The research shows that 79 percent of consumers utilized paper money in the last week. In contrast, only 65 percent used a debit or credit card.

This comes as a relief for vendors that specialize in small purchase items like coffee shops that have weathered the unintended consequences of the Durbin Amendment to the Dodd-Frank Act, which capped debit swipe fees at 21 cents. Previously, merchants would pay a small percentage of the total cost in swipe fees where a $1 cup of coffee would incur a transaction fee of a few cents. But after the Durbin Amendment took effect, banks decided to charge the entire 21 cents for any transaction, including that $1 cup of coffee, which ate into profits.

Since merchant are not allowed to pass swipe fees onto the consumer nor can they require minimum purchases, many have been biting the bullet on small purchases, though many still break the rules. Other ways merchant circumvent paying fees is by ditching card transactions all together and install an ATM in their place of business, which some customers take as an insult.

Javelin also found 70 percent of consumers believe the banks are actually benefitting from the regulations instead of vendors. This public sentiment most likely arises from highly covered news reports of Bank of America’s proposed $5 monthly debit card usage fee, which was abandoned after public outcry turned the plan into a public relations disaster.

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Under a 2010 city ordinance, taxi drivers are required to accept debit and credit cards in their vehicles, which isn’t necessarily a game-changing requirement. Their grievance arises from a new policy allowing the taxi companies to pass off the processing fee on the driver instead of covering it as they had in the past.

This has some taxi drivers telling riders that they don’t accept cards or the machine is broken, even offering to stop at an ATM so they can pay in cash if the riders don’t have any.

Taxi drivers already pay out relatively large sums of money to actually do their job — paying an average of $92 a shift just to use the vehicle and an estimated $60 in gas, plus optional tips for dispatchers — adding 5 percent on all credit card transactions has them outraged, taking away from their approximate earnings of $120 per 10 hour shift.

Customers who are turned down a ride are encouraged to call San Francisco’s 311 to report the taxi number and name of driver.

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ProPay

Probably the lesser known of these two options, ProPay caters to small business owners for all of their credit card processing needs.  Business owners can visit their website at propay.com and do a side by side comparison of the accounts offered.  Signing up for an account is done quickly and easily online.  ProPay uses encryption and tokenization to secure customers information and uses ProtectPay to remove customer data upon storage, thus keeping information secure.

Formed in 1997, Propay has been recognized as a leader in online credit card processing.      They are a Better Business Bureau member, a partner and member of the Direct Selling Association (DSA), and a member of the Electronic Transactions Association (ETA).  ProPay has been awarded the DSA partner of the year award, and the ETA Independent Sales Organization of the year award.  They are Trust-e certified and an eBay accepted payment provider.

PayPal

With 100 million users, PayPal is more widely known by most individuals.  PayPal is broader in their scope as they offer accounts for personal use as well as business use.  Their merchant account system is similar to that of ProPay.  Business owners who choose paypal.com, can visit the website and sign up for a merchant account in less than 15 minutes.  PayPal follows PCI compliant safety standards to ensure the security and safety of customer information.

In business since 1998, PayPal is recognized for and does most of their business through eBay, the online auction site.  Merchants who sell through eBay can use PayPal to safely and securely process their transactions.  PayPal uses veriSign identity protection on their website for their customers’ security and processes billions of dollars in transactions annually.

Comparison of Business/Merchant Accounts

ProPay                                                                    PayPal

Depending on what you would like your credit card processing account to do, either option could be a good choice.  Both companies offer similar benefits in linked cards, transferring funds, and almost identical processing fees.  If you are a small business who will primarily sell online through eBay then PayPal might be the best fit with no annual fee.  If you are a brick and mortar small business then ProPay might be the better choice, with options for calling ProPay to process a transaction, processing a card manually online via the online terminal, or by adding the ProPay JAK to process on the go, the annual fee might be worth it.

Jason Kupferberg of Jefferies Group Inc. is expecting a settlement before the case is to be taken before the U.S. District Court for the Eastern District of New York later September of this year. Kepferberg estimates the settlement to be between $5 billion to $15 billion of which Visa will be responsible for 67 percent and MasterCard the remaining 33 percent.

The litigation is being drawn on the behalf of larger retailers including Kroger Co. and Safeway, Inc. among many others for alleged price fixing on transaction fees between the two processing giants.

