“Minimum Credit Card Purchase is $10″.  If you have seen a sign like this at a retail store, you are not alone.  No matter what the sign says, if a merchant accepts credit or debit cards, you are allowed to use any card they accept for a purchase of any amount.  Merchants cannot, in any case, impose minimum or maximum purchase amounts for card payments.  Those who try to pull this off think they are being smart by avoiding merchant fees on small dollar items that may already have a thin profit margin.  What they don’t realize (or they do and think the customer will be naïve) is that they are in violation of card association operating guidelines.  They can also anger customers who must purchase more in order to pay by card. Continue reading "Want to Pay by Credit Card? Minimum Purchase $10."

Online business attracts more buyers each year. The internet has become a way to eliminate the costly overhead associated with retail store fronts. Internet sales are expected to rise by as much as 11 percent in 2009. With a greater number of merchandise being sold on the internet, businesses are more susceptible to fraud and chargebacks. There are ways to protect your profits in uncertain times.

Chargebacks were created as a form of protection for the consumer. The Federal Reserve created regulations guaranteeing card holders the right to a reversal. Various bank networks have their own corresponding rules. Initially, it would seem that a merchant would be more likely to provide quality products and speedy shipping if they had a threat of a chargeback or even having their merchant account turned off, however these rules are extremely one sided.

Continue reading "Are Chargebacks Fair Play or Fraud?"

Every day more businesses are going out of business and layoffs continue to plague the nation. The traditional brick-and mortar merchant may slowly become a thing of the past. Many are trying their hand at home based businesses and internet ventures. Over the past year we have seen a significant rise in companies like mortgage restructuring, debt consolidation, and various classified offerings online. Although these types of businesses are lucrative, they come with great risk to their owners and the acquirers that take on the challenge of processing credit cards for them.

Most may think that banks are not taking on these types of credit card accounts because of the financial state of our banks. There is a big difference between the acquiring side of banking and the issuing side. In fact the acquiring side that handles credit card processing in the banking industry seems to be the only piece still making money and I predict they will continue to generate revenue. There are acquirers out there that are designed to specifically cater to high risk types of online businesses and have flourished in these industries. To make sure your new venture does not turn out to be a big loss, it is important to look for more than just a card processor to partner with.

Some important items to look for when starting a high risk business online:

Continue reading "Does High Risk Mean Big Opportunity or More Losses?"

In 2005, a credit card giant was brought down by a massive security breach. It was said that at least 68,000 MasterCard account numbers were taken from the CardSystems database and that approximately 40 million cards of various brands were exposed. Since this breach, we have implemented PCI DSS and have come a long way in fighting these types of security breaches…or so we thought.

On Tuesday January 20^th, 2009 Heartland Payment Systems, a New Jersey based payment processor, disclosed that they had been hacked. Heartland Payment Systems processes about 100 million transactions a month for over 250,000 merchants. Although Heartland has not released numbers on how many card numbers have been compromised, it has been said that this breach will set a historic record. A breach of this magnitude will no doubt create a surge in fraudulent transactions all across a wide range of ecommerce sites and affect online purchases for a long time.

Continue reading "Heartland Security Breach Shakes the Card Processing Industry"

Most businesses seem to think that an old fashioned knuckle buster is not needed. Most merchants don’t want to purchase a manual imprinter, but this decision can end up costing them more in the long run. There are situations in which an imprint of the card is required.

One example of such relates to non-swiped transactions. Manually keyed transactions typically occur when the magnetic reader on the card doesn’t work or if an order is taken over the telephone. Visa and MasterCard regulations require that a manual imprint of the card be taken whenever possible and that the cardholder signs the imprint. This will provide proof that the card was present during the time of sale or delivery.

Another example would be if there was an equipment failure. When this occurs, a manual imprint and voice authorization is required. During a voice authorization a transaction will be entered into the terminal as a “post authorization” with the 10-digit authorization number keyed, and the funds are reserved for 10 days.  If the transaction is never keyed into the terminal, then the transaction will never be processed. Again, keeping the signed manual imprint is your proof that the customer was present at the time of the sale.

Getting an imprint of the credit card in the above situation would assist greatly in the event of a dispute or a chargeback. Visa requires that merchants keep all sales receipts for up three years and MasterCard requires you to keep receipts for 180 days. When a Retrieval Request occurs, your sales imprint will come in handy. A Retrieval Request is when the cardholder’s bank requests a copy of your sales draft. If you obtained an imprint of the card, you will be better prepared. So next time you are asked if you need an old fashioned knuckle buster, your answer should be yes.

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?"

Even if you manage to keep your chargebacks below the 1/2 – 1% threshold, any chargeback claims – whether remedied or not – take up precious time researching what happened. I’m sure there are other ways you’d rather spend your time (like focusing on new sales). Continue reading "Preventing Chargebacks"

To keep your chargeback ratio in check you have to take a proactive role. You can actually prevent chargebacks from escalating – and counting towards your monthly allotment.

The most common categories for chargebacks include point-of-sale errors, customer disputes, and fraud – and within these categories are a multitude of possible reasons. Understanding the reasons provides insight into how you can keep chargebacks in the “soft” phase from becoming full-blown chargebacks.

Let’s take a look at the possible remedies for common chargeback claims, along with the reason codes assigned by Visa and MasterCard. Continue reading "Remedies for Chargebacks"

While Visa and MasterCard don’t approve merchant accounts, they do hold all the cards – pardon the pun – when it comes to setting chargeback ratios.

Chargeback ratios are calculated by dividing your monthly sales by the number of chargebacks or the total dollar amount of the total chargebacks registered in any given month – or both. You can take proactive steps towards facilitating approval of your merchant account and receiving a fair chargeback ratio – which in general is 1%.

Make sure that you provide your bank with as much detailed and specific information as possible, including: Continue reading "Chargeback Ratios … the Unwritten Rules"

What’s a Chargeback?

A “chargeback” is more than a buzzword. A chargeback happens when a customer disputes a charge you’ve made on his or her credit or debit card. The chargeback usually happens after customers get their billing statement in the mail. And many times they’re quick on the draw – meaning they don’t call the merchant to try to figure out the problem before calling their bank. Continue reading "The Chargeback Cycle in Plain English"