Acceptance Methods

Posted by on Jun 1, 2014 in Blog, Credit Card Processing, Payment Processing | 0 comments

Merchant Type – How You Take Payments

For our overview video on Taking Credit Card Payments see this post.

Although there are hundreds of different types of merchants and seemingly dozens of ways to take credit cards, for the purposes of processing companies there are three major types of merchants. There are additional Merchant Category Codes (MCC) used to classify the types of goods and services provided as well as for reporting to the IRS. However when it comes to risk for the processing companies and thus application acceptance and associated fees, the merchant type is one of the primary factors. These three merchant types are listed below.

Three Primary Merchant Classifications
  1. Retail (Face-to-Face)
  2. Mail Order / Phone Order (MOTO)
  3. Internet / eCommerce


RetailFace-to-Face (Card Present Transactions)

Although this merchant type or way of acceptance is commonly referred to as retail, the more appropriate and technical term is “Card Present.” This is especially true today with wireless technology that makes face-to-face card transactions easier and faster than ever before. This type of card acceptance involves the physical swiping of the card, and carries the lowest interchange fees.

It is the lowest risk to both the processing company and merchant because fraud is much more difficult face to face. In addition the physical swipe of the card would require a fake card to be made which is an added cost and deterrent to many thieves who have simply bought stolen credit card numbers.

Whenever possible it is always best to take credit cards face-to-face. For high ticket purchases, checking the card numbers and card holder’s ID is an absolute must to avoid simple stolen card fraud.

In addition, face-to-face transactions afford the ability for the card holder to physically sign a receipt, either on paper or on an electronic device. This signature help further prevent fraud and gives the merchant a chargeback defense in the case the card holder disputes the charges.


PhoneMail Order / Phone Order (MOTO)

Although mail or catalog ordering is a bit-outdated in today’s internet age, the term MOTO applies to payment transactions that do not happen face-to-face with the card present. This includes writing the card number down and processing it later. This also includes stored credit card numbers and recurring transactions through a piece of software such as Quickbooks or a Virtual Terminal / Gateway. Obviously taking credit cards over the phone also applies, and is a very common practice in businesses of all types from take-out restaurants to construction and building supply companies.

Even though writing down a person’s credit card numbers because the machine is down and taking their info over the phone is fundamentally different, the processing network cannot tell the difference and treats this transactions as the same. They are risker because the assumption is that the card is not there because it is not swiped. This makes using stolen credit card numbers much easier, and thus fees are higher to offset for the higher level of fraud in this category.

Practically all businesses have a MOTO element to how they take credit cards, and thus should understand the proper documentation and steps to take to ensure that they are protected.


InternetOnline Transactions

That last and most risky are transactions that happen online. In this situation, not only is the card not present, but there is typically not a human element involved for additional soft touch fraud prevention. Ecommerce is the highest area for credit card fraud and thus carries the highest restrictions for approval and fees. However many of the fees between MOTO and Internet are very interchangeable. Security of the business information and inventory becomes a much bigger concern when dealing with online transactions.

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