Visa has already set aside $4.3 billion in litigation escrow, $2.7 billion of which is an “uncommitted balance” according to the Securities and Exchange Commission.

Banks have recently been scrambling to find new avenues of revenue after the Durbin Amendment of the Dodd-Frank Act effectively capped debit card transaction fees at 21 cents last year. Since then, banks have been raising credit card transaction fees in an effort to recoup some of the estimated $6 billion annual losses.

Credit card issuers have also been boosting card rewards to incentivize charging over the less lucrative debit transactions, much to the chagrin of business owners whose customers often swipe their credit cards for small purchases and have consequently been experiencing a loss in profits. This has caused some retailers to start enforcing or strongly encouraging minimum purchase policies for card transactions in states that haven’t passed laws prohibiting such practices.

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Central to the lawsuit are claims that these institutions have been setting prices on credit card transactions that fall outside of what would be expected in a truly open and competitive market.

Average interchange fees incurred by credit card transactions hover around 2 percent, but could be dropped as low as half of a percent, which would result is losses projected also in the billions annually.

The Durbin Amendment of the Dodd-Frank Act effectively capped debit card swipe fees as 24 cents per transaction, which caused banks to increase credit card transaction costs to recoup their losses.

The case is scheduled to start on Sept. 12 and will be presided over by Judge John Gleeson of the U.S. Eastern District, a judge that ruled over what is considered the largest antitrust lawsuit in American history. The 1996 class-action lawsuit was led by Wal-Mart Stores and Limited Brands against MasterCard and Visa and resulted in the banks paying $3 billion in damages as well as being forced to change certain business practices conservatively estimated at $25 billion in losses.

Proving price fixing collusion between Visa and MasterCard will be difficult as they have both become publically traded companies in the last six years.

Judge Gleeson will determine in the coming days whether or not the plaintiffs will be considered a class for a case that could significantly alter commerce in the future and could create a ripple effect for banks beyond our borders.

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The fraud involves criminals placing a device inside a gasoline pump that is used to obtain information from customer credit cards. There were several reports from customers who stated their ATM cards and credit cards contained charges that were not authorized after using the cards at the gas station pump.

Each charge was reported to be about $100 for each transaction and most customers reported the charges were made in areas they do not go to or had never been to for purchases, with one customer reporting a total of three separate charges made on his account.

Police investigators believe the perpetrator used a key to open the pumps and place the device and used the same key to later take the device out of the pump. The owner of the station told news reporters he was not involved in the scam and was victimized just like his customers.

Nearly a year ago, another local gas station was hit with a similar scheme and almost 600 customers using the gas pumps lost a combined total of $172,000. During a joint investigation by the US Secret Service and the Sierra Madre police, the gas station owner disappeared.

Customers who were potentially affected by this scam are asked to check their credit card and bank statements and report suspicious activity to the creditor, bank, and police department for proper investigation. Scams like the skimming tactics used at the Sierra Madre gas station are becoming more common and consumers face a long battle and bad credit for many years to come if not proactively monitoring their credit reporting and monthly accounting statements for errors and instances of fraud.

Foreign Travelers

People living in the United States who travel frequently overseas have found it difficult to use their regular credit cards once they arrive at their destination.  Many Canadian and European merchants no longer have equipment to process credit cards via the magnetic strip found on all US credit cards.  For frequent travelers out of the United States, it is recommended that individuals obtain Chip and PIN based credit cards.  Chase Bank is among a handful of issuers of US credit cards that also feature Chip and PIN features that can be used overseas.

What is Chip and PIN?

Instead of information being stored on a magnetic strip plastered across the back of a credit card, Chip and PIN cards store information on a microchip hidden inside the credit card.  Credit card processing equipment reads the data via radio frequency, and do not require physically swiping the card through a reader.  Instead of a signature on a recipe, cardholders enter a personal identification number (PIN) to verify the card.  This security is considered safer than traditional magnetic strip credit cards, and harder for criminals to obtain your information with skimming or forgery type frauds.

In fact, Europe has been using Chip and PIN credit card processing since 2006 and reports significant decreases in credit card related fraud.  France reports an 80% decrease in credit card fraud. Canadian merchants are all required to accept Chip and PIN cards by the year 2015, with many merchants already processing Chip and PIN style cards.

