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

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The 5 Commandments of Credit Card Processing – Protecting Your Customers, Your Profits, and Your Business

February 14, 2010

Think of this information as as the entire process of choosing a merchant solution boiled down to 5 things that will hopefully help you to avoid some mistakes that might be costly for your business.  Why not 10 commandments?  Because each business is different and although some in an “extended” commandments list might fit your business, these five are fairly universal.  We will start with the most important ones and go from there.

1. Don’t lease equipment – In almost all cases this ends up being a VERY good deal for the leasing agent and not such a great deal for you.  Leases are essentially long term contractually binding rental agreements.  Although you may get to keep the equipment in the end, they typically cause you to pay a lot more money for the equipment than if you simply purchased it outright or rented it until you figured out whether it made the most sense for you.  What it boils down to is that a lease is a way for the company to guarantee their revenue for the length of the contract.  It limits your options and traps you in a contract that in most cases you can not cancel without buying out the entire contract.

2. Do your Homework – Don’t take a solution as being right for your business without doing a little checking around as to what they have told you.  Ask them for some information on their company and ask questions about the solution.  Do they know enough information about your business to provide you with a customized solution or are they making assumptions based on nothing but a business name?  If anything ask them what about your business caused them to suggest that solution and what kind of business might that solution not be good for?  What other solutions does their company offer and why is this solution the best one for you?  These questions will help give you some insight on how much thought was put into the solution rather than reading from their company’s sheet on what to push this month.

3. Don’t sign an agreement with someone you don’t like – That would be like hiring an employee that you think you are going to have problems working with.  The true importance of any advisor is that you feel like you can trust their advice if you run into any issues and need objective guidance for a solution.  If they aren’t providing you any business value beyond their product then why are you buying the product from them?  In today’s world there are likely dozens of companies that offer the same or similar solution.

4. Buy solutions not promotions – Just like any consumer, we are attracted by promotions that offer discounted cost or increased benefit.  But ask yourself the real question, “would you be interested in the solution if the promotion wasn’t there?”  Not necessarily whether you would buy today, but would you see the benefit to your business absent of the promotion.  A promotion should be the icing on the cake not the filling in the pie.

5. Don’t be afraid to ask for a better deal –  There isn’t anything wrong with a healthy negotiation.  Whether that be reducing a monthly fee or set up fee, or decreasing the transactional cost of a solution, how they respond to the request can sometimes be just as insightful as the solution itself.

Hopefully these tips can help you find a good solution for your business the next time you decide to analyze the way you are taking payments from your clients or customers.

Thanks for reading and let me know if there is anything I can do to help you and your business.

Please don’t hesitate to contact me directly via the information in the “Contact Us” link or via my LinkedIn profile,

Ben Wallace

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Looking Beyond – Merchant Solutions That Can Give You an Edge

January 28, 2010

When you open a business, depending on what your business does, you may find yourself wondering whether you NEED to take credit cards.  What you may not realize is that looking at the expanded possiblities for electronic payment solutions beyond just debit and credit cards could give your business  an edge over your competition.

Most businesses look at credit cards and other payment solutions as a necessary evil for their business because of the profit lost from credit card fees.   Very few businesses look at the ways that payment solutions can help them better manage and promote their business.   Every business wants to increase their revenue and reduce their costs, here are some ideas to do just that:

