merchant card processing

About

Merchant card processing is a service wherein a customer's credit card or check card purchase is authorized (i.e. verified as a valid number, card not known to be lost or stolen) and the purchase amount is deposited in the merchant's bank. Usually additional security features are also provided, such as address verification (which checks a known street number and zip code against the card's billing address) and CVV.

This service is necessary if a merchant wishes to be able to accept credit cards for payment.

Costs

Typical costs associated with maintaining a merchant card processing account:

• a percentage of each transaction (the "discount" or "discount rate"), which usually varies depending on the type of credit card used
• a per-transaction fee, usually around 30 cents per transaction
• setup fee, which varies tremendously from company to company; can be anything from no charge to hundreds of dollars

Risks

Merchants are generally liable for fraudulent uses of credit/debit cards. Unfortunately, the security provided by merchant card processors is often quite limited. It will only verify the following¹:

• That the card is not known to have been lost or stolen
• That the account to which the card is tied (credit or checking) has a sufficient "available balance" to cover the purchase (for checking accounts, this does not guarantee that the charge will not bring the balance below $0, but merely that the bank is willing to take the risk)
• (AVS service) That the street number and zip code match, or that the address is in a country where AVS service is not available (usually anywhere outside the US, though I have occasionally gotten matches for addresses in England by padding out the numerical portion of the UK postal code to 5 digits using zeroes) or is a P.O. box.²

Note 1

The limitations listed here are my understanding based on experience with Cardservice International and a few things read elsewhere; it may be incomplete. --Woozle 14:42, 24 December 2005 (EST)

Note 2

For a P.O. box, it will only say that the address matches if you leave the "street address" part blank. This means that if someone steals a credit card whose billing address is a P.O. box, all they have to do is rent another P.O. box in the same zip code in order to make it look like they are the legitimate owner. This seems really stupid to me.--Woozle 14:42, 24 December 2005 (EST)

Related Pages

• card processing terminology

Card Processing Services

There appear to be hundreds if not thousands of brokers of these services; a few are listed below. (Some of these may be services which require you to set up a separate merchant card account elsewhere; these should be listed separately once we figure out which ones they are.)

• Amazon Flexible Payment Service
• Authorize.net
• Bibit
• Cardservice International: not recommended
• CDGcommerce: "I've been with them for 2.5 years and have NOTHING negative to say about them at all." -- Douglas of TRN
• CyberSource
• Datacash
• Due site
• directNIC
• Giropay
• Google Checkout
• Integrated Card Service: online/offline
  • Their rates and fees page automatically starts up a sales video (with audio) in the right-hand panel, but there is a stop button
• MerchantAnywhere has gateway support for OSCommerce and other shopping carts
• Nochex
• PayPal
• PayStand pricing
• Protx
• SecPay
• Square
• Stripe (site)
• WePay (fees): online only(?), no monthly fee
• WorldPay

Notes

Technical

• Credit Card Numbers: sample card numbers which pass algorithmic validation
• Luhn Formula: brief explanation of the Luhn algorithm used to pre-validate credit card numbers

Future Articles

• POSGuys should go on a page about point of sale equipment