Chip and PIN Processing to Travelers

Another consideration for American retailers is having credit card processing capable of accepting payment from foreign travelers.  Most European and an increasing number of Canadian credit cards do not have magnetic strips at all, and can only be processed with Chip and PIN credit card processing.  If you don’t have the capability to accept these cards, you will lose traveling customers who may have otherwise spent money at your retail location.  If you service a large number of travelers, this is something you may want to consider and determine if it makes sense for you to get a Chip and PIN processing system in place.

Some of the “best” sites for buying stolen credit card details include an ability to search for cards based on the issuing bank – so customers can choose cards from institutions with weaker security and minimize their risks of being caught.  Sites will also allow automatic validation before paying for the credit cards, to make sure the card details they’re buying have not yet been canceled by the banks and can be used to make purchases.

Other stolen credit cards are sold on illicit chat rooms and forums, where participants are allowed in based on invitation-only.   Other sites exist to teach beginners the ways of hacking and credit card theft, which anyone can access.

The National Security Agency’s Information Assurance Directorate, Tony Sager, says credit card fraud is growing faster than security can keep up.  The federal authorities are treating global cybercrime similar to how they dealt with the US mafia – it’s organized crime and it will take awhile to dismantle it.  Both the US FBI and European law enforcement are creating cybersquads to launch investigations of cybercrimes and credit card theft.

Plaintiffs Arguing Against the Durbin Amendment

The following are among the plantiffs in the legal action against the Federal Reserve over the failings of the Durbin Amendment:

• National Retail Federation
• National Association of Convenience Stores (NACS)
• Boscov’s Department Stores
• Miller Oil Co
• Food Marketing Institute

Their argument is that the interchange fees for debit cards do not comply with the Durbin Amendment, and that the amendment is heavily influenced by the banking industry which results in higher expenses for small retailers instead of the promised lower expenses the amendment was supposed to bring. Small ticket items are now being charged heavier debit card swipe fees than they were prior to the amendment because the amendment allows issuing banks to include fees on top of the debit card transaction fee.  The 12 cent cap on debit card swipe fees is now increased to 21 cents plus .05% of transaction value once issuing banks add in their fees.

The Durbin Amendment only limits fees that banks can charge on debit card processing transactions – and doesn’t require that third party companies reselling bank merchant account services pass on the fee savings to merchants.  The majority of merchants rely on third party companies for processing credit cards, which means the third party companies benefit from the lower fees paid to banks for debit card processing fees – while charging their customers (the small business retailer) the same fees they did before the amendment was passed.

Use our comparison chart to see which processors have reduced their fees after the Durbin Amendment. Maybe it’s time to switch and save?

Alexander Chiang, the Research Director at Dashboard Insight, was kind enough to let us ask him some questions on the future of the business intelligence and dashboard industry, and how we can further take advantage of such an early industry that will be exponentially useful the sooner small businesses begin using it ahead of their competitors…

CreditCardProcessing.net: What sort of progress has dashboard software made in the past couple of years?

Alexander: Vendors that provide dashboard software are able to handle larger sets of data now. They are also making it easier for less tech-savvy users to develop their own dashboards. It’s better known in the industry as self-service BI. In addition, some vendors are beginning to incorporate collaboration features to their offerings including Dundas, Panorama, and TIBCO Spotfire.

CCP: Can smaller businesses utilize Dashboard Software cost-effectively?

A: With the big push for Cloud BI (or SaaS BI in this case), there are definitely cost-effective solutions out there that range from 20 to 100 dollars a month per user. Companies that provide such dashboard offerings include Klipfolio, KPI Online, and MicroStrategy. Another option is Excel but it doesn’t scale well for enterprise wide dashboard deployments.

CCP: Do you need a statistics background to understand what the software shows you?

A: It’s important to state that dashboard software is just tools to build dashboards. It’s up to BI professionals well versed in data visualization and dashboard design best practices to use one of these tools to develop an effective dashboard. A properly designed dashboard should clearly display the data without the need for a statistics background.

CCP: What does the future look like for business intelligence software?

A: BI software vendors will start adding social media aspects to their products. It’s started, but only a few vendors have added it to their product offering. This would allow everyone to start sharing their discoveries on the data and to incite discussions on those discoveries. As a result, we will see an increase in corporate communication and better alignment between operational activities and strategic goals.  However, a company culture of sharing information needs to be in place first.

