here for a free rate analysis.