  • Pay customers to visit your store – Thats right, I said pay them to visit your store.  You can probably afford to make a slightly lower profit on your goods or services if you are increasing your sales volume and adding new customers.  Using a gift card and/or loyalty card solution, you can give away store credit using gift cards which will drive business directly to your location.  In addition, those gift cards can be set up to double as loyalty cards, which means that when your customers come in to redeem their store credit, you can capture their information for futher marketing and notification of special offers.  Gift Card solutions can be custom designed for your business with your logo and store information, so every one of your gift card/loyalty card holders is walking around with a piece of your company’s marketing.  Gift card solutions don’t have to cost a lot of money and can typically be implemented for about $100.  (See my previous article on Gift Cards for more information)
  • Incent those that bring you business – When you have customers, clients, or colleagues that bring business your way, you are increasing the chance that those new customers will be with you for the long term.  Referral customers already trust your business more than a typical customer because they trust the source that sent them your way.  So how do you create a system of rewarding those sources of quality referral business?  One way might be to put together a solution that allows for you to give a visa gift card depending on how much business they bring you.  By sending them a prepaid visa gift card, you are rewarding them for their help and allowing them to spend those funds on anything they want.  Sending a gift basket is nice, but allowing your referral to take their spouse out to dinner or choose their own gift is thoughtful and memorable.  Similar to gift cards or loyalty cards, visa gift cards can be custom designed to your business so that you are promoting yourself  every time that gift card is used. 
  • Offer convenient ways for customers to pay - These days, customers are just as appreciative of convenience as they are of price.  Businesses like Amazon.com allow you to purchase almost anything and for a small annual fee you can get free 2 day shipping on all of your purchases through their Amazon Prime program.  When you get to the checkout, you can pay by debit or credit card, amazon gift card, or check.  With customers feeling the negative effects of a tough economy, some merchants are offering payment arrangements including recurring billing and even layaway.  The easier you make it for the customer to purchase a good or service from you, the more likely they are to return.   Electronic payment solutions like recurring billing, ACH, e-check, and others allow you to provide a convenient payment solution while still ensuring that your business is protecting your cash flow.  Regardless of whether you do business in person or on the web, technology is making it easier than ever to let your customers pay how they want without requiring you to have a full time IT staff. 

So what are the first steps towards looking at these solutions and how they might help you manage your business better?  Here are some suggestions:

  • Make sure that you have a trusted advisor who can help you look at all of the options, not just what they are pushing this week.  (See my previous article on how to find a trusted advisor)
  • Figure out what the goal of the solution will be.  Is it attracting new customers or encouraging current customers to visit your store more often?  What kind of customers do you want to attract and what motivates them?
  • What is your budget for a new solution?  Never get into a new solution without figuring out how much you can afford to spend and what you would like to see as your return on investment.  Start simple so that you can figure out what works for your business.

Expanding or establishing new solutions like these might help you distinguish yourself from your competition and provide cost-effective ways for you to increase your sales without killing your bottom line.

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

Do you have an idea for a new article or a question about your business?  See the “Contact Me” tab above or just leave a comment below.

Have  a great day,

Ben Wallace

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Lets Start From the Top – A Basic Education on Merchant Services and Merchant Accounts

January 12, 2010

I have been working recently on finding quality topics to write about so that people can become more educated about taking credit cards.  During that process I have come to believe what might be helpful is a list of basic sources that someone can use to find out more about Merchant Services. 

Below is a list of currently existing resources.  Some resources, like Wikipedia, are a product of user provided content that may or may not be 100% accurate.  Other sources such as Green Sheet are industry publications that typically use expert opinion or professional contribution for their articles.

Hopefully this  list of websites is one that you will find useful as a starting point in your journey to understanding more about merchant services.  Whether you use it as a list of reading  or simply as a reference to answer specific questions, I hope that it provides you some value:

List of Reference/Educational Resources on Merchant Services

Wikipedia Entry for Merchant Account -http://en.wikipedia.org/wiki/Merchant_account

Resources page for the Electronic Transactions Association (ETA):    http://www.electran.org/content/section/8/40/

Resources page for NACHA, The Electronic Payments Association:  http://www.nacha.org/OtherResources/default.htm

PCI Security Standards Council:  https://www.pcisecuritystandards.org

Greensheet - Merchant Services Industry Publication:  http://www.greensheet.com/

This list is not comprehensive, but it does contain mostly sources that I am personally familiar with and comfortable referring to for industry news and information. 

If you have specific questions about something you read or just need a helping hand sorting out some of the details, feel free to post a comment on the site.  You can also click the “Contact Me” tab and send me an email with your question or issue.