CCP: How will cloud computing affect the dashboard software industry?

A: Cloud computing can be treated as another data source – data can be pushed into the Cloud to leverage its computational power to perform complex analyses and the results can be presented by dashboard software. It’s great for dashboard software that don’t have a strong data processing engine behind it.

Whether it’s a new product idea, choosing between insurance policies, or deciding which credit card processor offers you the most for your investment, as a small business it is crucial to make your decision based on the information you gather from investigating the options and trying to dispel uncertainty. The way you make an informed decision requires you to gather data and organize it in a coherent way and it is no doubt that in the information age we have plenty of data and not enough organization.

The concept of making money from using data by exploiting the differences in what we know versus what others don’t, the uncertainty, is what gambling in the 17^th century helped lead to the creation of what we now call probability. Probability is a mathematical discipline and tool that takes in data and creates a helpful model that lets you better predict an outcome despite the haze of uncertainty surrounding the future. If you know how to decipher your data using probability then you have a competitive advantage when it comes to making a decision today that lead to the best results tomorrow.

The age at which students learn tools like probability in school is younger each year and as the number of people who know a piece of information increase, the advantage that information brings gets divided amongst everyone who knows it. Being that so many people know and understand probability, at least intuitively, there is not much room for small businesses to capitalize on the discrepancy in knowledge without the use of specialized tools that the growing business intelligence industry has to offer.

Before the new law, businesses were being charged approximately six to seven cents for a $1 transaction on say, a cup of coffee. But now, in an effort to recoup substantial losses from capping larger transactions, Visa and MasterCard are charging the full 21 cents on that same cup of Joe, which has business owners scrambling to recoup their own losses through incentivizing cash purchases through discounts, raising prices or backing off debit transactions all together and installing ATMs.

Estimated losses for banks hovers around $6 billion annually, while repercussions for businesses that frequently conduct small transactions goes largely unaccounted for. Some banks initially attempted to charge a monthly debit card fee for consumers which resulted in public outcry and a mass exodus from large banks to local credit unions, known as Bank Transfer Day. Author of the amendment, Dick Durbin (D., Ill.), even encouraged people to leave Bank of America because of their proposed fee, decrying “Get the heck out of that bank!”

Some larger businesses, however, have managed to negotiate lower debit transaction fees with Visa, signaling that the banks might be willing to accept lower rates instead of losing business altogether. But smaller businesses that don’t generate enough revenue to have influence might find that negotiating more proportionate fees could be daunting.

It is unlikely that customers will embrace going back to cash as debit and credit card transactions have increased steadily for the last few years, which will ultimately force small business owners to raise prices to keep their businesses afloat.

Are You Being Charged a Fee for the IRS Reporting Requirement?

The intent of the IRS reporting requirement was not to cost consumers more money; but there have been a number of processors adding a new fee to their customer’s statements in an effort to offset their new expenses.  Take a look at your credit card processing statement to see whether you are being charged – you may see a new fee called “reporting fee” or “reg. comp fee” or “regulatory fee” or “monthly IRS fee”.  Because credit card processors are all using different terms to describe the fee, you may want to compare your current statements with previous statements to make sure there are no new fees added.

What Can You Do if Your Credit Card Processor Charges a New Reporting Fee?

While it doesn’t seem to present any legal issues when a credit card processor decides to add a fee to compensate for having to meet the new IRS paperwork requirements, you always have options if you don’t feel the fee is appropriate.  Your merchant application and agreement has a clause which basically gives your credit card processor the right to increase fees or add new fees as necessary, but the problem is the amount of the monthly fee varies greatly from one credit card processor to another.  This indicates some processors may be looking to increase revenues with the fee rather than simply recover their costs and expenses for fulfilling the IRS reporting requirements.

If you notice a new fee added to your statement, it may be time to seek out a new credit card processor that is not charging for reporting fees – or at least one that charges a lower fee. Try to keep your annual and monthly credit card processing fees under $200 total per year.

A large amount of data is generated by small businesses when they process transactions with customers, get visitors to their websites, and can even be found by a simple web search. Thanks to computer integration in the workplace, small businesses now have to opportunity to conduct their own market research by utilizing software that is customizable to each business’ specific needs.

