Chartered 6 May, 1940
19 August 2005
A Program to Accept Credit Card Payments
Our society has embraced the credit card as the preferred method of payment for many small to medium bills as opposed to cash or checks. I believe a squadron loses many opportunities to increase our membership, class enrollment size, or event attendance as well as to collect dues because we do not have the ability to accept credit card payments. I have investigated the question and believe we can open a merchant account that will enable us to accept some, but not all, credit cards.
There are several credit card systems, Visa and MasterCard, American Express, and Discover. American Express and Discover each operate their own payment and collection systems. Visa and MasterCard operate a combined system but are further distinguished by having cards that are “qualified,” “mid-qualified,” “non-qualified” and “debit.” Additionally, there are separate accounts and rate systems required for merchants operating a retail business as opposed to a mail order/telephone order (MOTO) business. In a retail business a merchant has the opportunity to “swipe” a customer’s card at a terminal or computer station that is connected directly to the service provider. This is the preferred method of card use and consequently results in the lowest commission charged to the merchant. A MOTO merchant records the card number and other information from the customer at the time of sale, but uses a terminal or computer later to manually enter the card number and sale amount. Discount rates differ for each type of business. A power squadron could open either a retail or a MOTO account depending upon the location of the transactions and the equipment in use. There are portable terminals available that would allow cards to be swiped at a remote location and then save the data to be recorded later. The use of such a terminal would allow a squadron to receive retail discount rates. Discount rates are based on a percentage of the sale. There is also a transaction fee for each input of data.
The following table compares fees and costs for four providers, Minotola National Bank, QuickBooks, Heartland and NOVA.
|
Card Type |
Minotola |
QuickBooks |
Heartland 4 |
NOVA |
||
|
|
MOTO |
Retail |
MOTO |
MOTO |
Retail |
MOTO |
|
Debit/Check |
2.35% |
1.60% |
2.44% |
1.714% |
1.13% |
2.04% |
|
Qualified |
2.35% |
1.85% |
2.44% |
1.99% |
!.68% |
2.04% |
|
Mid-Qualified |
3.05% |
2.35% |
3.14% |
2.80% |
2.28% |
2.75% |
|
Non-Qualified |
3.05% |
3.05% |
3.14% |
2.80% |
2.79% |
3.61% |
|
Transaction Fee |
$.28 |
$.25 |
$.23 |
$.15 |
$.15 |
$.28 1 |
|
Authorization |
None |
None |
None |
None |
None |
$.65 |
|
Mon. Disc. Fee |
Waived |
Waived |
Up to $20.00 |
None |
None |
$40.00 2 |
|
Monthly Fee |
$5.00 |
$5.00 |
$17.95 |
$35.00 |
$35.00 |
$5.00 |
|
Equip. Rental |
$20.00 |
$20.00 |
N/A |
$49.16 |
$49.16 |
$35.00 3 |
|
Set Up Fee |
$50.00 |
$50.00 |
$59.95 |
None |
None |
$25.00 |
1 NOVA transaction fee for qualified cards is $.18
2 Based on the fact NOVA requires minimum sales of $2,000.00 per month
3 NOVA equipment rental can be up to $230.00 depending upon equipment selected
4 Heartland is the processor for Commerce Bank the discount rates shown are averages; they provided quotations for twenty-two types of different cards
The major difference between a MOTO and retail account is the security and type of information provided by a “face to face” meeting between the merchant and the customer. A retail merchant can also accept mail order business; however, without electronic or paper copies of the customer’s card, the merchant has no relief from the credit card company in the event of a dispute.
“Qualified” cards are Visa and MasterCard that do not have any premium such as dividend miles or cash back.
“Mid-Qualified” cards are Visa and MasterCard on which the magnetic strip does not scan properly when swiped. Unless a squadron set up a retail account and purchased a card reader, there would be no “mid-qualified” transactions
“Non-Qualified” cards are Visa and MasterCard that pay the user a premium such as airline mile awards or cash back. The USPS credit card falls into this category.
Debit cards are Visa and MasterCard that deduct funds from the customer’s account immediately upon the sale. In retail accounts they receive the most favorable rate. In MOTO, most would be treated as “qualified,” although there are an increasing number that give the user benefits and would therefore be “non-qualified.” Approximately fifty percent of sales under $50.00 are made to debit cards.
Rather than rent a terminal a squadron could consider purchasing one. A VeriFone Omni 3200 SE terminal, recommended by Minotola National Bank sells new for $295.00. There are rebuilt terminals available on the internet for as low as $50.00, these would be perfectly acceptable for our use. Also, there are portable terminals which connect by cell phone, if the connection is not available at the time of the sale, the terminal stores the transaction and uploads it when a connection is available. Minotola National Bank has several of these, reconditioned, available for $275.00. Alternatively, a squadron could purchase computer software, PC Charge Express costs $129.00, or a more sophisticated program, PC Charge Pro, costs $199.00.
The transaction fee is incurred each time the terminal or computer contacts the processing center, once for each transaction and once again when the terminal is closed for the day. Once a transaction has been entered the terminal must be closed within 24 hours or the merchant is charged the “non-qualified” rate no matter what the card classification. Funds are essentially available the next business day.
American Express and Discover each operate their own systems. Although Minotola National Bank will process their transaction, additional accounts must be established. Their commission rates are between 3 1/2 and 4%, the transaction fee is $.20, and there is a monthly fee of $5.00 for each.
There is a potential liability in the event that the credit card information recorded by a squadron member is stolen or misused. According to the National Treasurer, John Alter, USPS insurance would indemnify a squadron from the results of theft or misuse of credit card information if the squadron took basic precautions for the safety of the information. Those precautions would include following a written procedure, limiting the number of people who can accept the card payments, keeping the credit card payment slips in a secure place and destroying them in a timely manner.
Thomas R. Dougherty
19 May, 2005 (Rev 6/8)
(Rev 8/19)
AIPS Credit Card Security Policy