It’s no secret that in order to succeed in today’s ever-changing business environment, you need to accept credit card payments. The first step to accepting credit cards is to open a merchant account. In the payment processing industry, every merchant is classified into a specific “merchant account type” category based on how they collect and process credit card information. When it comes to credit card processing, there are two main categories: swiped and keyed. Each of these categories has its own set of sub-categories, broken down according to the business environment and processing technique.

Swiped Merchants

Swiped–also known as “card present”–merchants directly interact with their customers face-to-face. Credit card information is captured by physically swiping cards through a point-of-sale system. The sub-categories within this group are retail merchants, restaurant merchants, mobile merchants and lodging merchants.

  • Retail merchants: Retail merchants typically conduct business in a storefront where they interact with their customers face-to-face and physically swipe credit cards through a point-of-sale terminal. Retail merchants are usually offered the lowest transaction fees, but they have the most restrictive rules associated with them.
  • Restaurant merchants: Restaurant merchants are similar to retail merchants in that business is conducted in a storefront and cards are physically swiped through a POS terminal. However, restaurant merchants require the ability to add tips to their charges.Using a special tip function, they are able to authorize a card for a certain sale amount and then settle the authorization with an adjusted amount that includes the tip.
  • Mobile merchants: Mobile, or wireless, merchants need the ability to accept cards wherever they are located, which includes being on the road. Mobile merchants use portable wireless terminals that allow them to process on-site transactions wherever their customers may be.
  • Lodging merchants: Lodging merchants include bed and breakfasts, hotels and motels. Lodging merchants process transactions similar to retail merchants except they require the ability to adjust the settlement amount depending on a customer’s length of stay or to include any additional charges made on-site.

Keyed Merchants

Keyed, or “card not present” merchants, indirectly collect credit card information from their customers. Depending on their business environment and the technology used, they can process transactions in various ways. The sub-categories within this group are: keyed face-to-face merchants, mail order/telephone order merchants and eCommerce merchants.

  • Keyed face-to-face merchants: Keyed face-to-face merchants eventually meet their customers face-to-face to deliver the product or service, but they collect credit card information without the customer or card being present. Generally, they take credit card information via phone, Internet, mail or fax and then manually enter the card information into software, a payment gateway or other point-of-sale system.
  • Mail order/ telephone order (MOTO) merchants: MOTO merchants rarely meet their customers face-to-face. Instead, they conduct transactions and collect credit card information over the phone or by mail and manually key-enter transactions. Once a payment has been received and an order has been confirmed, the product is shipped to the customer.
  • eCommerce merchants: E-Commerce merchants conduct all of their business online, and all credit card information is collected and processed online in real-time using a payment gateway that’s built into the website’s shopping cart.

Each type of merchant account is very different, but each is built and intended for a certain type of business. Once you choose the right type of merchant account for your business, you’ll find that you’ll be able to process credit card transactions much more efficiently.

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