Touchtone telephone merchant accounts are merchant accounts where a touchtone telephone is utilized to process credit cards instead of a credit card machine.
 Touchtone Telephone Account Classification
 A touchtone telephone merchant account is an account where a merchant uses a touchtone telephone to call into an automated network to process credit cards. the merchant will follow voice prompts and use the key pad on the telephone to enter credit card information, sales amounts, expiration dates, and so forth.
There are no credit card machines necessary to process credit cards with a touchtone telephone merchant account. Instead, the telephone itself serves as the credit card machine which passes transaction information to the processor through an automated (often third-party) network.
 By eliminating the need for a credit card terminal touchtone telephone merchant accounts often require only a minimal up front investment.
 The higher monthly fees associated with a touchtone telephone merchant account often outweigh the initial appeal of a low up front investment. Businesses that expect to do steady processing volume should strongly consider an Internet merchant account, or mail order merchant account. Please read the section below entitled "Alternatives to a Touchtone Telephone Account" below for more details.
Touchtone Risk
Touchtone telephone merchant accounts are considered by processors to be one of the riskiest accounts to underwrite. Some of the main reasons for this are:
Highest Risk Factor - Touchtone telephone merchant accounts are considered card not present accounts (CNP) where the merchant is mobile. These two factors contribute heavily to the higher associated risk factor for the processor on a touchtone account.
Third-Party Services - The automated system that a merchant dials into to process a credit card is often supplied by a third-party vendor that will charge a fee for their services. These fees are in addition to those already charged by the credit card processor and the independent sales organization (ISO) or merchant service provider - when applicable.
Common Uses for a Touchtone Telephone Account
Touchtone telephone merchant accounts can be utilized using a cellular phone, offering portability and making the accounts an appealing alternative to more costly wireless merchant accounts. Businesses that have a need for portability, but do not have a large enough processing volume to warrant a wireless system should consider a touchtone telephone merchant account.
Craft Businesses - Small craft businesses that attend trade shows and events are prime candidates for a touchtone telephone merchant account. Vendors with a large average ticket require the real-time authorization that touchtone telephone accounts offer. Vendors with a smaller ticket sometimes opt to go with a mail order merchant account and manually run transactions when they return from a show using a credit card machine.
Tradespeople - Plumbers, repairmen, carpenters, and other tradespeople commonly use touchtone telephone merchant accounts so that they are able to transact credit cards at a job site. Touchtone telephone accounts are more popular among tradespeople that will only see their customer once. tradespeople that perform larger jobs where a customer will pay in installments usually prefer to use mail order merchant accounts, wireless merchant accounts, or store and forward merchant accounts due to the lower rates and fees.
Touchtone Telephone Rates and Fees
Touchtone telephone merchant accounts have the highest rates of any merchant account. Touchtone telephone accounts commonly have a mandatory monthly minimum fee and statement fee that a merchant service provider is unable to lower. Per transaction fees and discount rates for touchtone telephone merchant accounts can be in excess of 3% and over $0.50 per transaction making them cost-prohibitive to businesses with a smaller profit margin.
Alternatives to a Touchtone Telephone Account
Wireless Merchant Account
Wireless merchant accounts are a good alternative to touchtone telephone merchant accounts for businesses that have a higher monthly processing volume on a consistent basis. The purchase of wireless terminal will require a larger up-front investment, and their will be an additional monthly wireless service fee each month, but a wireless account will have much lower rates and transaction fees similar to that of a retail merchant account. Like a touchtone telephone merchant account, a wireless merchant account will also offer portability and a real-time authorization on site.
Mail Order Merchant Account (MO/TO)
A mail order telephone order merchant account (MO/TO) will usually have a lower discount rate and per transaction fee than a touchtone telephone account. Merchant service providers will also usually be willing to lower a monthly minimum and/or statement fee on a mail order account, where with touchtone telephone accounts there is little room for negotiation. Merchants that choose to utilize a MO/TO account instead of a touchtone telephone account usually collect customer credit card information in the field using a manual imprinter and process transactions on a credit card machine when the return home or to the office. This system is beneficial because of the lower rates and fees, but a merchant is not able to acquire a real-time transaction in the field and will not know if a card is good or bad until they are able to run the transaction on their terminal.
Store and Forward Merchant Account
Store and forward merchant accounts are in fact retail merchant accounts. The only difference is that a swiped transaction is stored by a credit card terminal and transmitted to the processor at a later time. Store and forward refers to a process that certain terminals are able to perform. Currently Lipman Nurit credit card machines are the most popular terminals used to store and forward transactions. Store and forward merchant accounts carry the same low rates and fees that are found with a retail merchant account making them cost-effective options for businesses that require portability but cannot justify the cost of a wireless terminal. Store and forward merchant accounts will not provide a real-time authorization. A merchant would not know if a transaction is good or bad until they are able to plug the terminal into a physical phone line to transmit transaction information to a credit card processor. |
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