Over the Counter

Over the counter – or OTC – refers to a merchant and a respective merchant bank account that a business owner has in which actual credit card sales drafts are submitted to their local bank for payment.

Typical brick-and-mortar retail sales establishments have such an account for in-person sales transactions. These accounts are readily available and can be easily secured from a local branch bank, as opposed to a specialized merchant account bank. However, these accounts are not the same thing as a regular savings account or checking account.

Since the arena in which a regular brick-and-mortar in-person retail sale takes place typically requires a cardholder to be present, a great deal of fraud risk is significantly lowered in the case of such a transaction. Cardholder identification cards and ID matching can be easily corroborated in matter of seconds. Once a credit card is physically swiped in a retail sales location POS machine, it becomes very clear whether a sales transaction is legitimate or not. The lowered risk resulting from OTC sales, in turn, also allows the merchant bank to assess fewer fees from the merchant for these transactions. In the other most common form of sales transaction – the MOTO or money order/telephone order sales transaction – merchants incur fee because of the many steps that it takes to verify buyer identity and the ultimately higher fraud rates that accompanies these type of remote sales transactions.

An online business will typically require a Money Order/Telephone Order merchant account. The customer enters all of their credit card information into a form on a website, where the data is then sent out for verification and the money is subtracted out of the cardholder’s limit. In some cases the card is not actually charged at this stage, however. The money is placed in a holding account, and when the product ships out the card is charged for the purchase price.

In the case of in-person sales, the same data is sent directly from the retail location to the cardholder’s account through an issuing bank. A few steps later, the merchant receives his or her funds, usually within a few moments. After all of the days’ sales are batched at the end of the day or session, the money finally belongs to the merchant at large.