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Don'ts
- Don't accept a low introductory offer. Many are only good for 90 days. Then the sky is the limit.
- Don't buy new equipment if your current equipment is in working order and is qualifying for the lowest rates.
- If advised you can't use your current equipment keep shopping for a new vendor.
- Don't be pressured into a decision by the sales agent. Ask if you can make the decision tomorrow. A reputable sales agent will give you all the time you need to be comfortable with his program.
- Don't pay for any set up or application fee.
- Don't pay download fees if you purchase equipment.
- Don't do business unless agent can identify his ISO name and his sponsor bank.
- Don't pay exit fee beyond the 1 year contract.
- Don't buy private label equipment that can't be used by other processors. Stick with the brand names i.e. Hypercom, Verifone
- Don't pay for equipment up front. Make sure it is tested and processing prior to payment.
Dos
- Read fine print of contracts.
- Understand what non-qualified fees you will be charged. A low rate is only good for you if attached to low rate for non-qual fee.
- Look out for hidden fees. i.e. Annual fees, franchise fees, terminal support.
- Phone the sponsor bank to verify the agent is authorized and fees are legitimate
- Do use the Interchange Plus (Cost Plus) pricing that is offered today by all legitimate processors.
Bankcard Primer
Components of Bankcard Fees
Interchange
Assessments
Authorization Fees
Processing Fees
Processor Optional Fees
Chargeback and Retrieval Fees
T & E Authorization and Processing Fees
Ancillary Communication and Network Fees
Hardware and Software Fees
Interchange
MC/Visa are at the center of the transaction process, maintaining the flow of funds between issuers and acquirers. Clearing refers to the exchange of financial information. Settlement refers to the exchange of the actual funds for the transaction and the associated fees.
Clearing and Settlement Occur Simultaneously
The acquirer credits the merchants deposit account for the dollar
amount of the sale (less the merchant discount). The acquirer sends the transaction, through a data transport network, to INET
(for MasterCard transactions) or Base II (for Visa transactions). A financial institution can be both an issuer and an acquirer.
MasterCard and Visa send the transaction to the issuer overnight, credits the acquirer and debits the issuer for the transaction. In
essence, the issuer pays the acquirer for the transaction, via the MasterCard or Visa interchange system. Interchange makes it possible
for the issuing banks and acquiring banks to exchange information, transactions and money on a standardized basis. During Interchange,
fees are deducted by the issuer from the transaction amount and the net amount is paid by the issuer to the acquirer. These are called interchange
fees. MasterCard and Visa each own and operate their own international processing system. These systems connect thousands of banks around the
world. Member Institutions use these networks to transmit information about bankcard transactions.
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Transaction Process Overview
The cardholder purchases goods or services from the merchant.
The merchant transmits the transaction to the acquirer.
The acquirer then submits the ticket to the issuer for payment, via the MasterCard or Visa clearing and settlement systems.
The acquirer credits the merchant for deposits (net of chargebacks, returns, and agreed to fees -- the merchant discount).
The issuer funds its cardholders' purchases (net of chargebacks, returns, and agreed to fees).
The issuer bills the cardholder.
Finally, the cardholder repays the issuer for the goods or services originally purchased from the merchant. The issuer, via the MasterCard or Visa clearing and settlement system, has already paid the acquirer transaction amount, less the interchange fee.
From the cardholders point of view, it seems as if he or she is paying the issuer for the goods or services originally purchased from the merchant. In fact, the cardholder is actually repaying a loan from the issuer.
Functions
Storage of paper(hardcopy) sales drafts and film cartridges
Retrieval of items in the hardcopy retrieval and chargeback process
Request Fulfillment
Sales Draft Storage
Both merchants and acquirer store hardcopy sales drafts or POS tape. Acquirers and merchants typically hold drafts on-site for 3 years, and hold them off-site for 7 years.
Sales Draft Retrieval Retrieval areas receive requests from issuing banks. MC/Visa regulations stipulate that a request must be fulfilled within 30 days from the date of receipt. Any request not fulfilled within that time frame can be charged back to the merchant.
Request Fulfillment
Request for all hardcopy sales drafts are fulfilled as quickly as possible for disbursement to the issuing bank. MC requires all retrieval requests be fulfilled electronically through the MasterCom electronic image process system, while Visa will allow requests to be fulfilled through the mail along with Visas Copy Request Manager System.
Chargebacks and Collections
When an issuer disputes a transactions (either at the request of the cardholder or for reasons of its own), the matter is handled through a chargeback or compliance case. In a chargeback, the issuer returns a transaction to the acquirer, and the acquirer returns the payment previously made in interchange. Chargebacks result either from cardholder disputes or from rules violations by the merchant or acquirer; they help enforce operating rules and correct transaction errors.
The initial, or first, chargeback is always initiated by the issuer. It can result from the issuer finding an error in the transaction, or it may result from a cardholder complaint. MasterCard and Visa have developed standard procedures and time frames for submitting and processing chargebacks.
The Chargeback Process
The chargeback process begins when an issuer, on its own behalf or in defense of a cardholder, returns a presentment from the acquirer. Presentment is the stage of interchange when the acquirer, via the MasterCard/Visa system, presents the issuer with the transaction information. The issuer is automatically charged for the transaction during settlement, which takes place at the same time as clearing. In other words, the issuer receives information about a transaction, for which it has already paid, and realizes that the transaction may be invalid. At this point, the issuer wishes to charge the transaction back to the acquirer.
Functions of the Acquirers
Determine legitimacy of Chargebacks presented by issuers
Represent all "representable" items on behalf of our merchants
Handle Arbitration Chargebacks if the representment is disputed by the Issuer
Forward paperwork to the appropriate area for crediting/debiting of accounts
Collection Functions
Acceptance of incoming collections cases from Issuers
Acceptance of outgoing collection cases from merchants
Submit Arbitration/Compliance issues to Card Associations
Reversal of inaccurate merchant transactions
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