Happy Learning,

Ben Wallace

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Who Can You Trust – Finding a Trusted Advisor about Merchant Services (or anything else)

December 10, 2009

Although I make my living consulting with businesses about merchant services, I know that business owners don’t like talking about payment processing and I don’t blame them.  Having a trusted advisor for merchant services is like having a good car mechanic, you need someone you can depend on and hope you don’t have to talk with them too often. 

Regardless of who you decide to talk to about your merchant services, you should take the time to find someone that is giving you straight answers.  As in any high value industry, there are professionals in the merchant services industry that can help you ensure that you are paying as little as possible and those that will take advantage of someone if they can.  The question is how to know which one you are dealing with.

Here are some tips to help you choose a quality trusted advisor for your business:

  • Patience - This is essential.  A quality consultant is going to take the time to explain things to you and help answer your questions in a way that you can understand.
  • Trust – Yes, it is possible to find someone that you trust when it comes to finding a merchant services consultant.  The key is that whether you are looking for a CPA, Doctor, or Consultant, it takes time to develop the relationship necessary to be comfortable trusting them.  Are they telling you want they think you want to hear or giving you a straight answer even when they know it may mean that you won’t end up working with them? 
  • Knowledge – Ask what kinds of businesses they currently work with and what experience they have in your industry. 
  • Options – Most trusted advisors will give you a short list of recommended options for your specific situation and should be able to give pros and cons for each of them.  If they are only giving you one option, ask about other options and question them as to why they are suggesting one option over the other.
  • References – Ask if they would be willing to provide you with a couple of references to speak with.  Don’t hesitate to contact those references and ask questions about their experiences with the consultant.  A quality, experienced consultant should have a handful or more clients willing to vouch for them.  If they aren’t willing to provide a reference either they don’t care enough to win your business or they don’t provide quality enough service that they have anyone willing to speak up for them.
  • Relationship – Most people don’t want to buy important services from vending machines, they want to buy from real people.  Find someone that you can have a relationship with on a level that you are comfortable with.  Your consultant should know who you are and be willing to help before and after the sale.  If they don’t know who you are when you call or email, what value are they adding to your relationship?

Whether you are getting your car fixed, looking to buy a house, or need to find or re-visit your merchant services solution, having a dependable, trustworthy consultant is worth its weight in gold.  Not only can you rest assured that your issues and opportunities will be taken care of effectively, you have someone that is looking out for you even when you aren’t on the phone with them.  They are able to create value for your business because of their expertise, attitude, and willingness to help when help is needed.

The sign of a truly good trusted advisor is someone who you would refer and recommend to others even if they never asked you to.  It is someone that you can respect and appreciate because you know that they respect and appreciate you, your time, and  your business.  They don’t take you for granted and are willing to go above and beyond when needed.

Do yourself and your business a favor and if you decide to find a trusted advisor to help your business take the time to find the right one.  Having a relationship rather than a one-minute sales transaction can pay dividends when your business is on the line.

I hope that this information was helpful to you.  If you have any questions or suggestions, please don’t hesitate to contact me directly at takingcards@gmail.com

Thank you,

Ben Wallace

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PCI Compliance 101 Series – The Basics

December 3, 2009

Businesses large and small are being affected by PCI Security Standards and the associated compliance regulations which are being enforced by their processing company.  In an effort to help explain what PCI is and why it is important, I am starting a blog series that hopefully will shed some light on a very complicated issue.

PCI Compliance is focused on reducing the chances for credit card fraud especially in regards to credit card and cardholder information.  The standards that have been put in place with the purpose of helping the credit card industry establish security guidelines for everyone who is involved in the process of accepting and processing credit card payments.

