Transact e-commerce
Understanding Credit Card Transactions

All credit card transactions are processed through a Merchant Account

Just as in the physical world, a merchant on the Internet needs to establish a merchant bank account with a financial institution in order to accept credit cards. Even if a merchant already has a merchant account, they may not have the type of account required for accepting transactions over the Internet. This account is used soley to process credit card transactions. The money is delivered automatically into the merchant's normal bank account.

There are two types of merchant accounts:

1. Card Present or Swipe Account

   This type of account requires the consumer and merchant to be physically at the same location during the time of the transaction. For a card present transaction, the credit card is typically swiped through a card reader (or physical point-of-sale terminal), and the consumer signs an authorization slip, or sales receipt.




2. Mail Order/Telephone Order (MOTO), Card Not Present, or Keyed Account

   In a MOTO transaction, the merchant and shopper are not in the same physical location, and there is no card swiped or signature received. This method of payment was originally adopted for mail order and catalog businesses.

   • A MOTO account generally has a higher discount rate than a Swipe account.
   • All Internet transactions are treated as MOTO transactions and require a MOTO merchant account.

Fees and Rates

Fees and rates will vary widely, based on the financial institution, and the the risks associated with the type of business. Regardless of these factors, a merchant should expect to pay the acquiring financial institution:

• An application fee, a setup fee, or both

• Per-transaction fees, typically between 20¢ and 30¢

• A discount rate (i.e. percent of each transaction), typically less than 3%

• Monthly statement fees

Setting Up a Merchant Account

If a merchant does not currently have a MOTO merchant account, the merchant must set up a new account with an acquiring bank. At this point, we would normally recommend that a merchant contact your current bank, with whom they already have account history and relationship.

If a merchant already has a merchant account which can handle Mail Order/Telephone Order (MOTO), then it may be possible to expand the account to also handle e-commerce transactions. Contact your merchant provider to determine what options are available.