One such firm that offers these insights is InetSoft whose business intelligence (BI) tools and Dashboard Software provide small businesses with performance metrics in an easy-to-understand format. Mark Flaherty, the Chief Marketing Officer at InetSoft, was kind enough to answer a few questions for CreditCardProcessing.net about their software…

CreditCardProcessing: What are the main reasons for a small business to utilize business intelligence software?

Mark: To closely monitor performance of almost every business function. Sales, marketing, and finance are the most critical to monitor. They need to know each day how they are performing so they can better forecast the short-term future and spot problems quickly so they can be addressed quickly.

CCP: In your experience, how do most businesses conduct their business intelligence and data gathering before making the switch to more useful methods like those that InetSoft provides?

M: Almost universally, Microsoft Excel is the BI tool businesses of any size use before graduating to a proper BI software application like InetSoft’s. They copy and paste information from different systems they are using or even just manually enter numbers. Excel turns into the “data warehouse” and they create charts and graphs in it to make their own “dashboards.” Of course this is more tedious and error-prone as the manual processes must be repeated each day to update the dashboards. The other common software package used is something like QuickBooks which offers some reports and chart templates.

CCP: What types of businesses are most likely to use dashboard software?

M: Any product or service company that does more than a few dozen transactions each month has enough complexity in their operations that they need to be monitoring them closely by each of the major functions. Usually we find an employee count of 50 or higher is a good indicator for when they are ready to graduate to dashboard software.

CCP: In what ways can data be imported into the dashboard for analysis?

M: The most common and most reliable way is to configure the dashboard software to read data directly from a database. This way, once designed, the dashboard automatically updates with the latest data. The database can be as simple as an Excel spreadsheet, but is more commonly a relational database such as MS Access or MySQL all the way up to Oracle and data warehouses. Other automated ways include connecting to Web services and XML feeds. Manual methods, simply importing an xls file are also possible for occasional analysis, or if the data comes from an external source like a vendor or supplier.

CCP: How will the growing use of business intelligence software change the way we do business?

M: It further increases productivity, meaning business can get more done with less people, because less time is spent collecting and analyzing numbers. Especially with BI software becoming easier to use, it’s much more self-service, so again less IT support is needed for business people to take advantage of it. BI software is also helping businesses do better in the marketplace because they’re spotting problems or opportunities more quickly and responding more quickly.

Many consumers are taking advantage of various rewards programs that credit card issuers are using to incentivize charging in the wake of the Durbin amendment to the Frank-Dodd act that capped debt card transactions at 21 cents, costing the banking industry billions.

“After several years of declining use, credit cards are poised for resurgence,” Director of Payments Research at Javelin Beth Robertson said. “Despite the nation’s very rocky economic recovery, consumers appear to have halted their belt-tightening and bank incentives to use credit cards rather than debit are gaining appeal.”

This could spell bad news for ecommerce sites that were anticipating a reprieval from capping debit transaction fees. Credit card issuers have been pushing card applications like never before, with mailer applications rising 85 percent since the beginning of 2010.

Research firm Mintel Comperemedia reported that credit card purchases on Black Friday rose 7.4 percent from last year, signaling that consumers are easing up on their fear of debt and willing to embrace rewards that entice charging. It is estimated that nearly 80 percent of credit card offers have rewards programs attached to them, up from 60 percent two years ago.

“Non-traditional payment methods will also see growth as alternative payments make inroads on traditional payments share,” Founder and President of Javelin James Van Dyke said. “While online alternative payments represent less than one-fifth of e-commerce transactions, these options are well positioned to benefit from the introduction and adoption of emerging payment environments, such as the mobile channel and social networking.”

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Like PayPal, V.me will allow consumers to save their payment information and merely log in once they’re ready to complete an online transaction without having to share their credit card or debit card information with the merchant.

V.me will offer “industry standard encryption,” also known as Secured Sockets Layer (SSL) as well as “multilayer authentication.”

Though the eBay owned PayPal has a dominant command of the current online transaction market, consumers have been vying for an alternative to what they feel is an unapproachable and unpredictable service. Over the last decade, users of PayPal have reported frozen accounts without explanation, making it difficult for ecommerce and eBay sellers to withdrawal their money from the company.

Scorned merchants and shoppers report their grievances to sites such as PayPalSucks.com, which has logged countless complaints and garnered more than 83,000 likes on Facebook. One of the biggest complaints is that PayPal can hold funds in a frozen account for up to six months before transferring the money back to the owner, which can destroy an online business.