PCI stands for “Payment Card Industry” which is made up of all the players in the credit card processing industry.  Simply put, anyone that touches credit card transactions is involved regardless of the extent of involvement they have in the process.  The main players in the payment card industry and the security compliance process are:

  • Processors – Companies that actually process transactions on behalf of businesses.  Sometimes called “Acquirers”
  • Issuers – An institution or bank that issues a credit card to an individual or a business
  • Associations – Sometimes called “Brands” these are groups such as Visa and MasterCard.  Associations are comprised of credit card issuers and acquirers.  They facilitate the flow of transaction information and govern their members through a series of by-laws which regulate authorization, processing, and settlement
  • Qualified Security Assessor (QSA) – These are the companies that perform the PCI compliance assessments as they relate to the protection of credit card data.  QSA’s typically are companies whose primary business is PCI Compliance.   A current list of QSA’s can be found on the PCI security standards site at https://www.pcisecuritystandards.org/pdfs/pci_qsa_list.pdf
  • Approved Scanning Vendors (ASV) – Vendors authorized to provide security scanning services in compliance with PCI standards.  Typically ASVs are security solution providers that provide scanning services in addition to other general services.  A current list of ASVs can be found on the PCI security standards site at https://www.pcisecuritystandards.org/pdfs/asv_report.html
  • PCI Security Standards Council – a forum created by American Express, Discover Financial Services, JCB International, MasterCard Worldwide, and Visa Inc.  Visit their website at:  www.pcisecuritystandards.org
  • PCI Data Security Standards (PCI DSS) – a set of requirements for enhancing payment account data security developed by the PCI Security Standards Council to help facilitate the broad adoption of consistent data security measures on a global basis

The simple explanation of why PCI security standards were created is that it was a response to credit card fraud.  The card brands realized that if they did not proactively engage in measures to secure credit card holder data that fraud and theft would either destroy their industry or require the government to establish guidelines for them.

Every merchant that signs up with a processor to accept credit card payments from their customers must agree not only to the terms and conditions of the processing company but ultimately to the terms and conditions of the card brands as well.  This puts the merchants in a position where they are compelled to follow the PCI Compliance procedures set forth by the PCI Council and implemented by the QSA’s on behalf of the processing companies.  PCI Compliance entails the equipment that you use to take card payments, the system or network that the equipment is connected to, how you handle credit card information, as well as the processes you use to reduce the chances of credit card fraud at your business.

The data security standards required of every participant in the process are summarized by the PCI Council in the following principles:

  • Build and Maintain a Secure Network
  • Protect Cardholder Data
  • Maintain a Vulnerability Management Program
  • Implement Strong Access Control Measures
  • Regularly Test and Monitor Networks
  • Maintain an Information Security Policy

In subsequent editions of the PCI Compliance Series, we will work to help you better understand what is required and why you should pay attention to these issues.

If you have any questions regarding PCI Compliance, please don’t hesitate to leave a comment or email me directly at takingcards@gmail.com

Thank you,

Ben Wallace

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Gift Cards – Can they improve your business experience this holiday season?

December 1, 2009

If  your business sells any products or services that depend on the year-end holiday season to meet your revenue goals,  this is an important and potentially frustrating time of year for you.  When dealing with holiday sales you may experience any of the following issues:

  • Customers purchasing gifts for others who might not be exactly sure of what size, color, or type of gift the recipient would like
  • Customers needing to purchase gifts last minute and can’t decide what to get the recipient
  • Customers who want to give a gift that can be applied or combined with other gifts towards the purchase of a larger item
  • Customers who received a gift and need to return or exchange their gift and don’t have a receipt or are exchanging for a less expensive item

As a business owner, one of the problems you may run into is how to administer returns without letting all of the initial revenue walk out the door or find yourself a victim of fraudulent returns.

How do you cater to all of these customer issues at the same time?  One solution may be to look at a gift card solution to offer your customers.  A gift card solution offers you many benefits including:

  • Eliminates the need to give cash back for returns or unused gift certificate balances
  • Unused gift card balances remain in your merchant business account
  • Reduces risk of fraud and theft
  • Runs on the same equipment as credit cards
  • Eliminates cumbersome paper-based gift certificates
  • Automates accounting of gift card sales, redemption, and settlement
  • Lowers administrative costs associated with paper-based programs
  • Provides ability for real-time online reporting
  • Can be coupled with a loyalty program to promote customer retention and repeat business
  • Can support multiple business locations to provide a flexible and convenient solution for your customers

In addition to the ability to simplify your business processes, gift cards are a great way to market your business to others.  Gift cards can be created using a generic design or a custom design specified by you and in either case would display your business name on each card.

