Device Clears Credit Card Purchases Correctly, on the Spot, Proponents Say : BANKING/FINANCE

Holiday shoppers can grow numb waiting in long lines at checkout stands while clerks process credit card purchases for customers at the front of the queue. And merchants can grow numb waiting for banks to clear the credit card purchases and issue payments.

But some county merchants have taken the wait out of the exercise----both for themselves and their customers--with a new electronic system that speeds card verification and processing and enables merchants to receive overnight payment for credit card purchases.

“Merchants don’t have to call the credit center and check on cards for credit limits, expirations and authorized use,” said Rita Ohmer, a vice president at California City Bank in Orange.

“They also don’t have to total up sales slips or turn over the hard copies of the credit slips to the banks,” Ohmer said. “It’s all done electronically with each sale.”

Indeed, customers don’t even have to add their telephone numbers to the credit slips, she said. They just have to sign them.

And with the purchase of an optional printer, the store clerk doesn’t even have to fill out a credit card purchase slip. Instead, the customer just signs a receipt that comes straight from the cash register.

Doctors, restaurants and hotels, along with retail shops, are using the new system, which costs $200 to $250 per machine.

The system uses a small computer, which automatically scans the customer’s credit card, dials a dedicated telephone link to a credit card authorization service and electronically verifies that the card isn’t stolen or expired and that the purchase won’t exceed the customer’s credit line.

“There are no mistakes and no charge-backs to the merchants for unauthorized purchases, because authorization is automatic,” said Kenneth Slezak, a consultant at Vista Marketing Services in Huntington Beach.

The other benefit to merchants, said a California City Bank official, is that lower error rates can often result in a reduction of the charges credit card companies levy--usually 3% or 4% of the purchase amount. Visa and Mastercard have cut rates to 1.75% and even 1.5% for customers who use the electronic verification and processing systems, the bank official said.

A few banks began pushing the electronic system a year ago, but it is only now catching on. California City and Dana Niguel Bank are the only Orange County-based banks trying to get business customers to buy the necessary equipment and bank with them.

“More and more merchants will start to use the system,” Slezak said. “It makes a lot of sense for the merchant because it pushes sales through faster and saves them time afterward.”

It also makes dollars and cents for the banks if the system attracts new commercial banking customers, said Robert Hoyt, California City’s vice chairman. Because merchants typically put sales proceeds in demand deposit accounts, which do not pay interest, banks have more free money to use.