ECommerce Credit Card Processing Risks

PC based credit card processing solutions are uniquely vulnerable to security breaches and other potentially costly issues. Before you set up your small business merchant accounts, it is a good idea that you understand where the risks are in accepting card payments and how you can minimize them. Your credit card merchant processor should be available to help you. The risks can broadly be divided into two groups: fraudulent transactions and processing errors or inaccuracies.

There are a number of services to help you fight credit card processing fraud. All major credit card networks and companies have implemented a three- (Visa, MasterCard and Discover) or four-digit (American Express) security code that is inscribed on the back (Visa, MasterCard and Discover) or front (American Express) of each credit or debit card. The purpose of these codes is to ensure that the cardholder is in physical possession of the card. Another credit card payment processing security tool is the Address Verification System (AVS). It is designed to verify the identity of the person attempting to make a card payment. The system checks the numeric portions of the provided billing address and compares it to the ones that the card issuing company has on file. For example, if the address that is being verified is 5900 Central St., Cambridge, MA 02143, the AVS checks 5 900 and 02143. If there is an apartment number in the address, the system may check it as well.

The most common processing errors that plague eCommerce merchant accounts are inaccurate transaction information and improper authorization. Because payments are accepted over the internet, the information has to be key entered, instead of read from the card’s magnetic strip. It is easy to understand how this process can generate significantly more inaccuracies than a manual credit card processing operation. Merchants need to double check the payment details in order to reduce potential chargebacks. Authorizations present another challenge. Transactions should not be forced through if authorizations fail and, although credit card processing companies offer them, voice authorizations should be avoided as they don’t provide a record that can be represented in a case of a chargeback.

As you see, internet credit card payment processing solutions require closer attention than their face-to-face merchant account processing counterparts. Yet, with the proper system in place, virtual transactions can be almost as secure.

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Card Processing Risk For Travel Agencies

Before they set up an eCommerce travel agency, merchants should understand the potential sales agent liability associated with selling air fares online. Understanding risk exposure will help you take adequate steps to minimize it and protect your travel agency from losses associated with chargebacks resulting from customer disputes and fraudulent transactions. As a sales agent of an airline, for example, your travel agency may be liable for the entire amount of an airline ticket if it is successfully disputed by the customer or purchased with a stolen card account number. To mitigate risk, you need to establish eCommerce policies and procedures to address the following issues:

An authorization request that is approved by a card issuer indicates that the account is in a good standing. However, the transaction authorization approval is not a proof that the legitimate cardholder is making the purchase, nor is it a guarantee of payment. Be advised that, in most cases, airlines are liable for fraudulent card-not-present transactions, even when they were approved by the card issuer. As a travel agency, your organization may not necessarily be a Visa or MasterCard merchant subject to the Credit Card Associations’ rules and regulations. However, the airline is a Visa and MasterCard merchant and it is subject to their rules and regulations. Be advised that, in most fraud-related transactions, the airline transfers financial liability to the travel agency it has partnered with as part of the contractual agreement. In such cases your organization will bear the full financial responsibility.

Given the above examples, it is understandable why travel agencies are included among the highest-risk card processing merchants on both Visa’s and MasterCard’s lists. When selecting a payment processing partner to provide your merchant services, be sure to choose one with experience in working with travel agencies and other high-risk merchants. Your processor must be able to assist you in developing and implementing your fraud-prevention procedures and be proactive in identifying and correcting potential weak spots in your processing cycle.

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Credit Card Processing Lies

Experts claim that the average American family can significantly improve their quality of life with a $300 per month pay increase. Therefore, it’s no wonder why more Americans start a business in order to gain tax breaks and to make more money. For these same people, part of running a business comes with the job of accepting credit cards. Unfortunately, along with accepting credit, many business owners are losing $300 or more each month in credit card processing fees, unnecessarily.

So, where does the bank credit card processing money go? Much of this profit goes into the hands of the processing companies and the representative. Even more money goes into those hands when there is a lack of knowledge by the business owner. Merchant service providers make greater profits each time a credit card is processed incorrectly. Small mistakes due to lack of training causes higher fees. It’s for this reason that I have a problem with some credit card processing companies and the lies that are being advertised.

