Merchant Services

Ten ways to reduce your cost of accepting credit cards

SBOCTeam — Fri, 03 Oct 2008 17:03:00 GMT

by amspcs

In tough economic times, small businesses seek out ways to cut expenses. One of the best places to start is to lower the cost of credit card processing.

Here are ten proven ideas that every merchant can and should implement. To learn more about each item, please refer to the resource links provided below.

1.) Minimize surcharges Circumventing terminal prompts such as bypassing Address Verification (AVS) or failing to settle batches properly cause transactions to downgrade to higher rates. Adhering to proper procedurees will reduce your rates.

2.) Avoid chargebacks A common avoidable chargeback reasons is unauthorized use of card. This is easily avoided when cashiers are trained to compare, check and verify signatures on each and every transaction.

3.) Consider adjusting your discounting method Does your processor have you on gross processing or net processing? Daily or monthly discounting? Does your particular business qualify for one plan over the other, and would you benefit from it? Learning these fine points can mean extra profit for your business.

4.) Discontinue the Merchant Club membership Many merchants pay $9.95 or more monthly for Merchant Club dues; not knowing this fee is optional. These programs offer benefits like free terminal repair and free supplies. In rare cases, it's worthwhile. But most merchants accomplish nothing more than spending over $100 per year for maybe $30 worth of free supplies; hardly a justifiable expense. Betters to buy supplies from a local office supply outlet, and opt out of the merchant club.

5.) Verify PCI Compliance In the wake of data breaches and identity thefts, Payment Card Industry (PCI) security standards is a serious matter. This involves the manner in which merchants safeguard and store customer credit card data, among other things. The processing industry has established well defined procedures and regulations, failure to adhere to which can lead to nasty fines. Small businesses are not immune. Contact your processor and make sure you are compliant.

6.) Update your processing equipment Replacing obsolete processing equipment can net significant monetary savings very quickly. Examples: Replacing a dial-up credit card machine with a wireless machine and dropping a costly dedicated telephone line can pay for itself in no time. Newer terminals supporting the latest security programming can actually reduce some discount rates. Newer machines using thermal paper eliminate the need for costly ink cartridges and ribbons altogether.

7.) Invest in a Pin Pad A pin pad and a subscription to a true debit gateway enables merchants to process pin debit as opposed to signature debit at greatly reduced costs. For example, the cost of processing a $500 sale could conceivably be reduced from over $8 to under $1 by processing as pin debit instead of signature debit.

8.) Don't fall for the Cold Call scam Unethical processing reps make their living by cold calling merchants, performing an audit of their merchant statements, and promising huge savings if the merchant switches processors. The problem is that it's a big lie; comparing real world numbers with contrived assumption-based fantasy scenarios isn't a valid comparison. More often than not, duped merchants find themselves locked into long-term contracts with higher processing fees than before. Legitimate mainstream processors simply don't operate this way. Their growth is based on performance and legitimate referrals, not by dispatching droves of amateur salespeople to knock on doors. If you are approached in this manner, make sure you run their 'offer' past your current processor before you sign off. Chances are he'll enlighten you to what it really is nonsense. And worst case scenario, if it's legitimate, he'll probably meet or beat it.

9.) Get rid of the No Checks Accepted sign True, the world pays mostly with plastic these days. But there are still millions of checks written every day, Most of them are good. Problem is, when you turn away all checks in hopes of avoiding the bad ones, you're turning away tons of good ones too! The fact is: With modern check guarantee technology, accepting checks is as secure as credit card acceptance, and often cheaper. Furthermore, there are legitimate service providers offering 100% free collection services for NSF checks. There's really no reason to give your competitor the advantage by handing over your check revenue business on a silver platter

10.) Take advantage of free training offered by your processor Legitimate credit card processors offer training to teach you and your staff the right and wrong ways to accept electronic payments. Take advantage of it. Training teaches how to avoid mistakes, surcharges, and chargebacks. How to properly settle your batch, when to run a void instead of a refund (there IS a difference), what to do (and not to do) when you get a decline response to avoid wasting dollars, and much more. If your processor does not offer training, you are being severely short-changed and overcharged.

