Posted by Jeff Shavitz on Mon, Aug 24, 2009 @ 02:43 PM
Merchant account chargebacks are an increasingly expensive problem not only because of the fees charged by the processor, but also because of the time and energy that a merchant must invest to try to win a dispute. A thorough chargeback prevention plan can help limit the number of chargebacks that your business receives. Below are some tips and best practices for preventing 3 common types of chargebacks:
Preventing customer-related chargeback issues:
Use a recognizable DBA name - if the DBA is not easily recognizable to a cardholder on their statement, they may not recognize the charge and may issue a chargeback.
Include a phone number on cardholder statements - this ensures that cardholders can easily contact you with any questions regarding a charge.
Clearly post policies - make sure that policies such as returns and damaged merchandise are clearly visible and easy to understand.
Work with customers to resolve issues - it sounds simple but if you don't communicate with customers to resolve issues, you're forcing them to resort to a chargeback to solve their problem.
Proactively communicate with customers - keep customers informed on the status of their orders. Many customers won't bother to contact you if an order doesn't arrive on time, instead they may issue a chargeback.
Preventing chargebacks from processing errors:
Use address verification service (AVS) for not-present transactions - never process a card-not present transaction without an AVS match.
Swipe all card-present transactions or get a fully legible manual imprint.
Don't re-run a decline transaction - if a credit card is declined, don't run it again. Instead, ask the customer for another card or form of payment.
Never split transactions - always authorize a credit card once for the total amount of the transaction. If you accidentally undercharge, cancel the transaction and run another transaction for the entire payment.
Clear credit card batches daily - posting transactions to your customers' accounts quickly while the purchase is still fresh in memory lowers the chance that they won't recognize the charge and issue a chargeback.
Preventing fraudulent chargebacks (for card-present transactions):
Obtain and compare signatures - if a customer's signature on the receipt is significantly different than the one on the back of the card (or if the card is not signed at all) the transaction may be fraudulent.
Verify the number on the credit card machine matches the card - after obtaining an authorization, make sure that the number displayed on the machine matches the number on the card.
For more information on how to prevent chargebacks, you can also check with your processor, review the VISA and MasterCard websites and also look at resource sites like CardFellow for more great information.
Courtesy of MerchantCouncil.Org
To learn more about chargebacks or to find out if you're getting the best rate on your merchant account, click here for a free rate analysis.
Posted by Jeff Cohen on Thu, Aug 20, 2009 @ 11:39 AM
Below are a few of the key reasons why merchants overpay for credit card processing, and what business owners can do to address these problems:
1. Confusion about how fees are charged, resulting in costly downgrades
Problem - Credit card processing fees are confusing - transactions can fall into qualified, mid-qualified or non-qualified categories, and many businesses end up paying mid and non-qualified surcharges when they don't have to.
Solution - Contact your credit card processing representative to find out why your transactions are downgrading and what can be done to remedy the causes. If downgrades can't be lessened, consider switching to a new merchant account provider where transactions won't be downgraded as often.
2. Failure to read credit card processing statements
Problem - some businesses just don't read their merchant account statements, which is the main communications tool that many credit card processors use to inform merchants about rate increases and other vital information.
Solution - read your credit card processing statements every month, and pay special attention to the area where important updates (like rate increases) are listed.
3. Difficulty understanding credit card processing statements
Problem - processing statements are notoriously confusing, and to make matters worse, each processor has their own way of structuring their statements, which makes general tutorials on the subject impossible.
Solution - call your credit card processing rep and have them teach you how to read your statements - the time it takes to do this could save you a substantial amount of money.
4. Failure to regularly compare rates
Problem - Credit card processing rates can fluctuate over time. Changes can come directly from Visa and MasterCard or from individual processors, so failing to compare rates on a regular basis could leave you at an expensive competitive disadvantage.
Solution - Periodically test the market and get multiple merchant account quotes. If you're current rates don't compare favorably, it may be time for a money-saving switch.
5. Downgrades to due 'user-error'
Problem - credit card transactions downgrade because of things a person does or doesn't do when charging the card. Certain requirements must be met in order for a credit card transaction to fall into the lowest merchant account rate category, and failing to meet these qualifications may cause a higher rate to be charged.
Solution - learn about the different qualifying requirements for your credit card processor and your specific type of merchant account. The easiest way to do this is to call your credit card processing rep and have them walk you through it.
