7-3 Declaring the Correct Transaction Percentages

Declaring the Correct Transaction Percentages

Almost every processor, if not all of them, will have a section on their application that asks you to declare where and how you will be transacting your credit card sales. The processors do this to assess the risk associated with the transactions that you will be running. As we had covered in previous sections each type of transactions whether it is Internet, retail, mail-order, or otherwise carries a different level of risk. You will be asked to declare percentages of each type of transaction that you expect to run.

Some processors will get very specific on their applications by asking you to break your transaction percentages down into many different categories like retail, key-entered, telephone, Internet, and so forth. Other processors will keep this section of the application pretty general and simply ask you for the percentage of keyed in and swiped transactions that you will be processing.

Each processor has a percentage tolerance level for each of the different merchant accounts that they provide. By this we mean that they require merchants to stay within certain transaction processing percentages in order to qualify for the different merchant account types. For example, it is pretty typical for most processors to require at least an 80% swipe rate in order for a merchant to qualify for a retail merchant account. This means that if you are set up with a retail merchant account and you don't transact at least 80% of your Visa and MasterCard sales by swiping the customer's credit card, you are in violation of your merchant agreement and may be subject to account closure or other action from the processor.

As long as the processing method percentages are within the processor's guidelines and threshold for the merchant account type that you are applying for they will not affect the approval or decline of your account too much. Don't get us wrong, these figures are important, but they do not have as large of an impact as personal credit, processing limit, and, average ticket amount on the overall decision.

It is usually suggested that you declare whatever processing method percentages that will afford you the most amount of flexibility with your merchant account. This is especially important if you think that you will be processing a somewhat diverse array of transaction types. For example, it is probably fine for a retail store to declare a 90% swipe rate and a 10% key-entered rate on their merchant account application, but if a pizza restaurant were to declare these amounts they would run into problems. The pizza restaurant may have to declare 50% swiped transactions, and 50% key-entered transactions, making them ineligible for a retail merchant account.

Be sure to ask your merchant account sales representative what your processor's tolerances are for the different types of merchant accounts that they offer, and make sure that you are within these guidelines. You should also work with your representative to ensure that you have flexibility in your processing method percentages if you feel you will need it.

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