Why are merchant account rates higher for Internet, Mail and Telephone Order transactions?
The rates charged for credit card transactions vary based on the perceived risk associated with the transaction. The transaction is perceived to be more risky when there is less control over who is initiating the transaction. Transaction risk has been established by the credit card associations (Visa, Master Card, Discover, etc) and can be grouped into three categories:
- Card present, person present transactions
- Keyed transactions
- International and corporate card transactions
Card present, person present transactions, also known as swiped transactions, represent the lowest risk. The risk is lower because the merchant has more control over the customer initiating the transaction. The merchant can check the customer’s identification to make sure it matches the credit card being used. This greatly reduces the probability that the transaction is fraudulent.
Now, the rates for internet, mail order and telephone orders fall into our second category, keyed transactions. When a credit card transaction is completed via the internet, mail or telephone the order must be keyed into the credit card terminal by the business. The credit card is not present at the time of the transaction and therefore the identity of the customer placing the order can not be verified. Due to the fact that there is less control over the customer, the perceived risk is higher and therefore the rate is higher.
The last category, international and corporate cards represents the highest perceived risk. This is due to the fact that international cards are unable to be address verified leading to higher fraud and corporate cards have multiple authorized users also leading to higher instances of fraud.
If you would like help opening a merchant account please contact our friendly staff at (800)917-8026 and we can get you set up quickly and easily.