One involves swiping the credit cards at the point of sale and the other involves handling the credit card number by telephone or through the mail. These two accounts incur different interchange rates.
Face to Face Transactions
A business owner who operates a storefront would swipe the credit cards through a credit card machine. The customer then receives a receipt for his purchase. This is considered to be a retail account. Occasionally, the owner may take an order over the telephone or receive an order through the mail. In this case, the owner would enter the credit card in his computer to an online account or call the credit card number in to the credit card company.
When the Customer Is Not Present
If the business owner receives the majority of his credit card transactions over the telephone or through the mail, then he should be transacting business through a Mail Order/Telephone Order account. The owner enters the credit card into the computer or calls them into the credit card company. These types of transactions are common for a business such as a pizza shop, which receives telephone calls for take-out orders or a mail order catalog company.
What Are the Charges?
Because of the risks involved in handling credit card numbers, and the higher fees for transactions that are not swiped, the Mail Order/Retail account is assessed a flat rate of around 2.09% which is higher than the normal charge for an ordinary VISA or MasterCard. It would be very expensive if they were charged at the non-qualified retail rate of over 3% for calling the numbers into the credit card company.
Variable Rates vs Flat Fee
The difference between these two rates is that in the Retail Account there is a different rate for the different types of credit cards presented by the customer. Conversely, the Mail Order/Telephone Order Account involves a flat fee for all the cards regardless of the type. The only exception is with the American Express Card, which sets its own rate.
Which is Better?
When making a decision on the type of account to use for the business, the owner would have to determine how he transacts business with his customers. If the majority of the transactions are face-to-face with the customer, then the merchant should choose a Retail Account. If the majority of the business is transacted with the customer not present, then the merchant should choose a Mail Order/Telephone Order account.
Considering the Risks
It is very important for the owner to handle the Mail Order/Telephone Order account or to choose a trustworthy employee to handle it, as the person would be handling a high number of customer credit card numbers. Countless individuals have been charged with larceny for stealing credit card numbers. Recently, Kathleen Connell of The Christian Science Monitor reported on August 11, 2008 that “41 million credit card numbers had been stolen by a Miami based ring.”
Getting Help with the Decision
How a merchant transacts his business determines the type of merchant account he should have. Because of the risks involved, a qualified merchant services account executive should assist in making the decision.
Gail Cavanaugh - Gail Cavanaugh is the owner of Gail Cavanaugh's Business Solutions, a company providing merchant services, website design, and marketing ...
