Take 2 Minutes and Voice Your Opinion on Credit Card Processing

March 26, 2010

If you own a business, manage a business, or are thinking of starting a business, credit cards affect how you do business (or don’t do business).

Take just a couple of minutes and answer this six question survey focused on providing simple resources to better understand the complicated world of accepting credit cards and other electronic payments.

http://www.surveymonkey.com/s/PZBWS97

We appreciate taking just a minute out of your day to help and make the world a less complicated place to do business.

Have a great day!

Ben Wallace

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Posted by Ben Wallace

5 Reasons Why Taking Electronic Payment MIGHT Make Business Sense For You

March 11, 2010

As you go through the internal debate with yourself or your partners regarding accepting credit card payments, one of the questions that you will ultimately find yourself asking is “When does it make business sense to take a credit card payment?”  The truth is that it doesn’t always make business sense to take credit card payments or other electronic payment types.  This article will help you better understand the reasons for shifting some of your payment methods to electronic options such as Credit Card, ACH, or Remote Deposit Capture.

The typical reasons that a business might decide it makes sense to take credit card or other electronic forms of payment can be narrowed down to a short list as follows:

Customer Request – If your customer comes to you and says that they would like to do business with you but that they require or prefer that you take a credit card payment, it might make sense for you to take their card rather than miss out on the business.  That being said, you always want to make sure you are doing everything possible to ensure that the credit card number is authentic and belongs to the person giving it to you.

Shifting Payment Risk – If you sell items that cost a lot of money or provide a service where you typically aren’t being paid within a 30 day period, you can shift the risk of payment from you to the credit card issuer by asking for an up front payment via credit card.  The standard credit card payment process allows you to get instant verification that funds are available on a customer’s credit line.  If you are doing a transaction with the customer present and aren’t sure whether the person presenting the card is the true card holder, you can call your processing company to check and see if the card billing address that the client is giving you matches the one on file.  This is called the AVS or Address Verification System.

Speed up Working Capital – If you have a business where you are billing customers on a monthly basis, you inherently will have a time lag created by the time it takes to send out the invoice and for the customer to find the time to mail back a check.  Statistically speaking you probably wait anywhere from 5 to 20 business days to get paid for services that in many cases have already been provided to the client.  When you provide for a customer to be able to call in their card number or even arrange for automatic payment, you can expect to cut the average time almost in half.  This allows your business to increase your cash flow which allows you to better manage your available working capital, the lifeblood of any business.

Convenience to Business –  When you create options for your business to process transactions electronically you create opportunities to reduce the effort it takes for money to get from your customers to your bank account.  Whether you accept credit card payments, ACH payments, or use Remote Deposit Capture (check 21) you may be able to reduce or eliminate trips to the bank.  This may be especially helpful if your business is a distance from your bank or if you frequently attend remote events where you might be managing your payments away from the office.  If all of your customers are paying you remotely, giving your customers the ability to pay online via credit card or ACH automates the payment process for you and the customer and can improve how quickly you are able to verify payment and fill the customers order.

A/R Aging –  Regardless of what you sell or what service your business provides, if you don’t require 100% payment at time of service, you will have some level of receivables.   Even if you require payment with a certain number of days, you probably have clients that pay right away, and those that string it out as long as they can.  When you offer your customers the ability to do make payments with a credit card or via an ACH transaction from their bank account, you essentially give yourself more control over your receivables and ultimately your own cash flow.  If a customer is behind on their account and you find the need to touch base with them, you can offer to take a credit card or ACH payment over the phone to bring them current.  Instant remote payments are something that only electronic solutions offer.  There are things you need to ensure you have in place to safeguard customer payment information such as a secure tokenized software or a secure internal process.

You must make a business decision regarding whether taking electronic payments will benefit your business or not.  While industry experts such as myself can give you advice, no trusted advisor should ever be making the decision for you.  Your trusted advisor should be providing the information, options, and insight to help you better understand and make an informed decision.

If I can help answer your questions please don’t hesitate to let me know.  My information is in the “Contact Me” tab above.

Thank you and have a great day!

Ben Wallace

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PCI Compliance 101 Series – What is expected of you?

March 5, 2010

The first article in the series dealt with “The Basics” of PCI Compliance (see previous article here).  Now we want to tackle what is expected of you.  One of the most complicated pieces of the process can be understanding what is your responsibility and what is your credit card processors responsibility.  We will try to boil down the issue of PCI Compliance to the essentials as much as possible.  Regardless of who you are or what your business does, you should always have a trusted advisor that you can talk to about your merchant account or credit card processing solution.  (For information on how to find someone, see my previous article on Finding a Trusted Advisor)

Before we go into any more detail, if you would like information on PCI definitions, FAQs, etc, please see the PCI Security Standards Council FAQ Area.

The entire process of PCI Compliance is aimed at reducing the chances that your business will do something that will cause your customers’ sensitive information to be exposed and used for fraudulent use.  One of the biggest misconceptions is that your credit card processing company is supposed to take care of everything and that if something happens the pressure is on the processing company.  If you don’t get anything else from this article, you should understand that your company’s PCI compliance is 100% your responsibility.

Your credit card processor and the credit card industry is compelled to help ensure that sensitive data is not readily vulnerable to theft because if your business experiences a breach and is forced to file bankruptcy, the processor is held responsible for your breach.  Consequently, everyone up the chain from you must also be PCI compliant including the manufacturer that provides your credit card terminal or software, your credit card processor, and anyone in between that helps transmit the credit card data for transaction processing.

