How to Avoid Overpaying for Credit Card Processing

You’ve done all your research and finally picked a credit card processor for your company. The start-up fees are paid, you’ve budgeted for the monthly fees, and the transaction fees are reasonable. Your job is to make the sale. The credit card processor does all the rest, and before you know it, the money is in your account. Like the saying goes: “Set it and forget it.”


There are two key reasons why business owners regularly overpay for credit card processing. Both stem from the “set it and forget it” mentality that plagues busy merchants: 1) Failure to read your credit card statement, and 2) Failure to regularly compare credit card processing rates.

How do you read your credit card processor’s statement?

That’s not an easy question to answer, especially since credit card processors have different pricing structures and present them in their own statement format. There are lots of articles available on the net — and a host of YouTube videos — that cover the subject of how to read a credit card processing statement. The authors all seem to agree that in order to keep your processing costs down, you need to know where to find your base costs and how much you pay in markups each month. And you need to monitor that information on every monthly statement.

Your base cost shouldn’t change month-to-month. This combination of interchange rates (the percentage of the volume for each credit card transaction set by the issuing bank) and assessment fees (the flat transaction fee for each transaction set by Visa/MasterCard) are the same for all processors.

But here’s where things get complicated. Your monthly processor cost — the fees your processing company charges for their services — fluctuates every month for a variety of reasons. Obviously, sales volume makes the most difference in your costs. But the type of credit card transaction plays a part as well. For example, when your customer uses a rewards card, you may be charged a higher interchange fee. Secure on-line transactions and debit card charges may actually have a lower fee schedule. And each month, depending on a number of issues, your transactions are categorized as qualified, mid-qualified and non-qualified, all with a different rate. All these tiered rates can be very confusing at first, but once you learn how to interpret your statement, you can get a clearer picture of how your unique sales affect your credit card processing costs.

Armed with this detailed information, you should make a habit of getting quotes from other credit card processing companies. If your current rates don’t compare with the new quotes, it may be time to switch credit card processors. Or call your present company and ask a representative to check and see if fee schedules have changed since you signed your contract. Even a small down tick in a percentage rate could make a big difference to your monthly processing costs.

Of course, you could also switch to Transparent credit card processing and avoid the hidden and changing fees entirely.

However, if you insist on sticking with your current payment processor — or, more likely, if your current payment processor has you under contract and you don’t want to pay the cancelation fee — regular reviews of your credit card payment processing statement can help you identify fees that could be lowered or even eliminated all together. Combine this information with regular comparison-shopping among credit card processing companies to determine if the time is right to make a money-saving switch.

How to Protect Against Credit Card Fraud

How Can I Protect My Business Against Fraudulent Credit Card Use?

That question can be answered in two words: STAY ALERT!

Credit card fraud is theft. When you take a fraudulent credit card payment, you lose merchandise and profit, just the same as you do when someone steals something from your business. You place security cameras around your store to spot shoplifters. Why not be prepared to spot identity theft?

Although you may not be able to completely prevent credit card fraud from damaging your business, you can minimize the problem by putting some simple measures in place.

How To Detect In-Store Credit Card Fraud

If you operate your business at a physical location, train your staff to check to see if the credit card presented for payment is signed, and be sure they ask to see another form of identification. And if the credit card won’t swipe, be sure your employees know how to contact the issuing bank’s authentication line. Do these procedures take extra time when ringing up a sale? Certainly. But they don’t take half as much time as it’s going to take to get through the paperwork involved in dealing with a fraudulent payment.

Unfortunately, credit card fraud isn’t limited to your customers. As much as you might think you can trust them, you should run regular audits on your charge transactions. This can help to identify and/or discourage employee credit card fraud.

How To Detect On-Line Credit Card Fraud

Your chances for credit card fraud increase if you operate a business on-line. But just because you’re not standing face-to-face with your customer doesn’t mean you can’t spot the signs of possible fraud.

Stay alert for large transactions, especially if they are scheduled for next day delivery.

Credit card ID thieves want their merchandise delivered before you have a chance to discover the fraud.

Stay alert for orders that use different “bill to” and “ship to” addresses. Granted, many on-line businesses sell gift items shipped directly to the recipient’s address. But an unusually large order or a bulk order for an item usually sold individually should raise some doubt.

Stay alert for the customer who is not able to answer all your billing questions. Many fraudulent transactions are actually perpetrated using a stolen credit card number. Ask for information that only appears on the card itself. If your buyer can’t supply this information, you can refuse the order.

Stay alert for transactions where payment is made by using multiple credit card numbers. This could be a sign that the identity thief doesn’t want to raise a red flag by having a credit card charge denied because the amount charged exceeds the credit card limit.

In other words, trust your gut feeling. If something doesn’t feel right about a purchase, do everything possible to verify that purchase before your customer leaves the store or you ship any merchandise. Because no matter how or where you operate your business, spending time preventing credit card fraud will save you time and money in the long run.

Credit card fraud is theft. You’ll spend time reporting the incident to the authorities and filling out paperwork for the credit card issuer. You’ll lose the transaction amount and possibly be liable for charge back fees. And in the end the ID thief is long gone… and so is your merchandise!

What is PCI Compliance?

What is PCI Compliance?

Many businesses who accept credit card payments have asked What is PCI Compliance?  “PCI” stands for Payment Card Industry. The PCI security standards council is comprised of representatives from the major international credit card associations including AMEX, Discover, JCB, MasterCard and Visa. In 2006, this council established the DSS, Data Security Standard, to facilitate uniformity in the credit card industry and enhance security standards to better protect card issuers, merchant processors and cardholders as well as businesses that accept cards.