What is the difference between gift cards and loyalty cards?

  • Gift Cards typically have a stored value that can be used towards the purchase of an item or service that you offer
  • Loyalty Cards replace paper punch cards.  The cards help merchants track consumers’ loyalty to the merchant by accumulating points in a database.  Typically, one dollar or one visit is equal to one point.  Merchants can determine the rewards and reward level for points accumulation.

Gift card and loyalty card solutions can be configured to match the way you want to do business.

The goal of any solution is to provide value to your customers in a way that makes sense for your business.  The goal of any business solution will typically fall into one of three categories:

  • Attracting new customers
  • Encouraging repeat business from existing customers
  • Reducing the operating cost of your business

Whether you are a brand new business or have been around for decades, challenges and opportunities exist each and every day.  My goal is to help provide the information that will help you meet the challenges and take advantage of the opportunities that present themselves.

I hope that this has been helpful information.  If you have specific questions about how a solution works or have an ideas for future topics let me know.  I can be contacted at takingcards@gmail.com

Have a great week,

Ben Wallace

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Why does it cost more to take some cards than others?

November 24, 2009

One of the questions that comes up often from merchants is the fact that they were told they were going to get a great credit card rate by the company that set them up and now they are getting charged much higher rates.  They want to know why it costs more to take certain kinds of cards and what the differences are between them.

The answer is that there are hundreds of different kinds of cards out there and many of them are charged different rates by the card brands such as Visa, MasterCard, and Discover.  The base costs are charged to the processing companies who in turn charge their customers based on how their merchant services are set up.

But the reason behind why some kinds of cards cost more to take is a combination of risk and reward…literally.  The two things that determine whether a card is more expensive to take are:

  • 1)  the risk that the customer will chargeback the transaction and
  • 2) whether there are any costs that might make that card more expensive to operate such as airline miles, cashback rewards, etc.

First let’s look at the first factor which is risk of chargebacks.  The risk of each card type is based on statistical information gathered by the card industry that helps to understand how likely a user of each card type is to call their issuing company and demand a forced credit for a transaction, also called a chargeback.

Typically retail credit card transactions fall into four different categories: 

  • Rate 1 – Swiped Debit/Check Card Transactions (signature based, not pin based)
  • Rate 2 – Ordinary Visa/MasterCard/Discover Transactions
  • Rate 3 – Keyed Transactions
  • Rate 4 – Corporate/Business Cards

The higher the rate category, the more the processing fees for that transaction will cost you.  Regardless of which processor you use their base costs are all the same because they are dictated by the card brands. 

Whether it makes sense to us or not, their justification is that clients using their debit/check card are the least likely to ask for a chargeback for a couple of reasons.  First, it is very likely that only one or two people are executing transactions for that specific account, so they are very likely to know exactly where each of the charges comes from.  The second reason is that the money from each transaction comes directly out of their account so they are more likely to be cautious about where and how they use their debit/check card.

On the other end of the spectrum is the business/corporate card user.  The person who actually controls the company payments is less likely to have participated in the majority of the transactions.  You have supplies, wholesale goods, travel, entertainment, and a slew of other charges being applied potentially multiple cards.  If the controller or account manager is unfamiliar with a charge or the DBA name listed on the transaction looks suspicious they are more likely to ask questions and potentially call AMEX or their corporate card issuer and have it the charge taken off their account.  Because AMEX and other corporate card issuers value their customers business much more than that of the merchant, they will gladly reverse the charges immediately whether it was a valid charge or not. 

The other reason that card types might cost more is because of the prevalence of rewards programs or affinity programs  that give you incentives towards a specific brand or store for each dollar you charge with the card.  The rewards for these programs are actually paid by the merchant which is why your rates will typically be higher for rewards cards than ordinary credit or debit cards. 

When you see descriptors for the card types such as elite, world merit, merit 1, merit 3, signature preferred, or enhanced, they will typically designate a reward or affinity card of some kind. 

