What happens when you key enter a credit card on a retail merchant account? Most merchants and even merchant services sales agents don’t really understand the consequences of how this impacts what you pay in credit card processing fees, specifically how you qualify for different INTERCHANGE rates.
For this example, let’s assume you have a RETAIL merchant account. This means when you signed up for a merchant account, you signed an agreement that most of the time your customers are present and will swipe their credit card. As a result your account is coded in such a way that it’s expected you’ll transmit data from the magnetic stripe on the back of the card, or embedded chip. You’re also required to get a signature from the customer. For interchange qualification, the assumption is that if you key enter a transaction, it’s due to a misread of the magnetic stripe, not because your customer is placing a phone or fax order.
For a MOTO merchant account, the opposite is true. Your account is coded so that you are NOT expected to send the data that comes from the magnetic stripe, nor are you expected to have a signature. Instead different information is required. For example, Visa requires the address.
What happens when you key enter a transaction on a retail merchant account? The expected data is not received, and therefore the transactions does not QUALIFY for the associated ‘best’ interchange rate for the specific card.
EXAMPLE RATES FOR A RETAIL STORE with a RETAIL MERCHANT ACCOUNT and the customer uses a traditional rewards card:
Visa CPS/Rewards 1 1.65% + $0.10. The customer is present and the magnetic stripe data is sent. This is called the Qualified rate.
Visa Electronic Interchange Reimbursement Fee (EIRF) 2.30% + $0.10. The customer is NOT present and no magnetic stripe data is sent. The transaction is key entered. If you do not enter address on a key entered transaction, EIRF is the result. Let’s face it- your cashiers are not going to know when they need to enter an address and unless they are forced to, they will skip entering it anyway.
Visa Standard Interchange Reimbursement Fee 2.70% + $0.10. The customer is NOT present and no magnetic stripe data is sent. This transaction was key entered and additional required information was not present. How do your cashiers know what additional data is needed on a transaction by transaction basis?
Do you see how even if you have a great merchant discount rate, it doesn’t mean you’re paying the lowest rates possible? There are a number of reasons why EIRF and standard can occur, though I’ve discussed only one above.
EXAMPLE FOR A RETAIL STORE, with a RETAIL MERCHANT ACCOUNT USING CENPOS, and automated switching is on.
Visa CPS/Rewards 1 1.65% + $0.10. The customer is present and the magnetic stripe data is sent.
Visa CPS/Card Not Present CPS/Rewards 2 1.95% + $0.10. The customer is NOT present and no magnetic stripe data is sent. This transaction is key entered, and CenPOS automatically prompts for the address and any other information required to qualify the transaction for the best card not present rate, or per merchant custom settings.
Using the CenPOS virtual terminal solution, the merchant qualifies for the best rate under both types of transactions, swiped and key-entered. Savings using CenPOS on this transaction= .45% or .75%, the difference between qualified key entered and EIRF or Standard.
The illustration shows part of the payment cycle that applies to interchange qualification.
Plus risk is mitigated:
- The merchant is not expected to have a signature on the key entered transaction, which will be required to defend against disputes.
- A common retail fraud check is the last 4 digits, but for key entered, that is useless. Instead, address is automatically prompted for by CenPOS.
How does CenPOS compare with other internet based credit card processing solutions and virtual terminals? The vast majority do not have the switching technology and intelligence required to automatically force the desired transaction as described above. They either don’t do it, or leave it up to the cashier to make the right decision at the point of sale. The evidence that other solutions don’t work are in your merchant statement detail. Just look for EIRF, standard, stnd, std or non-qualified in any of the interchange or fee descriptors.
TIP: Are you thinking about mobile payments to your CARD NOT PRESENT or MOTO merchant account? The same logic will apply. The CenPOS switching technology will enable you to qualify for retail card present rates on you MOTO merchant account. Will you qualify for retail rates with any other solution? The proof will be if you see CPS Retail 1.51% and $.10, Visa CPS/Rewards 1 1.65% + $0.10, and other card present interchange rates.
About CenPOS: “Creating efficiencies through payment innovation”
CenPOS, based in Miami, is an intelligent payment processing network that streamlines the payment experience for businesses and consumers by using state-of-the-art technology to replace inefficient, outdated payment systems. The network reflects the core values that drive the experienced and innovative CenPOS team: Simplicity, Scalability, Security and a holistic approach to payment processing strategies.
CenPOS provides solutions to a range of organizations including but not limited to retail, card not present merchants, automotive dealers, professional services and academic institutions; special programs are also available for non-profits.
WHERE TO BUY
- Keep your existing merchant account.
- Contact Christine at 3D Merchant Services, authorized reseller.
Another way to avoid the problem is to have two merchant accounts. One for MOTO one for retail. However, this is not ideal because it depends on employees remembering to use the correct merchant account.