Understanding Credit Card Processing

If you currently accept credit cards, you already have a credit card processor in place. There are many credit card processors; some of the largest ones are Chase Paymentech, and First Data. There are also many other smaller companies that resell processing services. When a consumer uses a credit card to make a purchase, the credit card issuer makes money from that purchase.

Credit card issuers (e.g., MasterCard, Visa) not only make interest when a consumer doesn’t pay off their account balance, but even if the consumer pays it off the same day, the credit card issuer is going to take a little percentage of each purchase. For example, to make the math easy, say the percentage is 1.3%. On a $100 purchase, the credit card issuer is going to make $1.30. But, if it’s a cash-back card or a miles card (or any kind of reward card), the issuer takes a little more to cover that perk they offer the customer. This can vary depending on the card and the perk.

 The credit card processor (e.g., Chase Paymentech, First Data) also makes their little piece of the pie, say 20 cents per transaction plus 30 basis points. Basis points translate to fractions of a percent, so another way to think of 30 basis points is 30 cents on the $100 purchase. On top of that, there can be additional costs if the card is not physically present (like an internet order), or for other reasons, such as the security code or zip code does not match. Depending on the processing setup, that can make a transaction not go through, or may just increase the cost on that transaction. The higher volume of business you do, the better terms you can normally negotiate for your credit card processing fees. For example, if you are a good customer that runs a lot of non reward cards, you might be paying 1.8% or 2.1%. American Express typically runs higher, around 3.5% (which is why some merchants don’t want to accept Amex cards). At the end of the day, the credit card companies and processing companies are all getting their chunk of the pie – and they really don’t want to deal much with internet stuff… so, in steps Authorize.net.

Using Authorize.net

Authorize.net is a “gateway” to your credit card from a web page. If a consumer wants to use a credit card to make a purchase, certain information must be gathered and sent to your credit card processor. It bounces around from processor to interchange, back through an intermediary, then back to the web page. It’s a pretty complex set of steps and Authorize.Net is the go between that makes it all work.

At the end of each day, a batch occurs on Authorize.Net that sends the money through the processor into your bank account. If you want to process credit cards for your Vantora System, you will need to Set Up an Authorize.Net Account.

To use Authorize.Net, there is a one-time fee of $49, a monthly fee of $25, plus 10 cents per transaction. Even if  your present credit card processor has you on a low rate, this still might be your most cost effective way to go. You will need to contact your credit card processor and obtain what is known as a VAR sheet, and they will set up a new “terminal” for you – which really isn’t a terminal at all – it’s the interface numbers for Authorize.Net. The VAR sheet will supply the three numbers you enter in Authorize.Net, then you will get two codes back. Those you enter in the Vantora area for Settings –> General. Scroll down until you see AuthorizeNet Payment Info and enter the codes there.

Using PayPal

To use PayPal, you set up a PayPal account for your business which will be tied to the email account you want to use for it. This will be independent of your present credit card processor. When customers check out, they can choose to use a credit card or their PayPal account, in which case PayPal acts as a credit card processor.

PayPal is about the same cost of using the Authorize.Net option, unless you are in the situation where you run very low volume. For example, PayPal can be 2.9% and if your credit card is 1.9%, you are losing 1% per transaction, or one dollar on every 100 dollars. But since Authorize.Net has a $25 monthly fee – the break even point would be $2,500 in transactions monthly.

The other draw back of PayPal is they are “very consumer” friendly and very “merchant unfriendly” for these types of transactions. I have had multiple instances where someone did an online reservation and paid for it, came and played, and then refused the charge after the fact. I have called the custoer on a recorded line, where they admitted they played – and admitted that they accidentally refused the charge. Even with their IP Address, signature on a waiver, and a recorded conversation saying it was a legitimate charge, PayPal took the money from my account and charged an additional $35 charge-back fee. When I contacted PayPal, they explained their service is really for shipping product, and unless I can show a signature on a delivered package, they could not give me back my funds. With a lot of asking for supervisors and working up the line, I finally got my money refunded.

You can also get better rates with PayPal if you ask for them and do much volume. The 2.9 can move down to 2.2% for all cards which can be better than the averages for even good credit card rates through the bank.

Using Either or Both

It is up to you on which option you use. You can use either one, or both. If you put information in the PayPal lines in your Admin Settings, your customers can use Paypal. If you put information in the Authorize.Net lines, they can use their credit card through Authorize.Net. If you put both in, when checking out, your customer will get the option to choose which they want to use.

I have found the customer service at Authorize.Net to be very helpful in getting things set up, and PayPal is very easy, so either of these options should work for you. If you need additional help – feel free to contact us.