Courtesy of: MerchantCouncil.org
Posted by Jeff Shavitz on Wed, Aug 19, 2009 @ 04:14 PM
The two basic types of merchant accounts are "card present" and "card-not-present". Each basic type of account has subcategories that are defined by business type or how a credit card transaction is processed. Here are a few of the basic categories:
Card-Present Merchant Account: Any merchant account where the credit card and customer are present during the transaction, and the merchant is able to swipe the customer's credit card through a credit card machine or a magnetic card reader that is connected to a physical phone line. Typically this is a Retail Merchant Account - which are considered low risk and have the lowest merchant account fees and rates.
Wireless Merchant Account: A wireless merchant account is a card-present account where credit card transactions are swiped through a portable credit card machine or magnetic swipe reader to obtain a real-time authorization. Wireless merchant accounts typically have the same low rates and fees as retail merchant accounts, but higher monthly fees and initial equipment costs.
Store-and-Forward Merchant Account: Similar to a wireless merchant account, except this type of account does not provide real-time authorization. Transaction information is stored in the terminal's memory and forwards to the processor when hooked up to a phone line. This type of merchant account is ideal for business types that require portability, but may not have the budget for a wireless merchant account.
Card-not present Merchant Account: Any merchant account where the credit card and customer are not present when the transaction takes place, these accounts are considered to be higher risk by acquiring banks and are therefore charged higher processing rates and fees than Card-present accounts.
Internet Merchant Account: A card-not-present account that is used by an online business to transactions through an electronic payment processing gateway. When processing online it's just as important to get a good payment processing gateway as it is to get a good merchant account provider.
Mail Order Merchant Account (MOTO): The most common form of card-not-present accounts, this type of account assumes the businesses will not have the customer or card present for a transaction and that most transactions will be manually entered into a credit card machine. Mail Order merchant accounts are given the lowest possible processing rates and fees of all card-not-present account types.
Touchtone Telephone Merchant Account: Just like it sounds, no credit card equipment is needed with this type of account. It's a good alternative to wireless processing for businesses that require real-time authorizations while on the go but can't afford the upfront investment that is required for wireless processing terminals. Touchtone processing usually has significantly higher rates and fees than other card-not-present accounts, because there is usually another company aside from the merchant service provider that supplies the touchtone system, and they charge a fee for their services. Even with the higher rates and fees, the initial cost of a touchtone merchant account it usually very reasonable.
Posted by Jeff Shavitz on Wed, Aug 19, 2009 @ 08:42 AM
In order to figure out which type of merchant account is best for your business, and which rates and fees will matter the most you, you must create a quick profile for your business. Answering these 6 simple questions can point you in the right direction:
1. How will I be processing credit card transactions? Envision how you see a transaction taking place - will you be accepting credit cards via your website and/or in a retail store? Perhaps you will require some degree of portability in order to process credit card transactions - in which case you may need a wireless merchant account.
2. Does my business have seasonal swings? If your business is dormant for certain months, you should try to have monthly fees such as the merchant account statement fee and monthly minimum fee lowered. You may need to give a little in other areas (like discount rate and transaction fee) but it will save you money in the long run.
3. What is my average dollar volume (or ticket size) of each sale? If you have a high dollar volume per sale, you should try to find the lowest discount rate possible, even if you have a higher transaction fee. If you have a smaller average ticket size, then the opposite is true - you are better off with a lower transaction fee and higher discount rate. To get a better understanding of these terms, click here.
4. What will my processing volume be? How many Visa and MasterCard transactions do you expect to process in a monthly period? If the transaction volume is higher, then monthly fees are less important to your business and you should focus on trying to get lower transaction and discount fees.
5. Does my business require multiple merchant accounts? If your business will be processing credit card transactions in different ways (i.e., retail businesses that also have an online presence), you may be better off having separate merchant accounts - often times you can work with your provider to have monthly fees lowered or even waived on one of the accounts.
6. Will my business benefit from the ability to accept credit cards? This is probably the most important - and overlooked - business profile question. Make sure to compare the cost of credit card processing to the expected increase in sales it will generate, and also look what your competitors are doing. Retail stores and e-commerce websites may not have much of a choice, but smaller businesses and niche business types need to give this question some serious thought.
Posted by Jeff Shavitz on Tue, Aug 18, 2009 @ 08:37 AM
Each merchant service provider has underwriters that are responsible for determining the risk factor associated with certain types of business and accounts. When determining whether a business type is unacceptable or restricted, a provider considers criteria such as:
- Chargbacks: Certain business types are prone to having a high occurrence of chargebacks to sales. Any business type that has a typical chargeback ration that is 1% or higher, is usually considered high-risk or unacceptable by most credit card processors.
- Credit Card Fraud: Credit card fraud is more common in certain industries because of the products or services offered. Any business type that has a higher than normal fraud rate will be considered high risk or unacceptable by many providers.