RESOURCES:

To learn about CREDIT CARD SURCHARGES visit http://www.MerchantServices-help.com/discount-rate.html

To learn about CHARGEBACKS visit http://www.MerchantServices-help.com/chargeback.html

To learn about DISCOUNTING METHODS, visit http://www.MerchantServices-help.com/processing.html

To learn about PCI COMPLIANCE, visit http://www.MerchantServices-help.com/PCIcompliance.html

To learn about DEBIT PROCESSING, visit http://www.MerchantServices-help.com/debit-card.html

To learn about SALES SCAMS, visit http://www.MerchantServices-help.com/merchantmistakes.html

To learn about CHECK GUARANTEE services, visit http://www.MerchantServices-help.com/check-services.html

To learn about FREE CHECK COLLECTION, visit http://www.MerchantServices-help.com/nsfcheck.html

Barry Godofsky operates Automated Merchant Solutions, Inc., a Florida based Independent Sales Office (ISO) representing several of the largest credit card processing Acquirer institutions in the nation. For more information regarding small business credit card processing issues including unbiased tips, FAQs, and resources, please visit http://www.MerchantServices-help.com

Credit Card Processing For Business

SBOCTeam — Wed, 23 Jul 2008 19:52:00 GMT

Rate Reduction Strategies That Work

By amspcs

Has this happened to you? A credit cards merchant account salesperson sold you on a really low credit card discount processing rate. You thought you negotiated a pretty good deal. But lo and behold, you realize that you're paying much more than expected! What happened? And what can you do about it?

The culprit in the above scenario is merchant lack of understanding of "Interchange", the price structure of credit card transaction processing. Without this knowledge, the process of selecting merchant account service processors is usually limited to phoning every processor in the yellow pages and signing on with whoever quotes the lowest 'rate'. The reasoning : 'low rate' equates to 'low cost'. Therein lies the problem.

"Interchange defined"

Interchange is the wholesale price structure of credit card transaction services charged by Visa USA and MasterCard Worldwide to processors. The processors in turn mark up and re-sell these services to credit card accepting businesses, not unlike any other wholesale-retail relationship. Wholesale interchange is exactly the same for all U.S processors large and small, although low-risk and mega merchants enjoy the volume leverage of being able to purchase processing services from processors at smaller profit margins than small businesses are.

The flaw in the 'lowest rate wins' strategy is that merchants mistakenly assume the low rate quoted will apply to all of their transactions. Not so. Interchange in fact comprises some 125 separate rate categories, each of which is assigned a unique qualification criteria and corresponding price structure. The typical merchant will knowingly or otherwise process cards in several of these categories, not just one, and will pay appropriate surcharge rates for each. The low advertised rate is nothing more than a starting point for the entire spectrum of interchange charges.

Reasons for processing surcharges include:

HOW a card is presented affects rate. For example, Swiped vs. non-swiped. Card present vs. mail/phone order. AVS match or mismatch.
The TYPE of credit card processed accounts for many increased pricing criteria. Among them: Business (as opposed to personal) cards, foreign cards , rewards cards, purchasing cards and so on always result in increased rates.
POS equipment may affect rate structure. Older equipment unable to accommodate fully compliant processing software may lead to transactions being downgraded to higher rates.

The significance of this to the merchant is:

When a credit card processing service is selected solely on the basis of one singular advertised 'cheap' merchant account rate quote -often a loss leader--by necessity (no business can sell for below their dead cost....right?) the advertised teaser rate will apply only to a limited number (if any) of the credit card transactions processed by the business, based on very narrow interchange criteria. The remainder of the merchant's transactions that do NOT meet these criteria to qualify for the low rate quoted will be downgraded to a higher rate interchange category, thus allowing the processor to make up his margin and then some.

These higher rate categories will include ALL of the following:

non-swiped sales
rewards card sales
business card transactions
foreign cards
government purchasing cards
everything except personal swiped domestic cards

These non qualified fees compensate for, probably many times over, the low teaser rate afforded by the minority of the transaction volume. As a result, the actual fee paid by the merchant won't remotely resemble the low rate expected. This results in a quite unusual circumstance that many people find impossible to grasp: The lowest rate quotes result in the HIGHEST net cost to the merchant, not the lowest as one might expect. . Strange but true.

Three strategies to avoid this pitfall:

When evaluating a credit card acceptance account (or shopping for a new account), insist on disclosure of all interchange rates involved, not just the 'advertised' rate. The goal is to get the lowest rates in the interchange categories where your business will be, not just the lowest top tier rate quote.

To circumvent rate downgrade increases for incorrect data entry procedures, insist on on-site training by your processor to assure that your staff understands the proper procedures necessary to qualify for the lowest rates. Merchants using no frills processors who skimp on training and support-skimping on services is how they are able to offer cheaper rates in the first place-- are particularly vulnerable to unnecessary non-compliance surcharges.

Have your processor audit your merchant statement periodically to detect any changes in your credit card qualification criteria mix and make adjustments as necessary. Some merchants are still using the same antiquated processing schedule they used on the day they first opened their doors. A program geared to how you do business today, not five years ago, may result in significant processing savings..

