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Potential Drawbacks of Web Based Credit Card Merchant Account Terminals

Many businesses sign up for merchant accounts where they want to be able to process credit cards through their computers via the internet.  This can be a great alternative to traditional merchant account systems which typically require expensive purchase or lease terminals and the requirement to add a separate phone line for transmission of the data.

Once approved, the merchant is given a user name and password that they use to log into their web portal merchant account web page also known as a “Virtual Terminal”.

The page(s) of the Virtual Terminal have fields for data entry of the customer name, credit card number, expiration date, security code, billing address and transaction amount and details.

Some virtual terminal systems such as Chase PaymenTech also allow for the addition of a low cost credit card reader so that the cumbersome data can be easily “swiped” into the system. This will not only save on time but also errors in data entry.  However, many systems that do allow for a “swiper” system require only that particular merchant processor’s own expensive reader which can sometimes be quite cost prohibitive.

Some of the drawbacks of this Virtual Terminal system need to be taken into consideration before deciding on this type of credit card processing system.

One of the biggest problems a merchant can experience with this type of system is what happens when the internet goes down for whatever reason.  When a web based credit card processing system loses internet, the entire system is rendered Worthless! Because the system is web based, losing internet loses all data entry and all processing capabilities.  This can be devastating and amount to profit loss for a business.

Also, logging in to the virtual terminal can sometimes be a long and tedious process depending on the speed of your internet and how busy the processors servers are.  The other problem which can be a real nuisance is that if there is any period of time where you are not doing transactions, many virtual terminals will log you off which will then require you to re-log back in.

A second problem with this type of system is the lack of receipt printing formats.  Again, because it is web based, the only “receipt” a merchant can print is the actual web page itself. This will require a laser or inkjet printer which will end up being expensive for not only 8.5 x 11 printer paper, but also for toner.  Also, depending on the type of printer being used, this can be a slow process that customers do not want to wait for.

It is extremely important for a merchant to print a receipt not only to give to a customer but also to get signed for their own chargeback protections.  There are a very few web based virtual terminal type systems that have formats built into them that will allow printing receipts to smaller thermal receipts such as the type you are used to seeing at a typical store that also has a signature line for customer signatures as well as some of the other formatting that will make a business look more professional.

Another drawback to these systems is that most have no bar code scanning capabilities.  Many businesses with a lot of products benefit from being able to do bar code scanning for fast point of sale checkout.  A virtual terminal system will typically have no provision for this or even a drop down list of products, descriptions, or pricing.  All information typically must be entered in for each transaction manually. This can result in wasted time and productivity.

The System solves all of these problems in a cost effective easy to use credit card processing solution.  Because the system is software based, should internet be lost for any reason, all the transactional information is saved in the system.  That way, when internet returns, those transactions can then be processed.  Also, the system incorporates bar code scanning and professional custom receipts with a full line of 2.25” portable and rechargeable receipt printers.

Also because you are not logged into any web based system, you do not have to worry about being logged off and having to take the time to re-log back on to those web based servers which can sometimes take a long time and customers do not like to wait.

In addition to this unique software based system, USBSwiper offers a full line of competitive low rate merchant account options giving any business cost savings and flexibility not found in most other systems.  The USBSwiper merchant account options also offers ecommerce integration at no extra gateway fess which saves considerable amount of money for all inclusive merchant credit card processing features.

Why Do Merchants Shy Away from Accepting American Express? Turns out it’s for All the Wrong Reasons

The longer I am in the credit card processing industry, the more it amazes me how little thought goes into decisions on which credit cards a merchant decides to accept or in this case – not to accept.

We all know most merchants when they apply for a merchant account make the forgone conclusion to accept Visa and MasterCard.  But many have opted out of accepting American Express and or Discover Card credit card processing for payment of their services and or products.

When you ask a merchant “why?” the answer is a universal – “They are just too expensive – their fees are just too high”!

While the statement of their fees being higher than an average Visa or MasterCard processing fee is on the surface correct, if you were to actually examine the extra cost involved, it really isn’t all that much more expensive to accept those cards and actually downright foolish to potentially lose a sale because of it.

