Please advise me on credit and debit card proceedures?  I need to know
the difference.

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Request for Question Clarification by mvguy-ga on 23 Oct 2002 05:31 PDT

Which procedures are you interested in?  Are you interested on
procedures from the customer's point of view, or the merchant's? 
Thanks.

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Clarification of Question by gill59-ga on 23 Oct 2002 08:25 PDT

I need to know the procedures from both points of view merchant and customer.

I am the merchant.  Thank you

gill59,

Merchants will frequently set up accounts through their bank or some
other merchant processing company that permits them to accept credit
cards such a MasterCard or VISA. Most such accounts these days allow
processing of both real credit cards (which send bills to customers
for their charges) and debit cards (which deduct the charge
immediately from the holder's bank account).

Unfortunately, because of the way merchant credit card fees are
charged, the smaller the merchant, the less economical the system.

Some key aspects of the system:

- The merchant is responsible for ensuring that the person presenting
the credit or debit card number is really the person authorized to use
the card. This may mean asking to see a picture ID if the card is run
in person at the store. If the purchase is being made over the phone
or the internet, it is important for the merchant to get from the
customer -- and verify with the credit-card authorization service --
the 3-digit Credit Card Verification number printed on the signature
strip on the back of the card. This is especially important, because
someone who obtains a valid credit card number from a receipt found in
the trash or written down in someone's records can purchase things
over the phone or the internet without actually having to present the
physical card.

- Most credit card companies allow their cardholders to dispute
charges, so if a merchant does not have proof in the form of a
physical signature, or the CCV has not been verified with the
cardissuer, then the Credit Card company will make the merchant "eat"
the charge. In other words, the merchant has lost both the merchandise
AND the money. At least if the merchant has a signature or verified
the CCV, they have a much better chance of getting their money through
legal means.

- Most merchant processing systems require a monthly fee from the
merchant. In addition, many services require a one-time start-up fee
for opening the credit card processing account.

- In addition, the merchant's processor takes a fee that is a
percentage (anywhere from 1% to 3%, or possibly more) of the total
amount of the transaction, so the merchant doesn't actually get the
full amount that the customer gets charged. However, many merchants
choose to pay for credit card processing services anyway, because SO
many customers these days pay with credit or debit cards, that if they
don't accept them, they will lose a lot of business.

- Typically, the percentage taken by the merchant's processing system
for a debit transaction will be less than the percentage they take out
for a credit charge, because the customer has to provide a valid
Personal Identification Number (PIN) in order for the system to accept
the transaction. This means that it is much MORE likely that the debit
transaction is a valid one, since an imposter will probably not know
the PIN; thus, the risk to the merchant's processor is much less. Some
processors will have a minimum flat fee to discourage lots of
transactions for very small amounts.

- Another thing to keep in mind is that many merchant processing
services will require a merchant to have a good, solid, gradual
buildup of charge business over a period of months before they will
allow single transactions of extremely large amounts. So a merchant is
probably not going to be allowed to process a $12,000 purchase the
first week they have the credit card processing service.

If you are considering obtaining a merchant credit/debit card
processing account, you will want to shop around through local banks
and credit unions, as well as checking out the services available
remotely through national companies. BE SURE TO DO YOUR HOMEWORK:
- find out the up-front fee, if any;
- find out the monthly fee;
- find out all the different percentages taken out by the processor
for various types of transactions (this may depend on how large the
amount is, as well as debit vs. credit), and if there is a minimum
flat fee for transactions
- find out if there are any restrictions on type or dollar amount of
transactions

After getting the answers to these questions from various providers of
merchant credit card processing services, you will be in good position
to make a decision regarding which company will work best for you.

BEFORE YOU SIGN ANYTHING, be sure to read the contract thoroughly. If
you're not sure you understand everything, read it again, and get
someone you know and trust to walk through it with you so that you are
sure you understand it.

I used to work for a bank, so rather than search for information on
the web, I have provided this information from my own personal
knowledge. HOWEVER, I am NOT an expert, and I encourage you to obtain
advice from your banker and perhaps even an attorney before signing
any contracts.

Before Rating my Answer to this question, if you have any questions or
need additional information, please post a Request for Clarification,
and I will do what I can to get you the information you need.

I hope you will find that this information meets your needs!

Regards,

aceresearcher

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Clarification of Answer by aceresearcher-ga on 27 Oct 2002 12:35 PST

Gill59,

Thank you for your excellent rating of my answer, and for the generous tip.

Regards,

aceresearcher

Thank you very much for your help and getting back to me so quickly

Hi,

I have found a couple of sites which may be of use:

'... debit cards - which authorize merchants to debit your bank
account electronically - are increasing in use. Your debit card may be
an automated teller machine (ATM) card that can be used for retail
purchases. To complete a debit card transaction, you may have to use a
personal identification number (PIN), some form of a signature or
other identification, or a combination of these identifiers. Some
cards have both credit and debit features: You select the payment
option at the point-of-sale. But remember, although a debit card may
look like a credit card, the money for debit purchases is transferred
almost immediately from your bank account to the merchant's account.
In addition, your liability limits for a lost or stolen debit card and
unauthorized use are different from your liability if your credit card
is lost, stolen or used without your authorization.'
http://www.ftc.gov/bcp/conline/pubs/online/payments.htm.

Also see the article 'Paying With Plastic: The Differences Between
Debit and Credit Cards' by Francis B Smith
(http://www.consumeralert.org/pubs/commonsense/paying.htm )

Hope this helps,
Ali

The main difference is:

Debit Cards are charged directly to a bank account and depend upon the
available funds (or facility) at that bank.

Credit Cards are charged to a separate Credit Account up to a
specified credit limit and some payment is required to be made on
account each month.

There is also a hybrid card (typically 'a Company Card') where there
is a separate credit account but the balances are charged at the end
of each month to the bank account.

I am coming to my deadline.  Please could you advise me just the
procedurs from the merchants point of view.  Thank you.

The procedures are pretty much the same from the merchant's point of
view.

Depending upon the country, one facilty that may be available with
Debit Cards is 'Cashback'; one advantage (for the consumer) with
Credit Cards is that the there may be some larger component of
Purchase Protection.