Real-Time vs. Deferred Credit Card Processing

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When choosing a way of accepting credit cards, it essentially boils down to two choices: real-time processing and deferred processing. Real-time processing means the card is immediately approved. With deferred processing, the order is sent to you, the merchant, who then processes the order. Let's examine the advantages and disadvantages of both methods.

The biggest advantage with real-time processing is that the customer sees the results immediately. If you sell something that can be delivered over the Internet within minutes, such as software or information, real-time processing will let you fill the order within minutes. Real-time processing also allows you to automate your business. This is especially important if your time is very limited. The more tasks you can automate, the better. The nice part about Real-Time processing is you can have orders automatically or manually processed. For instance, let's say someone visits your site, they find something they like but decide to call in the order instead of ordering online. All you have to do is open your web browser, log into your Real-Time account's Virtual Terminal and manually type in the customers credit card information. If your business requires recurring billing, like an ISP or Web Host, then you'll be pleasantly greeted with an option that allows you to automatically charge customer accounts at certain pre-set time intervals.

Real-time processing also helps eliminate customer errors because they will receive immediate feedback on whether or not their card has been approved. If they made an error in entering their information such as a wrong expiration date, they will receive immediate notice of the error, and they can correct it during the original transaction. Although this is not likely to happen in more than 2% of your orders, it can make a difference in your sales. Customers are much less likely to return to your site a few hours later to re-enter all their details if it takes that long for them to find out they made a mistake.

In order to have your transactions processed in Real Time, your Web Site and Merchant Account will need to be linked together via a "Secure Payment Gateway." All that these companies do is simply provide a secure connection between your Web Site and your Merchant Account Provider (processor). The largest companies of this type are not Merchant Account Providers (processors), so you may need to obtain a Secure Gateway account, and a Merchant Account from a compatible provider.

Some of the big name Real-Time processing gateways are the **NexCommerce bundle (recommend bundle of merchant account and gateway), or AuthorizeNet, VeriSign and iTransact. If you're interested in a Real-Time processing solution check with the Merchant Account Provider of your choice for details.

If you do not deliver your products over the Internet, deferred processing may be the way to go for you. This is also called Offline Sales by some companies. The big advantage of using deferred processing is that you can manually examine your orders and correct them if necessary before shipping. If you ship products to distant countries you may find that the credit card issuer's network is down. By using deferred processing you'll be able to call and authorize the transaction rather than declining it, which is what real-time processing would do. Though network outages are rare and shouldn't be of major concern.

Using POS (Point Of Sale) software or terminals, you can handle transactions manually, over the Internet or by Mail Order/Telephone Order (MOTO). A disadvantage of deferred processing is that you need to securely download your orders, which requires daily attention on your behalf. It also means that until you download your orders, they are stored on the server - make sure that they are encrypted so that nobody can make sense of the information even if they do gain access of it. Don't be fooled into taking the cheapest solution, which is hardware (swipe terminal). You'll be forced to enter all your transactions manually, which can be a huge drain on your time. And don't be tricked into paying more than $400 for a software solution. In most cases you can get a POS software solution for less than $200. In addition, you shouldn't have to pay for any programming or software setup services.

There are several POS software programs out there that will meet your deferred processing needs. PC Charge and ICVerify are among the most popular. For information and downloadable demos of these programs and more visit http://www.merchantseek.com/software.htm What these programs do is connect you to your Merchant Account just like a POS Terminal would. Unless you receive a huge volume of orders, software processing will work just fine. Just make sure that you verify the credit card info before you ship. If you do real-time processing (explained previously), you can just use the Virtual Terminal instead, and everything is operated from your web browser.

If your business sells its merchandise by retail (storefront, trade shows, etc.) IN ADDITION to on the Internet it would be in your best interest to not only invest in a Real-Time solution for Internet and Mail/Telephone orders (or a POS software solution if you prefer to process cards only manually) but also a POS swipe terminal along with a Retail (Card Present-type) Merchant Account. This way you'll save money by processing your retail (face-to-face) transactions through the swipe terminal rather than having to pay the higher discount rate and per transaction fee like you would if did a MOTO type transaction (where the card is not present). It is also worth mentioning that many of the POS Software products support the addition of a card reader so that you can get the lower "Card Swipe" rates.

One last important note worth mentioning, if you decide to use POS software to process your Internet orders be sure to use Electronic Commerce Indicators (within the POS software) to show which orders originated from the Internet. Visa and MasterCard now require that all orders via the Internet must be "flagged" as such. If you're caught not indicating them you can expect to pay some hefty fines. Be sure to read the software instruction manual on how to use Electronic Commerce Indicators or contact the company you bought it from for directions.

You will also want to be sure to use the Address Verification type Authorization requests for your online sales, otherwise Visa/MC will charge you an extra .50% to 1.25% on those transactions.