PCI compliance is when a merchant complies with the standards set forth in an effort to provide improved security for the cardholder. There are various requirements that must be met in order for a merchant to be compliant. By taking the steps involved in making your business PCI Compliant, you reduce the risk of fraudulent transactions happening at your business. Regardless of what type of payment processing service you use you want to assure that your business is up to the highest security standards of processing payments. Not only will this help protect you from fraud and thievery, but it’s also a requirement by the credit card associations in most regions around the world.

Am I Compliant or Non-Compliant?

Prior to 2006, it was not a requirement for your business to be PCI compliant. However, with increases in online fraud and credit card fraud overall, the tables have turned to better fight fraud. While PCI today is not, in itself, a law, this standard was created by all the major card associations. Merchants that do not comply with PCI DSS may be subject to non-compliance fines, card replacement costs, forensic damage and other problems in the event of a data breach.
There are plenty of benefits that come with being PCI Compliant. With the continuing rise in identity theft and credit card fraud, the system used by merchants must be up to the task to protecting the number one asset, the customer. With these standards in place, it can be deterred and outright prevented, saving businesses and card issuers billions of dollars per year. By following the standards, you establish credibility with your customers while maintaining a positive reputation to help bring repeat business and new clientele.

The difficulty, especially with smaller business, is the consistency needed to maintain compliance. Much like anti-virus software, the standards are always being checked, double-checked, and changed as the need arises.

The Different Levels of PCI Compliance

The PCI/DSS has a set of levels to address different business types. Each level is dependent on how many transactions occur within a 12 month period of time. For each level, different security practices are implemented. Why the differences? If a local book store without an online presence is going to be compliant, why make a requirement for them to establish a particular level of security encryption on their online payment gateway? This multi-level system produces the best results for the different business types.

• Level 1 is associated with businesses and processors that produce more than 6 million card transactions annually.
• Level 2 is associated with businesses that produce 1-6 million card transactions annually.
• Level 3 is associated with E-commerce businesses that transact between 20k and 1 million card transactions annually.
• Level 4 is associated with E-commerce businesses that transact less than 20k card transactions annually.

A Few Examples of the DSS

• Changing the Password for equipment used in processing card payments. This reduces the risk of having vendor passwords compromised.
• Maintaining a strict and easy to understand company policy regarding customer privacy and card data security.
• Maintaining and update anti-virus software regularly.
• Assigning individual logins for each employee accessing the computer or register.

(Source – Better Business Bureau)

Why Pay for PCI compliance?

You are going to pay for PCI Compliance for the same reason you pay for the ability to process card payments. You make the effort and become PCI compliant for the same reason you pay for advertising. You have invested time and money in building your business. Paying for PCI Compliance is like paying for insurance.

PCI performs annual compliance checks on businesses. For larger volume businesses, they may have an externally-qualified security advisor conduct a Validation of Compliance. In smaller volume businesses, they may request a self-assessment questionnaire be performed. No federal law has been passed that requires these practices to be followed. Some state laws, however, have been passed to ensure practices similar to the PCI/DSS.

Cardholder information theft is a pathway to all things bad for businesses. It starts with a card number and a name. From there, a criminal can do anything from making fraudulent charges with the card to all-out identity theft. Security practices in place with merchants that accept card payments go a long way to help credit card fraud prevention. The PCI/DSS is an industry standard set up by a governing body of representatives from several card companies to help you provide secure payments for your customers.

What to Consider When Choosing a Credit Card Processor

When you’re assembling a desk for your new business, the directions tell you exactly where to start: ‘Step 1: Place tab A into slot B and tighten fastener.’ But setting up a new merchant account for credit card processing doesn’t come with simple instructions, which is probably how you got to this article.  In addition to being confusing, choosing a credit card processing company can become very costly if you don’t look at all your options and choose wisely. Once you get that new desk assembled, sit down and make a list of your company’s credit card processing needs by asking yourself some important questions.

Will customers be swiping their cards at your terminal? Having access to the actual credit card is the quickest way to process your sale, and the easiest way to handle receipts. If you’ll be swiping credit cards, you then have to decide whether you’re going to rent or purchase a credit card processing terminal. Will you have more than one physical location, or sales associate, that requires a terminal? What costs will that incur?

If you’re an on-line merchant you have a whole other set of credit card processing needs. For example, will you have auto-recurring billings? Yes… well then, you’ll need specific security measures in place to store credit card numbers.

Your volume of business affects your merchant account costs. Do you run a high volume business, say a medium priced restaurant with an average bill of $10.00 to $15.00? Or do you sell high-priced items with less frequency? These numbers impact your transaction fees.

Do you run a seasonal business? If so, you may think you’ll save money by terminating your processing service during your down months. But contract and cancellation fees can negate any savings you might gain by not having to pay recurring service fees.

Whatever your business, if you want to accept credit cards, you have to establish a merchant account with a processing company. Because there aren’t any easy-to-read instructions for setting up your merchant account, why not take a cue from the directions for that desk you were putting together for your new office? Even before construction step number 1: Put Tab A into Slot B and tighten fastener, the directions instruct you to account for all the pieces in the package.  Well, opening a merchant account for your company is no different. Before you dive into the murky waters of credit card processing, make sure you consider all your needs so you’ll be better prepared to put together the right merchant processing solution for your business.