How To Accept Debit And Credit Cards

Merchant Accounts

A prerequisite of accepting debit and credit cards is a merchant account to process payments. Currently, 9 banks offer merchant accounts and these are known as ‘acquiring banks’. These are (in alphabetical order):

• Alliance and Leicester
• American Express
• Bank of Scotland
• Barclaycard Merchant Services
• Diners Club
• HSBC
• Lloyds TSB Cardnet
• Natwest/Royal Bank of Scotland Streamline
• Ulster Bank

 

You can also accept debit and credit cards if your business bank is not an acquiring bank. You will still need to open a merchant account with one of the above acquiring banks, who will process the transactions. They will then transfer payments into your business account, which can be at another bank. This usually takes 3–4 days.

Opening A Merchant Account

Before setting up your merchant account, the acquiring bank will need information about you and your business. They will also need details on anticipated quantity of card transactions, value of transactions and forecast turnover. These are used to assess your business and calculate the level of charges that you will have to pay for the service. Opening an account can take between 2–4 weeks, but could take longer for those with no track record of running a business.

Merchant accounts allow you to process all major debit and credit cards, including Mastercard, Visa, Switch/Maestro and SOLO. To accept major charge cards including Diners Club and American Express you must apply separately to each charge card company before being able to accept them.

Pdq Terminal

Transactions are processed using a piece of equipment called a PDQ terminal. These are rented from your acquiring bank for approximately £20 per month. Your PDQ terminal is linked to the acquiring bank via a separate telephone line. When a card is swiped, using the terminal, a message is sent to the acquiring bank, which then checks that the customer has sufficient funds. Once this is verified, the customer has to enter their card pin number or sign a confirmation receipt to authorise the transaction.

PDQ terminals come in a variety of forms from small handheld terminals to larger counter-top types. It is worth thinking about what type of terminal will provide good customer service and also fit with your business operation. It may be more convenient to have a portable device if you want customers to pay for meals at their tables.

Cost Of Accepting Card Payments

Some acquiring banks require a fee when setting up your merchant account, others will not. Also, as mentioned above, the PDQ terminal will be rented to you at an approximate cost of £ 20 per month. You will be charged per transaction too. Debit cards are much cheaper to process than credit cards. Debit card transactions tend to be charged at a flat rate of a few pence per transaction. Credit cards are charged at a percentage of the cost of the transaction, usually in the 2–8% range. Transaction costs for charge cards are calculated in a similar way.

You will need to confirm what transaction costs you will be charged by obtaining quotes from acquiring banks. Again, it is worth shopping around to find the best deal for your merchant account.

Chargebacks

Chargebacks occur when a customer later refuses to pay for a card transaction. They can occur up to 6 months after the transaction has taken place. In these circumstances, the bank can transfer this liability to you. This means that they will reclaim the payment back from you by charging your account. In pub transactions, the only real risk of a chargeback occurs when a card has been used fraudulently. For example, a cardholder has had their card stolen, which is then used fraudulently to purchase a meal. The cardholder can refuse to accept this as a valid transaction and a chargeback is later made.

In order to avoid chargebacks of this sort, it is important to verify the identity of the person making the card payment. If a transaction is authorised via your PDQ terminal and you have received a correct pin number or clear signature, you will not be liable for a chargeback. Fortunately, the introduction of new chip and pin technology has greatly reduced the possibility of this type of fraud occurring.