Master Card Processing
From the cheapest pre-paid debit/credit cards all the way to the exclusive credit card used by the Queen of England, Master Card is there. The Queen’s card? A super-exclusive card issued by Coutts & Co. with a $700 annual fee (waived for spending more than $100,000 a year on the card).
With such a broad reach, Master Card (along with Visa) has been accused of holding monopoly power over the electronic payments marketplace. This recently became an issue when they stopped allowing payments to WikiLeaks (after a kerfuffle about releasing secret documents). Wiki-Leaks is in Europe and the principals in the EU wanted to know how an American company could interfere with payments from European citizens to a European company. The answer is that Master Card is really a global entity — and this is the important part for internet retailers.
Accepting Credit Cards Online
One of the beautiful things about retailing online can also be a trap. The great thing is the global reach – we can market to, not just thousands, but millions of customers across the planet. To do so, we need to be able to accept payments in their local currency. And we need a safe, secure way to do it that is simultaneously convenient for our customers. It’s the “safe and secure” part that can be a trap if merchant account services aren’t handled properly.
It starts with card acceptance of the two major brands – Visa and Master Card.
But there’s another factor. Because even the best rate merchant accounts have different charges, you may pay more (or much more) for accepting one type of card over another. Even if they all have the Master Card brand, they are treated differently. A pre-paid card is different than a “regular” card, and cards issued by bank A may be different than by bank B.
A lawsuit against Master Card and Visa last year addressed this issue. In an anti-trust suit, the card issuers lost and can no longer require that merchants take any card with their brand. This means you can reject transactions that have fees outside a reasonable rate.
This comes up in a couple of different ways. The first is when a transaction originates in a country that is considered “high risk.” It can also happen if your contract penalizes you for foreign exchange. When shopping for the best merchant rates, keep these things in mind.
How to Accept Credit Cards
Online, there are two main ways to process credit cards. The first is to have your own merchant account. Credit card merchant accounts are like other business bank accounts and are often linked to other banking functions. They have the advantage of helping your business establish a financial history and are cheaper when dealing with larger volumes of transactions. They are also more difficult to set up and merge with a website (although this is changing rapidly).
The second way to handle credit cards processing is with a third party service. You don’t have a credit card merchant processing account with a Master Card affiliate bank, but through someone who does. The most recognizable name in this game is PayPal, but there are many others. These companies are “net friendly” and will often add a shopping cart in service packages. Rates are usually higher because they are acting as a middleman, but for smaller businesses, credit card merchant processing can be had quickly, securely and with little bother.
So What’s the Best Credit Card Processing Option?
Unfortunately, there is no one best solution for all businesses. It varies by what kind of sales you do, the projected amount of sales, and what brand of credit card you intend to accept. Merchant services accounts have to be customized to get the best overall deal. Like many other things you buy, there will be trade-offs. A lower rate or fee in one area will be balanced with higher costs in another.
The good news for entrepreneurs is that the marketplace is highly competitive. Getting you as a client matters – it’s no longer the case of kissing up to monster banks and begging them to open an account. As the world moves closer and closer to the predicted cash-less society, accepting credit cards is the norm, rather than the exception.
You still have choices of course. Will you accept other brands? It depends. If your customer base uses American Express or Discover Card, you may find that taking these adds to your bottom line. It would be unusual not to take the “Big Two” – Master Card and Visa. The new choice is whether to add PayPal, Moneybookers or other types of online-only transactions. Interestingly, PayPal and others (Amazon for instance) now issue their own physical Master Card for offline use. In a strange twist, PayPal, once the most feared of the onlines, is moving offline, while the offline folks are moving online.
The advantage for you is that you aren’t stuck in two worlds. Taking credit cards online can give you the ability to take them offline (and the other way round). It is perfectly feasible to type in information you get over the phone (or in person) through your website processing functionality.
The take home message is to find a processing service that fits your business and your needs, rather than changing your business to fit some ideal model of credit card processing.
