Most businesses use a very simple technique to attract more customers. They add credit cards as a method of payment to already existing ones. Credit cards are easy to use and handle. People like to use credit cards for purchasing anything and everything. Be it shopping for diapers from Target or buying Alienware from the next-gen e-store, credit cards are being used everywhere.
Anyone who has been in the world of payments and services has seen the trend of credit card usage grow steadily. So why is it, that merchants are becoming jittery about adding credit cards to their methods of payment in 2017? Has there been recent changes in the rules and regulations? Has there been a major economic coup? What is it that has suddenly changed the way businessmen look at credit cards?
Today, we are about to give you the motherload of information about credit card transactions that will help you understand why you should or should not be using credit cards in your business
- How are credit card processing and merchant services related?
Merchant service refers to the entire process of dealing with all kinds of payments. Debit cards, ACH/eCheks, Digital wallets, mobile payments and credit cards fall under merchant services. Credit card processing is just a part of the entire process.
Merchant services also provides you with a terminal or POS system and a payment gateway. Have you seen those new mobile credit card and debit card software that can conduct secure transactions? A good merchant service can offer that as well.
- What is credit card processing fee?
There is no one fee that we can elaborate on while talking about credit cards. Credit cards involve quite a number of processing fees that may be annual, origination or termination fees. While some of these are absolutely necessary, a few of them can be negotiated to a minimum. However, there is no way you can avoid paying overheads while using credit cards. Most credit card companies are looking to make profit from your purchases and transactions, so they will try and include some kind of processing fee now and then.
For example – if a user is already bound by contract to work with the credit card company until 2018, he will be charged a termination fee if he tries to get out the deal by 2017.
You may have already noticed how you need to pay a certain amount while trying to access your credit card account(s) online. This is called statement fees and almost all credit card companies in the US charge it for online account verifications and checks.
Discount rate fee
If you have been using your credit card for at least a couple of months for business purposes, you may have already noticed the varying amounts deducted from your account by the company as some fees. Many of us mistake this as a transition fee. However, this is a discount rate fee that involves a certain fixed percentage of a credit card transaction. There are different percentages since there are different kinds of transactions involved in a single business.
Chargeback fees –
Chargeback fees are kind of a nuisance for most of the traders. These are fees associated with disputes opened by a customer at their credit card companies. This can be seen as a penalty to accomplish compliance from the customers. Every company has its own policy and amount for chargebacks. On the other hand, this is also used to discourage “friendly fraud” where customers tend to get out of paying for services and products they have already received.
- Added expenses include credit card processing equipment –
If you are running a storefront,you will need a credit card terminal. Otherwise, having a mobile software is enough for small businesses. Multiple pop-up restaurants, food joints and beauty salons are already using mobile software credit card processors. You will just need the card number and the passcode from the customer for getting your money.
Online businesses need not worry about credit card equipment at all. If you are an ecommerce veteran, focus on getting a shopping card system or a POS rather than worrying about tangible credit card readers.
- How to find the right credit card processing partner for your business?
If we were fresh out of the water we would have said, “Go with the cheapest one”. However, experience has taught us that; cheapest is not always the best.
There are a few things you must look for in your credit card processing partner:
- Support services
- Value added tools
- Education systems (white papers and webinars)
You must remember that along with your business finances, you will be dealing with your customers’ sensitive information as well. Compliance regulations are changing and advancing every waking moment. You need to make sure that your partner can educate you about new possibilities and their impacts on your business.
Reliability is another important factor while choosing the credit card partner. If you are running an online business, your customers should be able to complete a transaction from any part of the country (if not the world) during any hour of the day.
Every business has its unique needs and so does yours. You credit card partner needs to understand the small nuances of your financial policies and your special offers to be able to work towards the fiscal growth of your business. Your company should be flexible enough to accommodate your business needs and at the same time pay heed to the risks involved.
- How risky is credit card risk?
When working with credit card payment procedures you must know that you are embracing quite a few high risks. “Risk” is the favorite work of the credit card industry. Credit card processing companies risk their own reputation and finances to collaborate with new businesses.There is no telling how many of the new businesses will incur new chargebacks and frauds.