Barry Godofsky operates Automated Merchant Solutions, Inc., a Florida based Independent Sales Office (ISO) representing several of the largest credit card processing Acquirer institutions in the nation. For more information regarding small business credit card processing issues including unbiased tips, FAQs, and resources, please visit http://www.MerchantServices-help.com

Are You Compliant

SBOCTeam — Thu, 17 Apr 2008 12:41:00 GMT

PCI Compliance
If you don't understand the current Payment Card Industry guidelines for your business, you may be putting yourself and your customers at risk

By Reed Richardson

Over the past three decades, as our society has increasingly shifted toward one where both consumers and merchants prefer credit over cash (as a recent Visa commercial not so subtly pointed out), the threats from fraud have also radically increased. Gone are the days when criminals are satisfied with the paper bills in your wallet, now they really want the numbers on the plastic in your purse. So, protecting all this financial data, which can be found everywhere from credit cards to company databases to online servers, must now be a major focus of even the smallest of businesses.

Make no mistake: Credit card fraud is expensive. In fact, it cost U.S. consumers and businesses an estimated $3.2 billion in 2007, up more than 35% from just four years earlier, according to a tracking study by Celent Communications. In fact, credit card security is now a major or moderate concern of more than three quarters of the population. And though small retailers have-so far-not been hit as hard, another recent survey found that as many as one out of six had experienced online credit card fraud losses totaling more than 1% of their annual revenue.

Therefore, after years of merchant confusion concerning different brand-specific requirements, along with the continuation of massive credit card data breaches, the five major credit card issuers joined together to create a single standard for protecting credit card data. As a result, the Payment Card Industry, or PCI as it's known, which consists of Visa, MasterCard, American Express, DiscoverCard, and JCB International (a Japanese credit card issuer), finally established an industry wide protocol of best practices in June 2005 called the PCI Data Security Standard (PCI DSS). The goal of the PCI DSS is to reassure customers that their credit card data and transaction information is safe from hackers or any other malicious system intrusion.

"But I only process a few credit card payments a week on my website, do these new rules apply to my small business?" you might ask. The likely answer is yes. "The rule of thumb is this: If you house credit card information, in whatever form, if you house the information in your server-the server that you own or you added-then you are basically responsible for complying with PCI DSS," explains Khalid Kark, an analyst with Forrest Research.

Get the Facts: Know Your Classification
To promote its compliance efforts, the PCI set up a website http://www.pcicomplianceguide.org/ devoted to helping businesses understand these new expectations. Fortunately, the PCI recognized that data security, as well as the ability to invest in it, varies greatly depending on the size of the company. Accordingly, the PCI separates merchants into four different levels, sorting them by their total annual credit card transactions. Most small companies fall under either Level 3 or 4 (less than one million annual Visa or MasterCard transactions) with the distinction between Levels 3 and 4 figured by how robust their online retail presence is (Level 3 companies are defined as having between 20,000 and one million annual e-commerce transactions, Level 4 firms are under 20,000 a year).

Spurred on by massive data security breaches like the one experienced by retailing giant TJX in 2005 and 2006 where the company took a $40.9 million hit to settle a lawsuit after it compromised more than 45 million Visa accounts the PCI initially focused on bringing larger, Level 1 firms into the fold. Smaller businesses were able to meet the PCI's 12 requirements through a less rigorous process that involved taking an annual risk assessment questionnaire and conducting quarterly network scanning. Both methods are fairly affordable for small businesses; the self assessment is free and many PCI approved scanning vendors (ASVs) charge between $12 and $40 a month for their services.

Recently, however, the PCI has broadened its focus to smaller companies for two main reasons: volume and vulnerability. Despite their small size, Level 4 merchants still account for 99% of all credit card merchants and, because of their limited resources, all these companies are more susceptible to security breaches. "Usually, Level 4 merchants do not have the technical expertise, nor the IT staff, to properly secure card holder data," notes Aaron Biddar, president of one of the PCI approved scanning vendors, ControlScan. "So, if I am a hacker, I'm going to go to the merchant that I know cannot afford the proper security or staff to mitigate that type of breach." As a result, Visa unveiled a new Level 4 merchant compliance program last May that seeks to educate small businesses on risk-profiling strategies and how to minimize the amount of customer data that they store.