#1 Your Told It’s A Discount Rate

First of all, the discount rate isn’t a discount for a business owner. It’s not a savings. Think about it. Have you ever wondered why you scream and holler if a Mortgage Agent were to quote you 2% percentage points in fees today. However, when a Merchant Services Agent walks into your restaurant or store and shows you the small 1.89% discount rate you barely flinch. Why is that? could it be because the word discount makes you feel less abused? Do you feel like it’s a necessary evil to sacrifice a percentage of your money to provide a convenience for your customers who refuse to carry cash?

#2 Getting Only One Percentage Rate

The biggest and most popular credit card processing myth being advertised is, claiming the “discount” swiped rate is the only fee a small business is going to pay. More times than not, if you shop around for merchant services, you are only going to be given one percentage rate and the authorization fee. This is absolutely false. Discount rate is really made up of three parts – the qualified, mid-qualified and the non-qualified fees – charged as percentages. These terms represent the level of risk, in fees, a company will pay per transaction. The highest risk transaction type is the non-qualified fee. A qualified rate is charged for swiped transactions where the credit card is physically present and passed through the machine for payment. Also, each of these levels of fees can vary from one merchant provider to the next. In addition, depending on how your statement is written, your fees may not be what you think they are.

Therefore, there is no way to get an honest quote on processing rates by simply calling around and asking “What are your rates?” The only way to receive the best merchant rate is to have a experienced professional – like myself – analyze at least your past recent statements. Plus, you have to have all the information made available to you. This means you need to ask for all of the credit card processing rates and fees that will affect your business. Contact me and I’ll tell you what to ask for. By looking at what types and the number of transactions occurring each month, a professional can estimate future transactions and then offer the best rate based on the risk involved and costs associated with handling those sales. By accepting the lowest and cheapest quote without a statement analysis is like gambling…with the house always winning. If you’re shopping around, get your statement reviewed before you sign an agreement.

If you are a new business owner with no past processing history and statements to review, you may not get the very best rates because no history has been established yet. However, based on what similar businesses are doing, your rates can be priced fairly accurately the first time by someone who knows what they are doing. I usually setup first-timers on a standard but low pricing schedule and then review their accounts later to see where they can save money.

#3 The Amazingly Cheap Processing Rates

It’s only natural that business owners search for better merchant rates by shopping around. However, buying a better merchant account service isn’t as easy as visiting a wholesale merchant warehouse – like Sams or Costco. Plus, by simply responding to postcard ads, that can potentially cost you more money too. For example, online you can easily locate advertised rates like 1.19% per transaction. Unfortunately, these number are misleading. By making a phone call and probing such offers, a responsible advertiser will eventually confess that these rates are actually for debit card or bank check card transactions, not for regular credit card sales. The normal rate should be around 1.7% + 25 cents per transaction. This type of switch-and-bait scheme is even being done by well-known processing companies. Sorry, but for legal reasons I can’t say which institutions.

Tip: Keep a close eye on the words used in advertisements for payment cards. Terms like Visa bank card or bank credit card are sometimes used to confuse you into thinking your getting a low credit card processing rate. In fact, they are advertising the DEBIT rate. Which for your business may not make a difference. Therefore, you may sign up for an even higher rate. Look at the contract and ask to see the Tier List that shows the fees. If they don’t or won’t provide you with the tiers within your contract, beware. Contact me and I’ll show you what you need.

Confusion, lies and an over abundance of suppliers makes most business owners feeling frustrated. Getting approached by merchant salespeople is almost as annoying as receiving telemarketing calls in the 1980’s. On top of it all, overpricing and charging for many services that can be free is quite common.

Just last week, a small business restaurant owner noticed I was in the credit card processing industry while looking at my credit card, as I was paying. She asked me how much it would cost to add a tip line to her receipts. I replied that it would free of charge and should only take about 15 minutes to setup. Her jaw almost dropped to the ground. She couldn’t believe it. She went on to explain that her credit card processing Agent asked for a $350 fee to add this feature.

Have You Bought A Machine That Contains Rocks?

