Most merchants have likely seen a disclaimer on their monthly credit card processing statements about an upcoming increase in Interchange rates. The card associations (Visa and MasterCard) have announced some significant changes.  As you are probably aware there are hundreds of different Interchange categories. During April and October, rates in some categories are increased or decreased, and new categories are created. These Interchange rates are not to be confused with reimbursement fees. I mention this because there are two different rate charts. Reimbursement fees are charged to financial institutions to transfer funds between issuing banks. Yes, the banks pay percentages as well.

Several new categories will take effect October 3^rd, 2008. Debt Repayment, Government to Government, and Tax Payment are some of Visa’s new categories.

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Credit card processing has been around for many years in some form or another. Back on the “Little House on the Prairie,” the Olsen general store allowed consumers to pay for items on an account. All the consumers were kept in a log book and paid when they could. We have evolved as a nation, and so has our technology.

In New York, in 1950, the first credit card was released by Franklin National Bank of Long Island. It was also in New York in 2001 that our entire outlook changed. The World Trade Center was attacked and Homeland Security was created to protect our nation from terrorism. The government put in place The Patriot Act, which affected the merchant services industry by putting stricter guidelines on account approvals. Merchants are now required to submit a copy of government issued documents identifying themselves and their business.

The following items are considered acceptable (you will need a minimum of one from each category):

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“Interchange fee” is a term used in the payment card industry to describe a fee that a merchant’s bank (the “acquiring bank”) pays a customer’s bank (the “issuing bank”) when merchants accept cards using card networks, such as Visa and MasterCard, for purchases. Although Visa and MasterCard determine Interchange rates, the fees are not retained by them. They only act as intermediaries between the members on either end of the transaction.

In nature we have the cycle of life – in card processing we have the life of a transaction. It is important to understand where the fees come from and know who all the players are.

• The process starts with the consumer making a purchase via a terminal or website.
• The merchant’s terminal transmits the transaction, via DSL or phone line, to the acquiring bank.
• The acquiring bank routes the transaction to a processor, and then to the card associations via Visa’s system (VisaNet) or MasterCard’s system (INET).
• The association’s system requests an approval from the issuing bank.
• The issuing bank sends back a response. If the card is approved, an authorization code is sent back to the association. The association sends the code to the acquiring bank, and then to the merchants terminal.

Continue reading "How Are Your Card Processing Fees Assessed?"

Our economy is in a downturn and many financial institutions are tightening up guidelines and raising fees. These days even acquiring banks are cracking down on various business types. No company wants to take on a possible financial loss. There are merchant services providers out there that specialize in high risk business, but you have to be prepared to provide all the information that is requested.

Merchants may be required to provide the following:

• Two years of tax returns for the guarantor
• Six months of processing statements. If you have not processed before, you will be required to provide six months of bank statements
• If you are an internet based account, you will need to make sure you have a clearly visible return policy
• It helps to have a tangible product – I once had a loan restructuring company create a package with a welcome letter and question kit to send to all his customers once they purchased his services.

Continue reading "Is Your Merchant Account Considered High Risk?"

There are many third party processors out there that benefit when the Bank Card Associations (Visa and MasterCard) raise their rates. They look at this as an opportunity to make an additional profit from their merchants. Merchant services providers get to decide how they will pass the various increases and decreases through to the merchant. More often it is the increases that get passed on, and not the decreases. New Visa Interchange rates, MasterCard Interchange rates, and other processor Interchange rate schedules are typically published by the Bank Card Associations in April and October.

Since there are many different processing categories for Interchange rates, they can be confusing to most merchants. Merchants pay higher or lower rates depending on, but not limited to, whether or not it was a rewards card, purchase card, or debit card. Rates can also be assessed based on your SIC code and how often you batch your terminal.

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Many merchants ask me this question and want to know how it will affect their business.  The Payment Card Industry Data Security Standard (PCI DSS) is a set of requirements developed by the major credit card companies to enhance credit card data security. These requirements only apply to e-commerce merchants or merchants that are using an online payment gateway. In recent years there have been many card industry security breaches. It became apparent that there needed to be specific guidelines for all merchant services providers that store card holder data and all merchants that pass data through their terminal.

According to the bank card associations, in October 2008 any merchant that applies for a new merchant ID from any credit card processing company must be PCI DSS compliant. In some cases this may mean the merchant will have to download a new application into their terminal. By October of 2009, all merchants must be PCI DSS compliant.

If you are using a POS terminal at a retail location, you are still passing data through the system. The application running on your terminal must be an up-to-date version. Most card processors call you to do a download or an upgrade similar to when truncation laws were put into effect. If you have not received a call yet, be proactive and call your card processor to get compliant.

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When starting a new business, most merchants generally focus on the features of their cart and how the website itself looks. We pick our colors and how much items cost. We look for how the customer will enter their order, or how we will track shipping. The most important consideration is: When customers buy your product, how do they pay you?

There are many different shopping cart options for people to choose. Every online business is different, and shopping carts are customized to fit your business needs.

First, when looking for your business’s shopping cart, it is important to know what features you would like it to accommodate. Most shopping carts can total orders, calculate tax and shipping costs, and transmit information via a payment gateway to process a sale.

Continue reading "Is One Shopping Cart Better Than Another?"

Many merchants violate the credit card companies’ rules and don’t even know it. Most stores don’t have any procedural information about how to process a credit card sale as part of their employee training other than hitting the “sale” button, and why should they? Are there any consequences?

I am continually shocked by the number of Visa and MasterCard violations made by merchants I shop with a daily basis.

Here are a few mistakes I’ve personally witnessed merchants make:

Continue reading "How Do Merchants Violate Visa and MasterCard Rules?"

I belong to a networking group and have been told multiple times my monthly dues need to be paid and I have to remember to bring a check. For those who refuse to adopt current forms of payment, there are ways that people can still pay by check but do so electronically. This process is called e-check and is facilitated by a process called ACH (Automated Clearing House).

ACH is only used in the United States and Puerto Rico. Similar systems exist in other countries but they have different names and run on separate networks.

Many articles say this is a safer way of taking checks because you don’t have to worry about looking for forged or counterfeit checks. But one thing I learned the hard way is, if you are a merchant and you are using the ACH process you may be in for a huge run around if you have a chargeback. An ACH chargeback does not occur in the same way that a credit card chargeback occurs. A merchant’s bank account can be debited as soon as the consumer reports to their bank that they did not authorize the transaction. The difference is the merchant will not receive a letter requesting proof of the transaction before, or after, the debit occurs. Instead, the merchant will have to dispute the charge with the customer’s issuing bank directly. You may find yourself spending hours on the phone between the gateway, merchant services provider and the customer’s bank.

Continue reading "ACH Processing: Replacing Check Writing?"