Also, Discover Card is now part of the same association that Visa and Master Card are, so the fees for Discover Card are now the same as Visa and MasterCard.  Merchants should now take Discover Card with no reservations whatsoever.

So let’s examine what it really costs in terms of dollars and cents to accept American Express Cards and see if it really warrants non-acceptance of this form of payment for the merchant’s credit card processing.

Because of interchange pricing that dictates the different rates for different types of credit cards (rewards cards, bonus cards etc.) the average rate that a typical merchant will pay for a Visa, MasterCard or a Discover Card payments will be approximately 2.20% – 2.40%.

After talking with literally thousands of merchants as well as looking at many of their monthly statements, the typical merchant has an average credit card sale of around $50.00

If a customer paid with a Visa, MasterCard or Discover Card, the average rate for that transaction would have resulted in a transaction fee of $1.15 ($50 x 2.30%).

Because American Express is not part of the Association that determines the rates for the Big 3, they set their own rate which is a flat 3.50%.  If we take that same $50.00 transaction and multiply that by 3.50%, the transaction fee equals $1.75.

So on a $50 sale, it would cost the merchant about .60 cents more to accept an American Express card than the other 3 ($1.75 – $1.15 = .60).  However, if a customer wants to pay only with an American Express Card, is it wise for the merchant to potentially lose a $50 sale over .60 cents?  If a merchant has such a small profit margin built into their products or services where they cannot absorb 60 cents, then perhaps they need to reevaluate their business model.  Let’s take a look at why I can make this statement. If the profit margin on that $50 sale is $25, they would lose a $23.25 profit because of not wanting to pay the extra 60 cents!  Does this make any sense at all?  I say NO!

Even if the profit margin on a $50 sale is only $10. Does it still make sense to lose a $8.25 profit because of that .60 cents?

When I go through this simple exercise with merchants over the phone, I have yet to have one single merchant not agree that their decision not to accept American Express was based on false assumptions.  They simply looked at the percentage and not really the actual impact on their bottom line.

Watch Out for Hidden Costs Processing Credit Cards from Smartphones

While technology continues to advance in the payment processing industry, devices such as smartphones (iPhone, Android, Blackberry) and tablet devices such as iPads, are quickly taking the lead when it comes to processing credit cards for businesses.

However, there are some important details that many do not consider when it comes to using a smartphone to process credit cards versus another great technology tool that has been around for many years… the laptop or desktop computer.

Whether you are considering using a smartphone or a laptop to process credit card payments, you still need to have an easy way to connect to the underlying data transmission tool to do so.  In the case of a laptop computer we are talking about accessing the internet.  In the case of a smartphone, we are talking about the carrier signals through the mobile phone networks.

Careful consideration must be taken into account when deciding upon which platform to use.  What many users who already have smartphones do not understand is that they must upgrade to the heavier duty much more expensive data plans to use the credit card processing functionality on a smartphone. Often these plans can cost upwards of one hundred dollars or more depending on the amount of data a user will be sending as well as who the carrier is that they are with.

This can add an additional expense to the credit card processing costs that a merchant needs to take into consideration when comparing a laptop credit card processing system vs. a smartphone credit card processing system.

Many Laptops already have internet access built into them and with the wide variety of Wi-Fi hot spots available, it may add nothing to the bottom line to take and process credit cards anywhere.  Of course, where no Wi-Fi signal exists, laptops can still take into account the ability to rent, lease or purchase a Wi-Fi card that easily plugs into the USB port of their computer which can literally give internet access in a cornfield.  Also the costs for these “air-cards” as they are called can be much less expensive than the smartphone data plans so this cost factor needs to be taken into consideration before any purchase or decision is made.

Another factor to consider is with a laptop or desktop computer; you have the ability to generate a printed receipt for the customer right at the time of purchase as well as bar code scanning capability.  Most smartphone credit card processing systems do not have this functionality built into them. offers an entire line of credit card processing gear and merchant account options for processing credit cards with laptop or desktop equipment.

Andrew Angell is Invited to the Nerd Enterprises Weekly Interview with a Guru

Watch as Seth David from Nerd Enterprises and Andrew Angell, our USBSwiper developer, discuss the ins-and-outs of processing credit cards with various merchant accounts with a focus on the PayPal platform.