This is why, your company details are very important for all credit card companies you will be approaching. They will conduct a thorough background check. Many a times, if your company has survived the tides of time, you processing fee might be a tad bit lower than a fresh startup.
Other very common risks involved with credit card processing involve phishing, data breaches like hacking and many more. This mainly happens due to lack in security infrastructure of the payment gateways. You should also make sure to check the data management tools, security tools and compensation policies of different credit card processing companies before making your choice.
Among all challenges discussed above, credit card fraud is something that should grab your attention the most. And you have complete reason to be wary about credit card fraud in business. Credit card fraud has cost businesses over $16.31 billion in 2015. 48% of that number comes from credit card frauds in the US.
How to spot fraudulent orders?
If you are an online seller, there are a few things you can do to prevent credit card frauds from happening to your company. This way you can save thousands of dollars and a lot of headache.
The easiest way is to implement address verification system (AVS) and card code verification (CCV) systems for all cards not present in sales already.
Here are a few ways to spot suspicious sales –
- Bulk orders from a single buyers without any contact from the customer
- Requests for express shipments from large quantities of orders without contact from buying party.
- Orders with shipping address separate from billing address.
- Orders from out of the state and sometimes out of the US.
- Enquires in form of emails or phone calls with promises of large buys in exchange for your inventory details.
- Any discrepancy in the address and other information provided by customer when compared with info from their credit card company.
If there is even one of these 6 factors that match a recent order that was placed with your e-store you should be very wary. Credit card frauds are more common than you think. Once they do happen, taking it up with the credit card company and extracting compensation is more troublesome than losing the money.
How can you get the latest fraud detection systems in place on a shoestring budget?
Most online companies that protect businesses from credit card fraud use genetic algorithms to detect potential threats. They serve several business clients all across the US, and they also charge a decent fee for their protection services.
You can also hire your own transaction analyst, although it is far less common in the US due to money constraints. However, you can employ new software techniques and upgrade your website to include VAS, CVV and other verification methods to take care of potential frauds.
All these upgrades can cost you considerably. For any business, sudden fund diversion is almost impossible. You should try debt consolidation meaning pulling together all your outstanding debts, credit card payments and other bills. You can take out a big loan from any business debt consolidation company that will cover the existing debt amount and provide you with added funds for new projects like the implementation of credit card fraud detection systems. Business consolidation loan is an entrepreneur’s best friend. Making any new upgrades to your already existing website and business becomes a lot easier when new doors for funding open up.
Adding credit card to your business payment methods should only be done if you are sure about customer protection, fraud protection and a versatile array of fee payments. It is a huge step, and you should take it only if you are completely confident it will usher in more profit.
What to do in case of a suspicious order?
There are cases when customers are simply careless or too preoccupied while filling in the information. We have seen at least a thousand customers per month make such mistakes on leading ecommerce sites. Sometimes, people use home computers to send bulk shipments to their offices or storage. In these cases, if you get too wary simply because the “symptoms” match, you may end up losing a lot of business. The trick is to tell when the warning signs are true and when you are just reacting out of fear of the possibility.
Here are a few tips you may want to remember to make sure you screen all the profit from the confusion –
- You need to get to complete contact details including street address and zip code of the cardholder. This will act as an added insurance, provided you have a way to verify the details. You can ask for these later in an email if you think the order has the potential to make decent profit for your business.
- Add an extra step to make sure that the billing address is in fact authentic. Then you can verify the information from the merchant bank or the credit card company your potential customer is using. You can use other address verification methods as well that is in place through your ISO.
- Have you recently checked out any of the online credit card companies that offer fraud block systems? They are quite effective in spotting attacks based on order type, location and other factors.
- If you think an order, looks suspicious simply call the buyer back on the contact number provided. This will help you verify the contact details as well as the authenticity of the orders.
- To reduce all chargebacks you can set a reminder mail to go out to your customers a couple of days before the order is scheduled to arrive. This is perfect for those buyers who shop around a lot and keep forgetting what is to arrive and from whom.
Discrediting an order simply because it “looks” suspicious is foolish. You will end up losing money and reputation. You will need to employ at least 5 of these methods to crosscheck the authenticity of all orders that are coming to you.
This post is part of our contributor series. It is written and published independently of TNW.