Merchant Accounts 101

Everything You Need to Know to About Merchant Accounts

 

Author: Jim Conners

Rating: 10.0

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Types of Credit Cards

There are several different kinds of credit cards issued by Visa and MasterCard. There are differences between them may affect the rates charged for those cards and how a merchant is responsible for processing them.

Consumer Card

A consumer credit card is a plain old credit card carried by an average person. It is not tied to a checking account, offer any rewards, or associated with any business. It is not special in any way. These cards are becoming less and less popular as check cards and rewards cards gain in popularity.

Check Cards

A check card is very similar to PIN-based debit cards. Unlike a typical credit card where you wait until you receive your next bill to make payment, and maybe even make a partial payment, the funds for check card transactions are immediately withdrawn from your checking account.

Unlike PIN-based debit cards, however, you do not have to key a PIN number to complete the transaction. You simply sign your name as if you had used a credit card. Also, unlike PIN-based debit, no special equipment is required to accept check cards. The same equipment used to accept credit cards can also accept check cards.

Rewards Cards

A rewards card offers its cardholder special bonuses for using that card to make purchases. The bonuses will vary by card issuing bank. Typical rewards include airline miles and vacation packages.

All rewards cards are placed into a special Interchange table and typically cost more to accept then a traditional consumer credit card. They typically fall into a mid-qualified rate for retail businesses. Mobile, MOTO, and Internet businesses typically pay their qualified rate for these cards.

Business/Corporate Cards

Business cards, also called corporate cards, are carried by business owners. These are typically used to make purchases for the cardholder's business. They are popular amongst businesses as they offer extra features not traditionally found in consumer credit cards. The more detailed statements are their primary benefit.

Business cards are placed into a special Interchange table and typically cost more to accept then a traditional consumer credit card. They typically fall into a mid-qualified rate for retail businesses. Mobile, MOTO, and Internet businesses typically pay their qualified rate for these cards.

Purchasing Cards

Purchasing cards are virtually identical to business cards with one exception: they can only be used in predetermined businesses. All transactions outside of the predetermined businesses will be declined automatically.

The predetermined businesses are determined by SIC code. If a corporation has allowed a purchasing card to make purchases from a merchant listed in that SIC code the transaction will proceed normally. The company that the purchasing card has been issued to has the ability to determine what SIC codes a card may be used with. If a merchant has a customer that cannot make a purchase due to the SIC code restriction the customer will need to contact the card issuing bank to have the merchants SIC code added to their acceptable SIC code list.

Purchasing cards behave like business cards in terms of rates and fees as well as required fields.

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