The Risks of Non Compliance Are High
The role that the individual credit card companies play in the PCI compliance effort should not be overlooked. That's because enforcement of PCI compliance infractions is left to the specific credit card companies, like Visa, and their patience for non-compliance is quickly wearing thin. (In 2006, Visa alone levied almost $5 million in fines and, last year, the company imposed an $880,000 penalty against the bank complicit in TJX's mishandled credit card data.) Although most fines and penalties levied by the credit card companies target banks rather than small businesses themselves, there is a still a significant financial incentive to comply-it only takes one confirmed data breach at a Level 4 merchant to get that company reclassified to Level 1, which requires much more comprehensive and expensive security checks and audits.

Unfortunately, many businesses both large and small remain completely unaware of the PCI's requirements and the potential trouble their company could encounter if they don't comply soon. In fact, a recent poll on the PCI compliance website found a plurality of business owners 29% didn't even know their merchant level classification and a mere 11% said that they were currently in compliance. And, as might be expected, many myths about the topic have also blossomed.

In the end, PCI compliance should be considered just another cost of doing business in today's credit obsessed world. And though it might require an outlay of some capital and be a bit of an inconvenience, consider the cost of not safeguarding your customer's credit card data in terms of your company's reputation and ability to fight a long, protracted lawsuit. That's a price no small business is willing to pay.

Safety Is Important Online Too
In an interview on PracticaleCommerce.com in October of last year, John Munsell, founder and CEO of Bizzuka, a web design and development firm noted that online shoppers should make sure that their any business website where they plan to make a transaction should display a symbol verifying that it uses an approved scanning vendor, such as Scan Alert (Hacker Safe logo), ControlScan, Cybertrust, and VeriSign. "Merchants," he said, "should make sure that their vendors provide PCI compliance before proceeding." Also, he recommended checking to make sure that compliance by the vendor is ongoing, and not just during the delivery phase of the website. "I've seen a lot of merchants buy a shopping cart that was PCI compliant at the time of delivery, but 48 hours later, the cart became non-compliant and the vendor either disappeared or asked for more money to retain compliance."

The Data Less Retailer?
Still, Joe LaRocca, vice president of loss prevention for the National Retail Federation pointed out in an article on that organization's stores.org website recently that PCI compliance does not necessarily guarantee that a retailer is safe from having their customer data compromised. As a remedy, his organization is calling on banks and credit card companies to stop requiring merchants to store credit data in any manner. (Currently, retailers must store credit card numbers for up to 18 months in order to manage refunds, etc.) "If the goal is to make credit card data less vulnerable, the ultimate solution is to stop requiring merchants to store card data in the first place," LaRocca explained. "If you're not storing any credit card data, there's no incentive for the criminals to breach your systems."

Reed Richardson is an associate editor/writer for Business Minds magazine.

Going Plastic

SBOCTeam — Tue, 09 Oct 2007 19:59:00 GMT

With credit and debit cards increasingly becoming the norm, the business that doesn't accept them could be setting themselves up for failure
By Chris Freeburn

In a recent VISA commercial, dozens of hungry customers march in an easy, rapid dance through a coffee shop, pausing only briefly to tap their VISA card on the cash register, paying for their food and moving on with the greatest efficiency. Unfortunately, one woeful customer who tries to pay for his coffee with cash brings the whole ensemble to a crashing halt, earning a look of stern disapproval from the cashier. The message to consumers is clear-credit cards are not only a faster way to pay, they're increasingly the way you are expected to pay. Though VISA targets consumers with its commercial, the message shouldn't be lost on merchants either: No purchase is too trivial to be paid for with plastic.

Pervasive Plastic
Credit and debit cards are now so often used by American consumers it is becoming ever more difficult for merchants to avoid accepting them. In 2004, a U.S. Federal Reserve study found that more than 74 percent of all American families held one or more credit cards. But credit cards are rapidly being eclipsed by debit card use. According to a 2006 Federal Reserve study, debit card use has grown by 20 percent a year since 1996, while the use of credit cards has stalled. Purchases by cash and personal checks were also found to have declined to a tiny percentage of overall consumer spending. In fact, the study revealed that over the past two years, debit cards have actually overtaken credit cards as consumers' favorite means of payment. "Debit is becoming the dominant form of payment for many consumers," the study's authors concluded.

Consumer Expectations and Lost Business
Today's consumers expect a wide array of payment options when they shop. With cash and check transactions in a sharp downward spiral, merchants who offer only those payment options are likely to find many consumers simply willing to pass them by in favor of competitors with more convenient options. "At this point, it's almost common sense," says Dave Bowman of TTG Consulting, a Los Angeles-based consulting firm. "Very few people carry enough cash with them to fund their every day purchases, and the idea of having to run to an ATM to get more cash to buy something is enough to put them off the idea of buying it at all."

