When the first credit card was issued no one imagined card services would grow to the level they’ve currently reached.
Merchant services are big business today and even smaller retail stores are accepting the necessity to acquire a good payment processing system.
Twenty years ago you might have waited patiently in a small shop while the owner wrote out a credit slip and entered your credit card information by hand.
You would sign the slip and be given a copy while the master copy would be manually transmitted to the lender for your credit card account.
The first imprinting machines were immediately popular. The sales clerk would lay your credit card on the base surface of the machine and cover it with a multi-part carbon sales slip and would quickly slide a horizontal bar once or twice over the items.
This would press the forum onto the card and the carbon would transfer the credit number and other pertinent information from your credit card to the sales slip.
Even today you can still find a few of these old machines in use but they have mostly disappeared from stores across the country. The name and number on most credit cards are in raised print so your card can be used in an imprinting machine.
Cost of Merchant Services
As credit card use became more widespread, new processes were developed to provide faster processing and to reduce the increasing amount of fraudulent transactions.
Central processing centers became common and large banks and retailers quickly began using merchant services for their own branded credit cards.
Small retailers were more resistant due to the cost of using the services. Advances in technology have streamlined the efficiency and reduced the cost of such services.
In addition to centers that process individual credit card payments, there are now online payment services such as Paypal that handle purchases and process them through merchant accounts.
These third party businesses do not process in real time as direct merchant accounts do but instead use scheduled batch processing.
Rates are charged by the third party sites but the ability to use credit cards through such a business can allow merchants an inexpensive way to process credit card purchases.
Types of Credit Card Services
If you are seeking card services, the best place to start your search is with the bank that holds your business accounts.
Banks often provide easily accessed card processing as they outsource the work to a third party for the actual processing.
A company that is a third party processor does nothing except process credit transactions. They handle all phases of the process including authorizing the charge, billing, and reporting.
An ISO (independent sales organization) is a broker who may represent several payment processors. This is a business that services credit cards but in reality they do not process the transactions.
The ISO is not as tightly regulated as a bank and often accepts businesses that banks may reject. This higher risk is reflected in the high costs charged to merchants who choose an ISO.
American Express allows small business card services directly through their own business and you apply to AmEx for that privilege.
MasterCard and Visa, however, require use of a third party business to create a merchant account with their logos.
Great resources for card processing are industry trade organizations or associations where the business owner has membership.
These merchant services are often established for niche products that are difficult to obtain services from other credit processing companies.
Requirements
If you want to enroll with a credit processor, you must be able to meet their standards. Any processing organization needs to be certain you have a legitimate business and will not leave the process open to charges of fraud.
A background check is standard as is a thorough review of the credit history of the small business and the business owners. Credit references are often required from suppliers you regularly do business with.
Of particular concern for card services is the number of chargebacks that might be generated by your customers.
The purpose of a chargeback is to protect consumers from unauthorized charges by merchants or provide safety from non-delivered items or from defective items purchased.
If a merchant refuses a refund or replacement or disputes your claim, a chargeback can be requested.
The process of a chargeback is not difficult for a consumer but has ramifications for a business and is expensive for the processor as it is a reversal of a sale.
Summary
The need for card services can be met by several types of businesses. Your choice will be based on the cost of the services offered and on your ability as a business owner to provide the proper documentation for yourself and your business.