- Charging too far in advance for services: Merchants that charge for products or services too far in advance heighten their exposure to excessive chargebacks. Subscription publications, online memberships, and other similar services are most affected by this guideline. Typically, a provider will limit the time in advance that a merchant is able to bill their customers to around 4 months.
- Target Market: Specifically, businesses with an international client base are considered high-risk. Exporters, international freight forwarders, and shipping businesses can all be considered high-risk merchants due to their international client base.
- Business Operation: Businesses that use outbound telemarketing, door to door sales, multi-level marketing, and third party order fulfillment are all considered by most providers to be high risk merchants. This type of businesses operation increases the likelihood of chargebacks for various reasons.
- Type of Merchant: Card-present merchants are always considered lower risk than card-not-present merchant accounts. For example, a courier services that utilizes a wireless terminal to swipe cards at a customer's residence may be considered high-risk, when the same business would be prohibited if they were to take credit card numbers over the phone.
- Legality: Businesses that offer services that are illegal, or are closely related to illegal activities, will be considered high-risk or prohibited by most providers.
- Marketing: Products or services sold using marketing that exaggerates results are at a high risk for chargebacks. Customers will ultimately issue chargebacks once they realize that the product or service that they purchased does not deliver the results promised in the marketing.
For a list of typical 'high-risk' business types or more information on credit card processing for high-risk merchant accounts, check out Alternative Merchant Processing at http://www.ampworldwide.com
Posted by Jeff Cohen on Fri, Aug 14, 2009 @ 04:41 PM
Merchant account fees are a substantial portion of monthly expenses for many businesses. Keeping processing expenses low is a very worthwile priority - here are 5 tips you can use to make sure your saving money on credit card processing for your business:
Periodically test the marketing to ensure you have competitive rates and fees. Merchant account providers can raise rates and fees over time. If you don't test the market, you will fall out of touch with what competitive rates and fees are. To kep your rates and fees as low as possible, periodically get processing quotes from other service providers.
Stop leasing processing equipment. Credit card processing equipment is not nearly as expensive as it was even a few years ago. Leasing made sense when processing equipment was cost-prohibitive to own. These days equimpment can be purchased for a few hundred dollars, and some providers even offer a free machine with a new merchant account. If you're currently locked into a leasing contract, research how much it will cost to end the agreement. If you have to buy out the remainder of the lease, it may not be worth it to cancel. However, if your lease has a cancellation fee it may be less expensive to cancel the lease and purchase a terminal.
Negotiate your monthly minimum fee. A monthly minimum fee is the minimum amount of processing charges that a merchant must pay their provider in a monthly period. In any month where processing fees don't equal the minimum, the merchant will have to pay the difference out of pocket. Businesses that have a substantial and consistent monthly processing volume won't be affected by a monthly minimum as much as businesses that process seasonally or that don't process a high volume. If you're paying monthly minimums on a fairly regular basis, call your provider and ask to have the fees reduced or waived. If they decline to work with you, find another provider that doesn't charge a minimum.
Get two merchant accounts if you process card-present and card-not-present transactions. Card-present businesses that process even a small amount of not-present transactions can reduce processing fees by getting another merchant account. When you're trying to save money, the suggestion to open another account may sound counterproductive - but the devil is in the details. When a not-present transaction is processed through a card-present merchant account, the transaction downgrades to a higher processing rate. By opening a separate card-not-present merchant account to process not-present transactions, you'll avoid excessive downgrades and save on fees. Also, providers are usually willing to waive or lower merchant account statement and minimum fees on a second processing account.
Figure out why transactions are downgrading and take action. A credit card transaction downgrades when it is assessed a surcharge called a mid or non-qualified fee. Knowing how many of your transactions downgrade is vital to saving money on credit card processing. Study your monthly processing statements each month to figure out how many of your transactions are downgrading. If you're unable to read your statement, call your provider and ask that they go through and explain the charges. Once you assess how many of your transactions are downgrading, call your provider and ask them to explain the reason for the downgrades. Depending on the reason, it may be possible for your provider to make changes to your account to limit downgrading. Changing your processing habits may also help minimize downgrades. When you're processing credit cards, make sure to follow Visa and MasterCard guidelines for qualifying transactions. For example, always obtain a signature for card present transactions and take care to obtain an AVS match for card-not-present transactions. When you contact your provider to ask why transactions are downgrading, they should be able to diagnose bad processing habits by looking at downgrades on your statement. Be sure to ask for their suggestion on how you can change your procedures to minimize downgrades.
Article Source: MerchantCouncil.org
To find out if you're getting the best rate on your merchant account, click here for a free rate analysis.