So what can you do about reducing the cost of each of these card types?  Unfortunately there is little that you can do to control the card types that your cusotmers use for payment.  As a business, it is against your merchant agreement with the card brands to discriminate against specific card types if you are set up to accept them. 

In terms of chargebacks you can, however, take steps to ensure that the charges to your customers are easily recognizable for them.  You can do this by making sure that the DBA name you use to set up your merchant account matches the store that they are doing business with.  Although your legal name may be the same for multiple businesses or locations, you can have different DBA names.  For instance if you are doing business with your customers as ACME storage solutions but your legal name is ABC Industries, you will want to make sure that your merchant account is set up to reflect the ACME business name.  This will translate to the proper name on your credit card reciepts and when the charges are reflected on their bank or credit card statement.

Understanding why and how things happen in the complicated world of merchant services can help you reduce high risk business practices that will cost your busienss more in the long run.

If you have any questions about specific credit card rates or merchant services issues, feel free to contact me at takingcards@gmail.com

Leave a Comment » | Credit Cards, General Information, Rates | Permalink
Posted by Ben Wallace

Why would anyone pay money to take money?

November 15, 2009

You may not remember the moment you learned that businesses pay fees to accept debit and credit cards but I bet you probably asked yourself the same question I did, “Why would anyone PAY money to take money?”   It just didn’t seem to make any sense.

For the majority of businesses, the simple answer is “because your customers want you to.”   There really is no reason that a business would go through the hassle of setting up the ability to take card payments if their customers didn’t want them to.  The typical business owner has to go through the process of setting up a merchant account, paying setup fees, deploying a method of taking the payments, and figuring out the best way to integrate an extra step into their daily business practice.

However, this hassle might be less painful than some of the other problems that they have.  Some reasons that a business might find value in taking cards are:

  • Convenience to customers paying in person as well as remotely (phone, mail, ecommerce)
  • Immediate verification of funds available
  • Shortening the payment cycle
  • Shifting receivables risk from their business to the credit card companies
  • Create a record of each sale for bookkeeping purposes

Even if you know it makes sense to take payments, you might still run into the issue of understanding how and why you might be charged for all the different fees that come with taking a card payment.  Industry professionals take months and years studying the payment process to understand the complex bits and pieces that make up a credit card fee.  For the purpose of simplicity it is helpful to know that there are two basic parts to a credit card fee:

  1. Discount Rate – charged based on the full amount of the transaction
  2. Per Transaction Fee – a flat fee charged per transaction, sometimes called an “item fee”

Some business owners naturally find themselves feeling like the solution is too complex and decide to blindly trust that the person setting up their credit card payment solution has their best interests in mind.  I would not recommend implementing a solution that you don’t understand.   I suggest doing the research to learn about the process well enough that you could explain to a stranger how you are charged and what you will be charged for the types of transactions that you expect to do, even if this means that you delay implementing a solution for a month or two. 

Please realize, I am not saying that you shouldn’t ever trust the sales representative that helps you set up your merchant account.  What I am saying is that you should ask questions if you have them and shouldn’t sign anything until you feel comfortable with how the solution is going to benefit your business.  I am a sales professional and my clients trust me to help them find the right answers, but I absolutely want them to ask me questions and learn more about the process. 

The purpose of this blog is to provide a resource and place for business owners to find out more about the business of taking credit cards so that they can make better informed decisions.

I am a Senior Business Consultant for a national credit card processor.  I make my living helping people find the right solution and putting it in place for them.  I won’t pretend by any means that I am 100% objective about any of the information presented, but I will try to be fair when it comes to addressing issues that may be specific to one company or another.

I have observed a lack of objective, helpful information readily available for business owners and decided to create a way for businesses to get the information they need.  My hope is that this blog will become a resource for businesses and industry professionals to find and discuss issues affecting them.

Feel free to comment or send me a message about the content of this blog or suggest issues or problems that you would like me to address.

Thank you for reading!

Ben Wallace

1 Comment | Credit Cards, General Information | Permalink
Posted by Ben Wallace

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