The simple answer to the question of what is expected from your business is:

  • to go through the process of checking your business process and systems to ensure that you are limiting the chances of your customers’ information being taken by someone who shouldn’t have it
  • to ensure that you and your employees are properly handling sensitive credit card and personal customer information
  • to ensure that the hardware and software you use is compliant with the data security standards created by the PCI Council (See PA-DSS standards and PIN Transaction Security info)
  • to scan your network, or have someone else do it, on a regular basis to ensure that there aren’t ways for hackers to gain access to customer information via your wireless networks or internet service.

Why should you care about PCI Compliance?  Here is a very simple list:

  • Your business could be seriously impacted or even bankrupted by a breach
  • The Ponemon Institute’s 2009 Survey on the Cost of a Data Breach found that the average cost per compromised record was shown to be about $204, however of all the data breaches experienced by 45 organizations in 2009, the least expensive total cost for an organization was $750,000 and the most expensive was $31 million.
  • The financial impact to a business that experiences a data breach is not just the cost of cleaning up the problem, it also causes a loss of customers and future business
  • The cost of going through an annual compliance process usually costs less than $500, not a bad investment
  • Just because your credit card processor shows “$50,000 of Security Breach Insurance” doesn’t mean that your solution is compliant or that your company is safe, especially when the least costly breach in 2009 cost the company $750,000.

Where can you go for more information?

  • Visit the PCI Security Standards Council website at https://www.pcisecuritystandards.org
  • Call your credit card processing company and ask them what their process is for PCI compliance is and what you need to do
  • If you use a Point of Sale software, check with the company that supports your solution.
  • Check with one of the many Qualified Security Assessors or Approved Scanning Vendors listed on the PCI Council website at https://www.pcisecuritystandards.org/qsa_asv/find_one.shtml

Hopefully this information and these resources will provide you with a chance to educate yourself on the topic of PCI compliance and help you better understand why and how the guidelines affect  your business.

Thank you as always for reading, if I can do anything to help your business answer questions or point you in the right direction, please visit the “Contact Me” tab or just email me directly at takingcards@gmail.com

Thank you,

Ben Wallace

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How To Tell If Your Credit Card Processing Rates are Too High

March 1, 2010

As I work with companies in various industries with various annual volumes one thing is clear:  It is difficult as a business owner to know if your rates are “too” high.  In this article, I am going to give you a quick, intuitive way to figure out whether your rates are too high.  We will walk through this in sequence so that we keep it as simple as possible.

1. Determine your Net Effective Rate – This is simply the whole cost of processing your cards each month.  It includes monthly fees, processing fees, surcharges, PCI compliance fees, and any others.   Here is the best way to do this:

  • Take the number at the end of your statement that shows the total of all the fees charged and divide it by the total dollar volume of the transactions that you took for the month.  If you get a separate AMEX or Discover Statement, take that out of the volume you use to divide the fees by.
  • Example would be:  my statement typically says on the last page “total fees” or “amount debited from account” and the amount this month is $400.00.   I look at the total volume under the deposit summary or transaction summary and see that I did about $15,500 for the month in Visa, MC, and Discover transactions.
  • I take the $400 in fees and divide it by the total volume of $15,500.00 which looks like this:
  • $400 / $15,500 =  .0258    In order to make this look like the percentages I am used to, I need to multiply this number by 100 which gives me 2.58 or 2.58%
  • Typically your net effective rate should be between 2.0% and 4.0%   If your net effective rate is lower than 2.0% there is a chance that you are not seeing all of the fees that are being charged to you each month.  If your net effective rate is higher than 4.0%, chances are there could be an opportunity to look at how you are being charged or how to improve the way your solution is being put together.
  • *Please Note* This method is not meant to give you all the information you need, it is meant to be a quick way for you to determine if it might make sense for you to talk to someone about your rates.  Regardless of who you talk to, it is best if you choose someone that you can depend on as a trusted advisor.  If you need help in finding a trusted advisor to speak with, see my previous post on How to Find a Trusted Advisor.

2. Check to see if there are any extra fees that don’t match your current solution – Especially if you have had your solution for many years, it is good to keep an eye on extra fees that you might not even need to be charged any more.  Here are some common fees that you might be able to reduce or avoid:

  • Many providers give you the ability to download a copy of your statement each month rather than having it mailed to you.  Can you opt for using the website instead of a hard copy statement and reduce your monthly bill by $5 or $10 a month?
  • Are you being charged a monthly “PCI Non-validation fee” of $20 dollars or more?  All providers either do or will be including annual or monthly PCI fees.  However, if you don’t go through the compliance procedure, it has the potential to cost you even more in non-validation fees.  Going through the process to ensure that your transaction environment is secure can potentially save you from being charged those extra fees.  If you are seeing non-validation fees on your statement, call your processor to ask about what needs to be done to avoid those in the future.  For a basic understanding of what PCI Compliance is, see my previous post regarding PCI Compliance.
  • Are you being charged for a service or equipment that you no longer own or use to process your transactions?  Make sure that all of the fees that you are being charged each month are connected to something you should be charged for.  If you aren’t sure, call your current processor to ask them about the fees and if they can be reduced or eliminated.

More than anything it is important to find a credit card processor that is going to help you establish what your best rates might be and how to put them in place.  Low rates are important, but it truly doesn’t matter if your solution isn’t structured to make sure you are qualifying your transactions at that low rate.

Remember, this is only a starting point to help you decide whether you should be spending some extra time looking at your solution more closely.   If you need to, find a trusted advisor to help you analyze your statement more closely and what options are available, then make a decision on your own.

Thank you for reading, I hope that this information is helpful to you and your business.

Ben Wallace

1 Comment | Credit Card Acceptance, Credit Card Processing 101, General Information, Merchant Accounts, Merchant Services | Tagged: , , , , , , , , , , , , , , , | Permalink
Posted by Ben Wallace

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