Stories of overpricing are not surprising to me any longer. I hear about them every day. Of all the calls I receive daily, 30% of them contain some type of bad experience. Representatives have done things like change merchant application fees after the fact. Bad reps have sold credit card machines that are actually empty or filled with rocks. I’m not kidding. One client bought a brand new looking, clean and shiny terminal, only to discover that something rattling inside was rocks.

So, what’s a business owner suppose to do to protect themselves? For one, merchants should call the representatives processing company and ask to verify their relationship. Ask for the name of the nearest business reference or locate the nearest Better Business Bureau. Look to see if any issues were attempted to be resolved. As long as the representative or his company attempts to resolve problems, that’s a good sign. Plus, get your past statements analyzed first if you have any.

Ask a merchant salesperson as many questions as you can. There is never a dumb question. Any legitimate representative will invest as long as it takes to educate you. The best type of sales Agents try to use simple terms and give definitions for the terminology. I for one try to help my clients understand how a sale will occur and how the money and transaction flows from the credit card, through the machine by telephone, to the processor and eventually back into the bank account within 48 business hours.

As for me, it’s important you understand what steps must be taken to avoid any delays. More important is training clients, so transactions don’t generate higher fees by making simple mistakes. By the time my customers get off the phone, they are 99.9% as equally educated as I am about credit card processing.

Proper training is important because you, the business owner, will be the instructor for your cashiers. Therefore, it’s important to explain how you can save money and avoid unnecessary fees by following correct steps many of the other merchant companies will skip over. The unfortunate fact is, many competitors leave out easy instructions, because skipping steps adds higher fees to a credit card sale.

Ralph Prado is a Credit Card Processing Expert with over 20 years of business experience. His expertise is in merchant account services and credit card processing equipment. Visit him online at his site for Credit Card Processing

Successful Ecommerce Processing Means Effective Credit Card Processing

Successful Ecommerce Processing Means Effective Credit Card Processing
The emergence of the Internet in everyday life has helped to not only enhance personal communication and growth, but has had a dramatic effect upon how modern day commerce is conducted. Once limited by physical retail locations, business entrepreneurs first attempted broadening a consumer market through products advertised for long distance sale and shipping in magazines, newspapers, catalogues, radio and television as communication technology evolved.

This evolution produced today’s Internet and a new host of commerce opportunities commonly known as e-commerce. This process usually involves a website where goods and services are offered and payment for these in a variety of ways including credit cards. The e-commerce processing of product and or service payments is essential for the success of any online “e-tailer.” Therefore, online merchants have to pay particular attention when choosing a credit card processing system.

There are a number of factors that need to be considered when making a choice for your e-commerce processing. One area that needs careful consideration are the array of different fees accompanying any type of credit card processing especially online.

Bank And Card Company Fees

Even if your bank handles the transaction – it is important to make sure that a registered service provider performs the necessary relay connection. Be wary of service providers charging exorbitant fees – sometimes up to 5 percent. The card company also charges the merchant a fee when depositing funds into their account. Most often, fees will be based on your prospective annual usage either determined based on your prior experience or based on industry standards. Other fees, or charges, may have some negotiable aspect determining the amount.

Equipment

Credit card processing equipment can run from simple models for a few hundred dollars to extremely sophisticated computer operated systems requiring proprietary software. Equipment costs should also include whatever conveyance used to transmit like the Internet or a separate telephone line.
Buying speed

Negotiations may include fees based on a sliding scale determined by the amount of time it takes for you customer’s money to appear in your account. Some added-on monthly fees “allow” merchants to choose a variety of “lag” times available from the exact point-of-purchase time to when you, the business owner, can spend this money. The quicker the “lag’ time, the larger the fee. Keep in mind that the processor must pay a fee to the credit card company that sometimes is attempted to be recouped through “other” type fees not associated with this cost. Select a “registered” provider to ensure you aren’t being charged hidden fees. Be careful to read all the fine print notices and ask all the questions needed to get that information to make a wise choice.

Always check out incidental fees like termination costs because most contracts follow an industry standard of three years. Additionally, check to see what fees are charged for processing items other than credit and debit cards like gift certificates or checks.

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