Merchant Accounts 101

Everything You Need to Know to About Merchant Accounts

 

Author: Jim Conners

Rating: 10.0

Pages: 1|2|3|4|5|6|7|8|9|10|11|12|13

Types of Transactions

Although processing a sale is the mostly completed and discussed transaction type it is certainly not the only one. Different transactions will affect your account, and thus your fees, differently.

Authorize & Capture (Sale)

This transaction is just a basic, common everyday sale. Whenever a purchase is made it really is a two step process, although the two steps are seamless. The merchant's POS system, in whatever form that may be, contacts the processing bank and acquires an authorization for that credit card transaction. It also requests for that sale to be captured, that is, to have the sale be completed and funds delivered to the merchant.

Refund

A refund is very similar to a sale except the flow of funds is reversed. A refund gives the money back to a customer's credit card. There are no penalties charged if a merchant issues a refund. A merchant may issue as many refunds as necessary.

Authorize Only

Auth Only transactions are very similar to Authorize & Capture transactions except the transaction is not captured. The merchant is issued a six digit authorization number indicating that the funds are available and the transaction is approved. However, the merchant will not receive those funds until they capture the transaction.

Authorizations are only valid for up to 30 days from when they are issued and for up to the amount they were authorized for. For example, if an authorization was obtained for $100, the merchant may use this authorization for any transaction up to $100 for that customer. However, they cannot go over $100 with that authorization number.

An Important thing to note is that the funds from authorizations are frozen on a customer's credit card and cannot be access by that customer. From the customer's point of view, that money is essential spent. Authorizations should not be used without a customer's consent and with care.

Authorizations are captured when a Force transaction is processed.

Force (Capture)

A Force transaction takes an existing authorization number obtained from an Auth Only transaction and forces the sale through so the merchant may receive those funds. Unused funds from an authorization are immediately freed for the customer to use.

Void

A void transaction erases another transaction of any type. It essentially makes that transaction act and appears as if it never existed.

Voids can only be performed before a POS device has successfully batched its transactions. Once a transaction has been batched a void cannot be performed.

Credit Cards Types | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | Processing Fees