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Retailers: Avoiding Transaction Risk of Keyed Payments

business.com editorial staff
business.com editorial staff
business.com Member
Updated Apr 13, 2020

In the majority of transactions, this risk is minor and ephemeral. However, certain transactions come with a greater degree of risk.

  • Processing credit card payments can present a risk to business owners of all kinds.
  • Keyed-in transactions are credit card payments involve keying in the numbers on a credit card in order to process a transaction.
  • Some of the benefits of using key-in payments are that they are convenient, reliable, and small business-friendly. 

When you process a credit card transaction in your retail store, there is an element of risk involved in the transferal of payment – a moment when the processing company assumes, but cannot confirm, that it will receive payment from the credit card holder.

In the majority of transactions, this risk is minor and ephemeral. However, certain transactions come with a greater degree of risk that the company will not receive payment or will become a victim of fraud.

To make up for the risks of this kind of transaction, credit card processing companies charge the merchant a much higher fee. Once you understand how risk is assessed by your processing service, you can take action to reduce that risk and, therefore, reduce your transaction fees.

What are keyed-in card payments?

According to Leap Payments, keyed-in card payments are credit card payments that are processed by keying in all the numbers. Unlike swipe payments, keyed-in payments require the focus, precision, and attention to detail necessary to key in a vast array of random numbers throughout the day. Additionally, while swipe payments are considered convenient in some respects, they can cause more harm than good to certain types of businesses and organizations. For this reason, many people and businesses prefer to use a key-in credit card payments for a variety of reasons.

Why do companies key in card payments?

According to Leap Payments, many companies prefer to key in payments for the following reasons:

  • Convenience: One of the top benefits of accepting key in payments is that they are highly convenient. For those who are selling things over the internet or phone, and may not be able to meet with their clients face to face, key-in payments are a convenient method of accepting key in payments from our customers no matter if you are able to meet with them or not.

  • Reliability: Another major benefit of accepting key-in payments in that they are a reliable method of accepting payments. This is because the process of keying in the numbers eliminates the need to be able to read the data on the card, which can, at times, be faulty. Therefore, while many people think that accepting swipe payments is the most efficient method of accepting credit card payments, this is not always the case.

  • Small business-friendly: One of the top benefits of accepting key-in payments is that they are small business-friendly. Paying for a credit card system that processes swipe payments can be a tad more costly than many small business owners can afford. However, by purchasing a key-in credit card system to process your payments, you will have the freedom of processing payments without having to pay an excess of fees on a regular basis. 

Keyed transactions

When processing a credit card transaction, you can be charged one of three different rates. The qualified rate is the lowest possible rate a transaction can incur; this rate is based on the most common way you accept the majority of your cards.

The non-qualified rate is the highest rate that your credit card processing company can charge you, it is most commonly incurred when a card number is keyed in, rather than swiped.

  • When a card number is manually keyed in, there is no way for the credit card processing company to know whether the card was actually present for the transaction. Since fraudulent use of credit card numbers costs companies millions of dollars each year, they charge a higher fee for those transactions that are most likely to result in a loss.

  • If your business manually keys a large number of cards, not only are you losing more money to higher fees; you are leaving yourself open to the financial ramifications of credit card fraud.

Techniques to reduce risk

A few transactions charged at the non-qualified rate can put a dent in your business's revenue. An entire day's worth of credit card transactions charged at that rate can cause severe problems, especially if it happens regularly. You need to take action to reduce transaction risk within your retail store.

  • To avoid the non-qualified rate being applied to a full day of transactions, make sure to settle your terminal within the time limits of your credit card processing company – usually 24 to 48 hours. Your employees should be properly trained in settling the terminal when appropriate.

  • Reduce the number of transactions that you key in manually. This cannot be fully avoided, as customers will always have finicky cards that refuse to be swiped. If you have any business processes that necessitate manual keying – such as offsite sales – invest in a mobile card machine to accept swiped cards while you're away from your terminal. 

Keyed transactions are not the only cause of transaction risk. Some rewards cards and business cards are not processed under the qualified or mid-qualified rate because they are rarer than most common credit cards. Check your transaction history to determine what kind of card is most regularly used in your business, and make sure that your credit card processing company attributes the qualified rate to that card type. 

When accepting credit card payments, you should ensure that the majority of your customers' credit card information is acquired by swiping, and that you settle your terminal daily. The less risk that is involved in acquiring, transmitting, and processing your customers' credit card information, the lower your transaction fees will be. Double-check your current merchant fee structure, and look into mobile payment services to help reduce your risk. Follow this link to learn more about average credit card merchant fees.

Image Credit: cyano66 / Getty Images
business.com editorial staff
business.com editorial staff
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