- American Express & Discover Card
- CISP Certification
- Discount Rates
- Electronic Checks
- Fraud Screening
- High Risk Merchant Accounts
- How Transactions are Processed
- Keyed Transactions
- Merchant Account Fees
- Offshore Merchant Account
- Payment Gateways
- Reasons for a Merchant Account
- Select a Merchant Account Provider
- Terminated Merchant File
- Third Party Processing
- Types of Merchant Accounts
- Understanding AVS
- Understanding Chargebacks
- What is a Merchant Account
Keyed Transactions
When entering credit, debit, or cash/rewards cards into a point of sale terminal or other type of payment gateway; there are essentially two ways of entering the information. Either the card is swiped through the electronic reader and the customer signs the sales slip, or the card information is keyed in by a sales clerk. Technically, the information could also be keyed in by the customer if the information is being sent using an electronic funds transfer point of sale system also known as a payment gateway.
Whenever the card information is keyed into the database, the assumption is made that errors in keying can and do happen easily. For this reason, when a three tier discount system is in place, purchases that uses keyed in transactions instead of swiped card information is assumed to have the potential for more errors and is therefore charged at a higher discount rate than swiped cards would incur. Theoretically, keyed in transactions incur a higher rate of errors and potentially a higher rate of returned items or chargebacks.
Discount rates for credit card transactions are generally grouped into three categories or tiers. The first tier is for fully qualified transactions. These are swiped card transactions. There is not the possibility of error in keying information because the information is not keyed; it is read as part of the identification and security process during the time that the card is swiped.
The second tier is for mid-qualified transactions. These transactions are where a card is present for the transaction, but the information is keyed into the point of sale terminal rather than being swiped. For an internet or ecommerce user, a mid-qualified rate would be used because a keyed in entry was made but the address verification system was still used. If the batch was not closed within 24 hours, but was closed within 48 hours, a mid-qualified tier is called for. A mid-qualified rate is also used when the card is presented for approval more than one time.
The third tier is for non-qualified transactions. If card information is keyed in and in addition, the address verification system is not used, the card is considered non-qualified and will charged at the highest rate. The Merchant Service Provider (MSP) is considered to have the highest risk and therefore will charge the highest discount rates for the non-qualified transactions.
Three additional tiers exist when the cards are debit cards rather than credit cards and different discount rates are charged for the three types of debit card categories. Debit cards are keyed in less often, but it still does happen usually when the point of sale terminal is not working correctly. In this situation, the card information would be keyed in and the customer either asked to sign a receipt ticket or the clerk would key in the card data and ask the customer to key in the PIN number.
In either case, the multitude of components which go toward making up a fair settlement system for credit card charges are hard to organize, although the three or six tier system does make an effort relating cost of charge to typical risk of the transaction.