1. Why do I need a merchant account?
Visa USA and MasterCard International have published several white papers showing how merchants can increase
their sales by accepting credit cards. Some good reasons for accepting cards are:
• Increased sales: consumers will spend more money (also called lift) when paying with a credit card.
• Increased customer traffic: when given a choice, a consumer will shop at merchant location that accepts credit cards more frequently than one that does not.
• Increased payment options: accepting credit cards provides flexible payment options for customers.
• Reduced check out time: no more waiting on the consumer to write out checks or sort through their cash.
• Reduced risk of theft: credit card transactions reduce cash on hand, making merchants less vulnerable to theft.
2. How does credit card acceptance work?
There are two basic parts to the credit card industry: the issuing side and the acquiring side. The issuing side is best described as a
member bank that issues Visa and/or MasterCard credit and debit card products for consumers and businesses to charge products and services.
The acquiring side is a bank or sales entity of a bank – typically called an Independent Sales Organization (ISO) or Merchant Service Provider (MSP).
These ISO/MSP companies acquire the sale transactions on the behalf of merchants who accept credit and debit cards.
3. What other entities are involved in the process of accepting card payments?
The companies that provide connectivity between the point of sale (POS) at merchant locations and the acquiring and issuing banks are known as processors.
These companies receive sales requests, also known as authorizations, when consumers either have their credit cards swiped on a terminal in a retail
store or enter their credit card information on an Internet merchant’s web site using a secure payment page. The purchase amount (or
transaction) is then routed to the bank that issued the card to confirm the status of the consumer’s credit card account. If approved, the sale is
captured and the approval message is sent back to the merchant.
At the end of each day, the sales are “batched out” or sent back to the processor for end-of-day processing. The transactions are
distributed to each cardholder’s issuing bank for consumer billing and sent to the acquiring institution (Visa or MasterCard’s member bank) so
that the merchant can be funded for the purchases. Funding of card sales to the merchant’s operating account generally takes 48 hours.
4. What about the other card types?
The other card companies – such as American Express, Discover Card, and JCB can be accepted through the same merchant account, although a
separate application is required. Pricing and credit policies for these cards are different than from Visa and MasterCard, and
merchant funding usually takes an additional day.
5. Will I be able to accept debit cards as well?
There are two types of debit cards that are issued by banks: offline and online PIN (personal identification number) debit cards. Offline, also
known as signature debit cards, are used in the same manner as a standard Visa/MasterCard credit card: the purchase amount is posted against a
credit line of their credit card account, and a signature is required to authorize the transaction.
Online debit cards require the use of the cardholder’s PIN number to authorize a transaction and a signature is not required.
In this case, the purchase amount is deducted from the cardholder’s checking account of their bank.
With regard to the cost for a merchant to accept the two types of debit cards, an offline card will cost less than a standard credit
card to accept (a percentage plus a transaction fee). The online debit transaction will be even less but can also consist of a percentage
plus a transaction fee. Online debit is not available for card-not-present merchants.
6. Does Dharma Merchant Services offer Gift Cards, Checks or ACH programs?
Yes, we can offer all three. We have partnered with Secure Payment Systems to offer competitively priced products.
The gift card program can support gift cards, loyalty cards, or combinations cards. The generic or custom cards, envelopes, and marketing
materials are all available for a full turnkey solution.
We offer a wide variety of check services ranging from Check Verification to Check Conversion with Guarantee to the latest product called
ExpressCheck21. Our check product supports PayDay feature, 2 to 4 time recurring checks and Check21 for depositing checks without going to the bank.
The ACH program is a web-based tool that allows your business to automate the collection and payment process for single and recurring
transactions electronically. It eliminates late payments, handling of paper checks, trips to the bank, and offers multiple payment
schedules to customers.
All of the solutions listed above are priced very competitively and are supported by one of our technical support centers in the U.S.
7. What is the process to establish a merchant account?
The first step is to complete an application and submit it to the ISO either electronically or via a paper document. The application then
goes through an underwriting process to establish the costs, terms, and conditions for using a merchant account. The underwriting
process is required since acquiring banks must take great care in determining the creditworthiness of each merchant as they are at great risk from
chargebacks. Businesses that are used for fraudulent purposes or subject to failure due to poor business practices are at risk from
losses due to a high rate of chargebacks, which could result in businesses losing their ability to continue accepting card payments.
8. What will it cost me to accept credit cards?
Merchant costs are reflected as a percentage of each sale plus a per-transaction fee. The rates used are
establish by the Card Associations and are based on three criteria.
The first criteria is the card type: consumer, reward, commercial, or foreign-issued.
The second is the industry type, such as Quick Service (QSR), supermarket, warehouse, retail, restaurant, lodging,
car rental, business-to-business, MOTO, and eCommerce. Some industries, like supermarkets, are given preferential pricing due to the
expected lower risk, lower average tickets, and higher transaction volumes.
The third is the method of acceptance, such as card-present swiped, card-present
key-entered, card-not-present or consumer-activated, such as at fuel pumps or other dispensing equipment. The method of acceptance has an effect
on the cost since the Card Associations and other card companies consider any merchant who operates in a non-retail environment, such as Internet
or mail order and phone order (MOTO), to be high-risk merchants because there is no signed consumer receipt to prove that a consumer authorized
the sale. This is in contrast to retail merchants that utilize point of sale (POS) terminals or software, who receive lower rates
because each sale is confirmed by a signed sales slip from each cardholder.
Other fees that are typical include chargeback/retrieval fees, statement fees, monthly minimum fees, and various surcharge fees. Your
application with Dharma Merchant Services will clearly state all the fees that will apply to your account.
9. What about equipment and or software costs?
Retail merchants need terminal equipment and PC or cash register software that can process credit cards to be swiped to receive the benefit of the
lowest discount rates. Many merchants find the “all in one”, stand-alone terminals that have the terminal, printer,
and a PIN pad for debit transactions to be the most effective and space-friendly. The cost of the equipment depends on
additional peripherals such as a PIN pad or check reader. The basic terminal with no added features will generally cost about $400 to $500.
Special software applications are used for merchants that need the benefits of additional programs for retail, restaurant, lodging, and
MOTO (mail order/telephone order) merchants. These applications can include a property management system for lodging merchants,
software to manage inventory and clerk processing for retail merchants, restaurant management software, or MOTO software would include shipping,
stocking/inventory, and tracking feature. Software applications can be purchased for as little as $295 for basic functions and as much
as $75,000 for very sophicated applications for very large merchants. One of our experienced bankcard representatives will help you
find the best solution that meets your needs.
eCommerce and MOTO merchants can use PC-based software to enter cardholder information or they can use an Internet based payment gateway such as
Authorize.Net to have consumers purchase goods online in real time. The right solution would depend on the unique needs of each merchant,
taking into consideration the tighter security standards required by the Card Associations for card-not-present transactions. One of our
knowledgeable bankcard reps can give the most prudent guidance here as well.
10. Are there any publications or information that I should read?
Both Visa and MasterCard publish Merchant Guidelines every merchant should read and put into practice at their businesses. The website for
MasterCard is www.mastercard.com/us/merchant/how_works/merchant_rules.html. To access Visa Merchant Rules, go to www.visa.com,
select your country, and then select Merchants. All materials and documents for new merchants are available under this site.
11. How do I get started?
To apply for a merchant account please contact us at 1-866-615-5157.