To accept payments through credit cards from customers the merchants need to have a payment processor associated with them. Usually, this means that the merchants should have a credit card merchant account. If he has a merchant account the merchant will be able to accept payments through the major cards like MasterCard and Visa. The biggest drawback of the merchant account is the cost associated with it. A merchant account has many types of fees that have to be paid at different intervals of time ranging from per transaction to per month to per year. Depending on the contract, the fees will more or less eat in to your business profits.

The trend with the consumers is also changing. More number of people is using their debit cards to pay for the items that they purchase. While most of the merchants are aware of the fact that transactions with the debit card will attract lesser fees than credit card, most of them are not aware that there are several types of transactions with the debit card also, each attracting a different fee. The rest of this article will explain how accepting a debit card is different from accepting a credit card. You will also learn the ways you can make your fees lesser.

Debit Card Processing versus Credit Card Processing

The primary difference between payments made through credit and debit card is that when a consumer uses his credit card the amount will be deducted from his line of credit and when he uses the debit card the amount will be deducted from his bank account. The primary reason for lower fees and rates with the debit card is: with the debit card, the amount will be deducted directly from the card holder’s bank account thereby posing no risk for the bank. Therefore, the banks or the debit card issuers offer lower rates and fees.

What exactly is the “Direct Debit Transaction”?

The end result of both the normal and the direct debit transactions is that money is transferred from the card holder’s bank account to the merchants business account. But, the difference is the way they are processed. With the normal debit card transactions the process has to go through a merchant account in a way similar to that of the credit card.

However, the “Direct Debit Transaction” goes via the ACH or Automated Clearing House network, which means that the money is directly transferred from one bank account to the other. For this type of transaction you need to have authorization for processing ACH transactions.

Making your processing fees lower by using Direct Debit

Although, debit card transactions will attract lesser fees that the credit card transactions, you can lower it further. The normal transaction using the debit card will have a discount rate ranging between 2and 3 percent. But, the direct debit transactions have a fixed fee of about $1 or lesser for each transaction.

You should always look out for ways to lower the processing fees so that your business will enjoy larger profits. Contact one of our helpful account representatives to assist you in the setup of a high risk merchant account or offshore merchant account for a high risk merchant.