There are many unfamiliar merchant services industry terms you may have never heard of before. Here are a few of the most important for you to know.
Authorization Fee: There will be times when the customer or the card are not present for your transactions. If you want to get your best rate, you will have to verify the cardholder’s address. Your merchant processor will charge you a flat fee per transaction for this verification. This may be a listed fee on your invoice or bundled into your rate.
Card association: The credit card association is a network of the issuing and acquiring banks that process the transactions.
Chargebacks: A cardholder has the right to dispute a charge on his statement within 60 days of the charge. The complaint will go to the issuing bank. Then a retrieval request will be sent by your bank and you will be asked to pay $10-$50. Make sure that your response is timely or you could face more fees or lose the transaction completely. If you have to give a refund, then you will probably lose the interchange fee from the original transaction as well as the sale.
Downgrades: If one or more of your qualifying requirements are not met and because of this your exposure increases, you could face a downgrade. This could result in a higher risk rating for you, and you will pay more to the merchant service provider. Common reasons for receiving a downgrade include not settling with in the required 2 days of initial authorization, missing data, invalid data, corrupted date from the swipe process and the absence of address verification on any manually keyed transactions.
Interchange fees: There is a fee called an interchange fee for the processing of each transactions.
You are charged different fees depending on the type of merchant account you have and how the transaction is sent over. This fee will cover the costs of getting the funds to your merchant bank and all of your billing information to the issuing bank.
Issuing Bank: This is the business that extends the credit to the consumer and offers them a payment card.
Merchant Bank: This is the financial institution that offers you a merchant account. They handle all aspects of the transaction from payment to the credit card processing itself.
Merchant service provider: This is the business that makes sure your business is set up correctly to handle the credit card transactions on both the front and back ends. They also serve as a liaison in communications with the card associations, processors, and your bank.
These are some of the most popular terms that are used in the merchant processing business arena.