More Sales with Plastic
Not only does accepting plastic prevent you from losing sales, it can bring in more business than cash transactions. "Studies have repeatedly shown that consumers will spend more money when charging purchases to a credit card than they would have with cash," says Gerri Detwieler, a consumer debt expert. "Cash in pocket sets a strict limit on what can be purchased," she says. "A credit card, on the other hand, takes away the tangible sense of money leaving their wallets, and leaves the idea of paying that debt off into the future."

Online Sales
If your business hopes to sell its products online, accepting some form of electronic payments is almost a requirement. Electronic payment insures instant payment in U.S. currency no matter where in the world your customer resides. This makes processing international (and domestic) purchases incredibly easy and speeds shipping. In addition to credit and debt cards, online electronic payment systems include eChecks and PayPal, eBay's dominant payment system.

Obtaining a Merchant Account
Not long ago, businesses had to jump through all sorts of hoops before being permitted to accept credit cards. Credit cards had complicated approval processes. High fees made it affordable to only those businesses that would see a large number of credit card transactions. Today, however, most financial institutions are eager to get their plastic accepted in as many places as possible. Numerous credit/debit card and electronic payment processing providers exist, including VantageCard, Sage Payments and Bank of America.

Chris Freeburn is an associate writer for Business 24/7 and Priority magazines.

Evaluating Vendors to Minimize Expenses

SBOCTeam — Sun, 29 Jul 2007 22:39:00 GMT

Many small business owners wait until the end of the year to reevaluate the services they currently use and to decide what new services they are going to implement in the coming year. Here are some tips you can use to evaluate financial and insurance services for your business.
By Chris Freeburn

Payroll
When you have employees who need to be paid, the one business function that must run error free is payroll. Accountants and companies like ADP or Paychex all offer the same basic services: payroll check creation/calculation and tax filing. You can also purchase software packages that do the same thing. The two biggest factors to weigh when considering any payroll option are its accuracy and total cost. In making your evaluation, think about the following:

Accuracy - Does this payroll option guarantee the accuracy of withholdings and tax filing? With the average small business incurring an $845.00 tax penalty, accurate tax filing and withholding is key.
Needed Services - What services do you actually need? Many payroll options offer ancillary services such as HR functions, wage garnishments, FICA tip credit calculations, etc. as a part of their basic package. If your payroll is just you and two employees, why spend $1,600 a year on payroll?
Direct Deposit - Do you want direct deposit? Many software packages and payroll companies charge for direct deposit. Yet direct deposit saves the payroll companies money because there is no production of live checks and no delivery fees. So why should you have to pay for it?
Regardless of how you manage your payroll, it is an extremely important business function and must be done correctly to avoid accounting headaches, tax penalties, and frustrated employees.

Credit and Debit Card Processing
When you break merchant processing down to its most basic requirements, you want to be able to accept payments from your customers and receive those funds as quickly as possible without incurring huge processing fees. Here are some things to consider when evaluating any card processing solution:

Card Acceptance - When most merchants think of the cards they’d like to accept, Visa®, Mastercard®, and American Express® come to mind. But there are many other card types including Discover®, Diners®, etc. that your customers may carry. And the more payment options you can offer your customers, the more likely you are to make a sale.
Processing Fees - All card processing services charge fees for allowing you to accept credit and debit cards from your customers. They may use flat fees, percentages of the sale, transaction fees, etc. to determine how much of your sale ultimately goes to them and how much stays with you. From a fee standpoint, it's important to understand how the fees are calculated and what you’ll have to pay. The better services will often customize your fees based on your business, rather than charging blanket or arbitrary fees.
Access to Funds - Accepting credit or debit cards for payment is not like accepting cash – you don’t have immediate access to the funds. However, you should not have to wait days to receive the proceeds from your sales either. And, depending on the type of business you run, waiting more than a few days for your credit or debit funds to be deposited can really affect your cash flow. So before choosing a merchant processing service, make sure you get a clear estimate of how long it will take to receive funds from a basic credit or debit transaction.

Insurance
Health insurance is a vital component in any employee benefits package, but it can be a major expense for small businesses. So keep these things in mind when searching for health insurance coverage:

Affordability is often a question of flexibility - Your goal as a business owner is to find a plan that balances the needs of your business with the health care concerns you have for your family and your employees. If comprehensive coverage is not economically feasible, look for alternative plans with high deductibles that still provide meaningful protection for you and your employees.
You should only have to pay a regular monthly premium - The services provided by a health insurance agent should be at no cost to you or your company. Typically, the compensation they receive comes from the insurance company that writes the policy.

Chris Freeburn is an associate editor/writer for Business 24/7 magazine.