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Accepting credit cards also is good for a company’s image, as it lends legitimacy to a retail establishment, and image is key to a business’s success. Accepting and displaying recognizable credit card brands adds validity to a business in a customer’s eyes. To obtain a merchant account, a merchant must apply and show that it is a legitimate business. The customer may or may not know this, but they will recognize the credit card logos that they have seen in businesses for years.
The Costs: Set-up Expenses and Fees Accepting credit card payments does come with a price. First, consider the initial cost of the equipment to swipe or capture the card. Equipment can range from a basic magnetic stripe reader for
less than $100 to a stand-alone terminal that can cost more than $1,000, depending on the needs of the particular business. If a retailer’s point-of-sale software inte- grates with a processing company, then expensive hardware might not be needed. In addition to the costs of the equip- ment, businesses also will be charged what is known as a discount fee. The discount fee is the percentage of the purchase that the credit card processing agency charges per transaction. This fee can vary depending on the type of card and how it is processed. Rewards cards have a higher fee associated with them because the merchant’s fees pay for the rewards received by the consumer. When the card is present during the transaction and can be swiped, a lower fee is gener-
THE HISTORY: RISE OF THE CREDIT CARD C
Let’s take a look at how it all started and how we got to where we are today. Beginning in the 1950s, merchants noticed that their selling opportunities were limited because customers needed cash on hand to make purchases. To address the issue, merchants began to offer in- house credit lines. This created an organizational nightmare and significant risks for the merchant.
In response, banks began to offer credit loans, which could be used by consumers to purchase against the funds in their bank accounts.
In the 1960s, Bank of America introduced the BankAmericard and offered franchises
to other banks. This solved the problem of customers needing multiple loans at mul- tiple banks to shop on credit. Banks resisted BankAmericard for competitive reasons, and MasterCharge was created by a group of independent banks to compete against Bank of America.
In the 1980s, things started to move at a much faster pace. Merchants were frustrat- ed by having to call and wait while an agent verified a consumer’s account status, so Visa and MasterCard introduced VisaNet and BankNet to facilitate “online real-time authorization and settlement.” Concurrently, the first point-of-sale terminals were introduced, and magnetic strips appeared on the backs of cards.
With the increased use of the Internet in the 1990s, people began to communicate and conduct business differently. Industry shifted its focus to “eCommerce,” and security measures were needed to make the Internet a viable marketplace. One of those se- curity measures was the security code on the back of every card, known as the CVV.
The need for increased security against fraud led to the formation in 2006 of the Payment Card Industry Security Standards Council, which was made up of repre- sentatives from all the major payment card companies. The PCI DSS (Payment Card Industry Data Security Standards) helped merchants build and maintain a secure network, protect cardholder data, maintain a vulnerability management program, implement strong access control measures, regularly monitor and test networks and maintain an information security policy.
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