Credit Card Processing FAQ


Q. What does "Issuer" mean?

A. The "Issuer" is the bank that issues and controls the charge account. For example, Chase MasterCard is issued by Chase Manhattan Bank and Citi Visa is issued by Citibank.

 

Q. What is an "Association"?

A. Visa /MasterCard

 

Q. What is an "Acquirer"?

A. A processing company, such as Bank of America Merchant Services [BAMS]. The Acquirer's role is to take the merchant's end-of-day settlement and verify that the funds are moved from the Issuing Bank's Cardholder account to the merchant's account

 

Q. What is the "Visanet/Vital" network?

A. Visanet/Vital is the international telecommunications network that ultimately handles authorizations for credit card transactions. It is managed by the Associations, not by the Acquirers.

 

Q. How does Visanet/Vital work?

A. When you swipe a card an authorization request goes to the Issuing Bank. The authorization comes back from the Issuing Bank via Visanet/Vital. The Acquirer [Bank of America, for WordStock] has no direct role in this process. When Visanet/Vital goes down, BAMS, like all other processing companies, is down. Whenever that happens, the Acquirers act as advocates for their clients and press Visanet/Vital for answers and problem resolutions.

 

Q. What does "Interchange Rate" mean?

A. The Interchange Rate is the Issuer's [bank's] fee. It has two components: the rate plus a transaction fee.

 

Q. What are "assessment fees"?

A. These are additional fees for the Associations.

 

Q. What does "Average Ticket" mean?

A. Average ticket is the dollar value of your average sale. Acquirers use your average ticket to estimate how much demand you'll be placing on the system's resources. The average ticket for the book industry is $30-$35. For bookstore customers, we use an average ticket of $40, unless we have specific information to justify using a higher average ticket.

 

Q. What Merchant Rates are available through WordStock and BAMS?

A. The Rates BAMS offers WordStock customers are:

Flat - The rate blends the Best/Non-qualified so the merchant is charged a single rate no matter how the transaction was processed. A good rule of thumb is, if your Non-qualified Transactions are more than 10% of the total transactions, a flat rate should be considered. If projecting a fixed cost is important then this might be the rate you want. This consists of the following components: interchange fee on net dollars, assessment fee on gross sales and processing fee.

Best/Non-Qualified - This rate type has a best rate for customer present transactions. A transaction qualifies for the best rate if all the required elements are received by the authorizing bank and transmits transaction within 2 days of the transaction date. The authorizing bank has final say on whether a transaction meets the requirement or not.

If the transaction does not qualify the merchant is charged a higher rate for the transaction Mail Order/ Telephone Order are considered as Non-Qualified, for example. This consists of the following components: interchange fee on net dollars, assessment fee on gross sales and processing fee. Best/Non-qualified with transaction fee - Same as above except the Best/NQ rates are lower and the merchant is charged a fixed transaction fee for each authorization.

Currently both Visa & MC charge $.10 a transaction + interchange fees from the issuer. Currently we do not offer this type though we have asked NPC to add this to your choices. One more thing about rate types. You can try one on for size. The only requirement is that you keep a rate type for a minimum of 1 year. If you don't like it after a year, you can change.

 

Q. How do I evaluate a competing offer?

A. The first thing to remember is that the banks never lose! Therefore, if you get a bid that looks to good to be true, it probably is.

Every year, Visa, Mastercard, and the Issuers raise rates a few hundredths of a basis point. Therefore, when you evaluate a bid from an Acquirer claiming to offer a better deal than you're getting, you'll want to ask them to freeze the rates and fees for 3 years as part of the Merchant Agreement.

If you accept a counter-offer of one year, you aren't getting rate protection because the rates normally are increased only once a year. (If you've entertained a bid prior to October 1, ask if the quoted Visa rate is still good.) So the issuing bank claims that their rate is frozen, which it is, in fact. However, there's usually a paragraph in the agreement that allows them to pass through any increased Association Assessment fees.

The net result, of course, is that your overall processing costs do, in fact, go up. In sum, the key thing to understand is that the Merchant Agreement is the controlling document: if you were promised something that is not explicitly included in the Merchant Agreement, then you will not receive it.

 

Q. I understand that service fees are often 'hidden' in the Merchant Agreement - can you identify them?

A. Among the fees you might be charged are:

  • Application Fee

  • Setup Fee

  • Weekly/Monthly Fee

  • Monthly Minimum Fee

  • Voice/ARU Authorization Fee

  • Dial/CPU Authorization Fee

  • Authorization Research Fee

  • Chargeback Fee

  • Retrieval Fee - Annual Fee

  • Interchange Management Fee

  • Online Reporting

  • Bank Charge Fee

  • Restructure Fee

 

Q. Which of these fees will BoA charge me?

A. None!

 

Q. Am I getting a good deal from WordStock and BAMS?

A. Yes, we think you are because, whenever we've had the opportunity to analyze all the rates and fees from a bid compared to our offering through BAMS, processing through BAMSis always more than competitive. (Unfortunately, we rarely get all the facts we need from the bidding company to do a real analysis! )

 

Q. Does WordStock review every customer's account activity to make sure customers are getting the best rates?

A. No, we do not automatically review every customers account activity. If you ask, we'll review your activity if you provide a current copy of your merchant report. If we find your specific business activity has changed in volume or average ticket we will review your current rate and if warranted, qualify you for a new rate. Because we use BAMS to process our own credit card activity, we can take quick action if something changes that has implications for our customers.