A website shopping cart is software that allows customers to select and purchase products online. It mimics the experience of shopping in a physical store, where customers can browse, add items to a cart, and then check out. If a merchant sells to businesses, it must have a shopping cart that will connect to a data-enhanced payment gateway. If not, then the merchant will pay anywhere from .70 to 1% in interchange fees. A shopping cart will collect the minimum data needed to process a credit card transaction. However, business, corporate, and purchasing cards require much more data in order to get lower interchange fees. A traditional payment gateway will only pass the data it receives, allowing the transaction to downgrade to a higher credit card interchange rate. A data-enhanced gateway will fill in the missing data to ensure the merchant pays the lowest available credit card interchange rate. Credit card processors will often tell merchants that their gateway will auto-populate that missing data. Be sure to get that in writing on official letterhead and signed by an authorized officer, so you don’t end up learning the hard way and having to pay to fix it later.

The fee charged to the merchant is passed back to the issuing bank. The fees fluctuate based on industry, card type, processing network, method of entry, and data passed. The interchange fees are updated every April and October. It is best to use a Data Enhanced Payment Gateway that will fill in missing data or correct the data to ensure the transactions settle at the lowest interchange fees. This can reduce interchange fees as much as .70 – 1%.

Caution—Processors have been caught inflating/padding the interchange. For example, Visa charges 2.2%, and the credit card processor charges the merchant 2.95%, creating an extra .75% profit for the credit card processor.

A credit card surcharge occurs when a merchant passes their processing fees onto the customer. This can be done in a couple of ways:

A) The credit card processor can charge all the merchant’s customers a flat 3% fee. However, the processor will also raise the merchant’s debit fees, which cannot be passed back to the consumer. A bigger concern is that the credit card processor is fully indemnified, meaning the merchant is 100% responsible for any fines or penalties from the card networks. Even worse, the merchant risks losing the ability to accept credit cards and could face legal consequences in states where surcharging is prohibited or strictly regulated. It’s not a simple “one size fits all” solution; it’s a complex process. Review your merchant agreement carefully—you’ll find an indemnity clause stating that the processor cannot be held accountable, leaving the merchant with all the risk.

B) Partnering with a third-party expert can offer advantages:

However, even with this option, ensure you are not liable for any legal or regulatory violations, and that the third party assumes 100% of the liability.

Credit cards used by businesses for travel and entertainment expenses.

Also referred to as a VAR sheet, a document given to a gateway provider that provides merchant account information, bank account information, processor information, etc., to aid in setting up communication between the payment gateway and the credit card processor.

A unique number assigned to each POS terminal, Virtual Terminal, or Gateway.

A third-party vendor that enhances or modifies existing hardware or software, adding value to the services provided by the processor or acquirer, e.g., a payment gateway.

A document given to a gateway that provides merchant account information, bank account information, processor information, etc., to aid in setting up communication between the gateway and the merchant account provider.

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