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What Exactly Do The Numbers On The Front Of Your Credit Card Mean?

Have you ever wondered what all of those numbers on the front of your credit card actually stand for? Here is the actual breakdown...

The first digit signifies the system that the card runs on: 3 - Travel/entertainment card (ie: American Express/Diners club) 4 - Visa 5 - Mastercard 6 - Discover Card

The actual card number also varies by the system. (For example, American Express cards start with 37, Diners club cards start with 38)

Visa: Numbers two through 6 are the bank number. Numbers seven through twelve or fifteen is the account number. Finally digit 13 or 16 (the final number) is a check digit.

Mastercard: Numbers two and three, two through four, two through five, or two through six are the bank number (This depends on if digit two is a one,two, or three.) The numbers after the bank number up through fifteen are the account number, and the final number is a check number.

American Express: Numbers three and four are type and currency. Numbers five through eleven are the account number. Numbers twelve through fourteen are the card number within the account and the last number is a check number.

Hopefully this will give you a better understanding of what you are looking at the next time you pull out the plastic! So what about the back?

The back of the card has what is called a magnetic stripe. (Commonly called a magstripe.) It is made up iron magnetic particles in a plastic film. If a credit card terminal ever refuses to take your card it is most likely because this stripe is dirty or scratched. The stripe can also be erased by exposure to a magnet. (This can even happen with a basic refrigerator magent.) This stripe has all information associated with your account. This is why a merchant pays less for a card swipe when compared to a key entry.

An Interchange Plus Pricing Structure Can Greatly Reduce Your Credit Card Processing And Merchant Account Fees

Traditionally small to mid sized businesses have been set up with what is called multi-tier pricing for their credit card processing. This system is usually set up with three tiers (qualified, mid-qualified, and non-qualifed.) Occassionally, if the business owner has negotiated well, there will be a fourth tier for qualified offline debit cards. While this system has worked well for many years, the increasing number of rewards and corporate cards being issued has made this type of pricing obsolete.

Visa and Mastercard have many different interchange categories for the multiple card types that are issued. Tier pricing takes a large number of these categories and lumps them into one of the three tier buckets available to the merchant. If the merchant only ever takes standard credit cards then this system will work well for them. Once they start to see more debit, rewards, and corporate cards being used in their place of business they will notice that their merchant services bill has increased dramatically. This is because many of these transactions are falling in to the mid or non qualified transaction categories.

Some of these cards are actually not that much more to process than a standard credit card, but the underwriting company for the merchant account needs to make sure that they are profiting on every transaction. They can ensure profit if they charge a large mark up for any transactions that are not qualified. So you may pay 2.9% for a mid qualified transaction and 3.5% for a non qualified transaction (These numbers can range much higher and lower.)

The fact is that some of the cards that fall into these categories may only cost an additional quarter of a percent to process. So the merchant may over pay by 1-2% to run certain card types. The business owner can avoid this if they are set up on interchange plus pricing.

What interchange plus pricing does is pass the true cost of running the card right through to the merchant. So the fees associated with that individual transaction will be put through at the lowest possible cost. The business owner pays a mark up at the end of the month based solely on their number of transactions and the sales dollar volume. (typically .25-.50% plus $.10-$.15 per trnasaction.)

This system will almost always prove to be a better deal than a three tier structure. Make sure to check your latest credit card processing statement to look for a high number of mid or non qualified transactions. If you see them, then setting up an interchange pluse pricing system may be the way to start saving your business money.

What Are The Many Credit Card Processings Fees Associated With Setting Up A Merchant Account?

These are some of the fees that a merchant will pay when they process credit cards through a typical merchant account...

Address Verification Fee
The fee charged to the merchant to perform address verification. This usually happens when a merchant has to key in a transaction if the mag stripe does not work.

Chargeback Fee
This is the fee charged by a bank when a chargeback is issued to a merchant. This varies from $15.00 - 30.00 per transaction. (Plus the actual amount of the chargeback sale)

Check Guarantee Fees
Check Guarantee fees are basically structured similar to credit card processing fees. There is usually a percentage rate, transaction fee, statement fee, monthly minimum, and application fee.

Check Verification Fees
Check verification does not guarantee checks. Check verification checks whether the check writer has a history of writing bad checks. There is usually not a percentage fee associated with check verification.

Debit Fees
Debit fees vary based on the debit network that issues the debit card. Debit fees are comprised of network fees and transaction fees.

Discount Rate (Per Transaction)
The discount rate is the fee charged by the acquirer to the merchant to process each transaction. This rate is dependent upon several factors, but usually the rate is either a retail (card present) merchant or a MOTO/Internet (card not present) merchant. (If the business owner is set up on a three tier system) Retail Rates are lower because they present less risk than card not present transactions. Card not present rates are higher due to the increased risk exposure to the bank.

Internet Payment Gateway Fees
A monthly fee associated with maintaining a merchant's secure payment gateway. Usually there is a setup fee, a monthly gateway fee, and/or a transaction fee. The monthly gateway is usually between $10.00-$25.00, and the transaction fee ranges from .05 - .15 per sale.

Investigation Fee
This fee is charged by some banks to investigate or research merchant transactions.

Monthly Fee
This is the monthly fee charged to the merchant in order to produce a monthly statement of transactions and will cover customer service. This statement will usually breakdown their total sales by day, average ticket amount and total charges.

Monthly Minimum Fee
This is a set minimum the bank charges each account. Monthly minimum fees range from $10.00 - $25.00. That means if the merchant doesn't process any transactions, the bank will still receive the monthly minimum fee income in order to service the account. Let's look at a merchant with a monthly minimum of $25.00. If they processed $1,000.00 in charges and the discount rate is 1.65%, the monthly discount fees will be $16.50, they did not reach the $25.00 minimum, so they will be charged the difference of $8.50. If they ran $10,000 in sales at a 1.65% discount rate, the monthly discount fee would be $165.00, so they would not be charged the $25.00 monthly minimum fee.

The monthly minimum only comes into play for low sales volume merchants.

Retrieval Fee
Fee charged to process a retrieval request.

Transaction Fee
This is a fee charged to the merchant to authorize a transaction.

Voice Authorization Fee
This is the fee charged if the merchant calls to Visa/MasterCard for a manual voice authorization.

Wireless Fees
Wireless terminals require a wireless network to process transactions. The monthly wireless access fees range from $15.00 - $30.00 and additional per transaction fees can range from .05-.35 per transaction depending on the carrier.