If V.me wishes to successfully compete in the market, it must gain confidence from consumers that it will concentrate efforts not only on security, but on customer service as well.

The executive director of the Smart Card Alliance, Randy Vanderhoof, indicates that there are 1.3 billion chip-based credit cards in circulation around the world, with a few thousand issued in the United States.

The technology has been slow to catch on in the United States because it requires merchants purchase new credit card processing equipment in order to read the chip-based cards.  The cards themselves cost about $3 each to produce, compared to about 30 cents per traditional credit card with the magnetic stripes.  The costs of upgrading the equipment has prevented many merchants from getting on board, but credit card processor Visa Inc announced a program in August of this year hoping to drive merchants to adopt the EMV technology.  Their program would allow merchants to save money through avoiding certain annual security reviews once upgraded to the chip-based checkout systems.  In 2015, Visa also intends to pass on more of the credit card fraud expenses to retailers’ banks rather than the merchants.

but J.P. Morgan Chase is now offering a Visa branded, chip-based, British Airways credit card.  When US credit card users travel abroad, they are finding it increasingly difficult to use their magnetic stripe credit cards, as many merchants overseas no longer have credit card processing equipment for this type of card.  If buying train tickets through machines, or using sales kiosks, you can’t swipe your card unless it has EMV technology.
The British Airways credit card offered by J.P. Morgan Chase is their third chip-based credit card, designed to help frequent travelers.  All three chip-based cards also feature the traditional magnetic stripe so US customers can continue to use their card domestically, as well.

Similar announcements of upcoming United States chip-based credit cards have been heard from Wells Fargo, Bank of America and US Bancorp.

What is Dwolla?

Dwolla looks like another PayPal or Square at first glance, in that it allows consumers to send money to other people or make payments to businesses, but Dwolla doesn’t accept credit cards as the payment method.  Instead, Dwolla users connect their Dwolla account with their bank account, and then allows you to move money to anyone you want.  You can even pay your Facebook friends through your Dwolla account if they don’t have a Dwolla account.  The service promotes spending only the money you have available, in contrast to credit card companies that let you spend money and worry about paying it back later (at a hefty fee).

Consumers sending money with Dwolla pay nothing.  People receiving money through Dwolla pay a flat rate of 25 cents per transaction regardless of the amount of money being transferred.  They’re able to keep the cost per transaction lower because they do not use credit cards.  Credit card processing companies and PayPal fees generally charge a percentage of each transaction (2-3% average) plus a flat rate per transaction – and over the course of a year these fees can really add up.

How Merchants Can Use Dwolla to Accept Payments

If Dwolla doesn’t process credit cards, you might be wondering how a business can possibly use the service to accept payment at the checkout line.  You don’t need fancy equipment and you probably already have what you need to accept payments at the checkout line with Dwolla.  Basically, you can keep an iPod touch next to the cash register to verify that a payment has been received from a customer; or you can use an online kiosk (a webpage) that you leave open on a laptop or other device to verify payments are received.  Customers make a payment with their phones and it will instantly show up on your iPod or laptop screen.

Online merchants can simply install a plugin to their online shopping cart, or install various apps to WordPress and other platforms to begin accepting payments with Dwolla online.

Funding: $1 million from The Veridian Group and The Members Group in Iowa. Raising another round now.

RFID Security Flaws

Since the first radio frequency credit card, privacy experts and security firms have expressed their concern of thieves accessing the card data as it is transferred from the card to the special reader through the air.  In response to security concerns, some identity theft prevention companies have created products to block RFID technology.

When security companies walked around an airport, they were able to get full credit card details and expiration dates with a $100 scanning device anyone can purchase online.  Some people with RFID cards didn’t even realize they had cards with this technology.

With radio frequency, thieves do not need to physically gain access to your credit cards, instead they just need a reading device and to stand near you in a public place to pull the information out of the air.

How to Prevent Identity Theft with Radio Frequency Cards

If you have radio frequency credit cards in your wallet, consider purchasing a product that prevents transmission of the data.  This means you can keep your cards in the protective item, and walk freely in public without fear that an inexpensive device carried by a thief is going to read your credit card data when you walk by.  If you aren’t sure if your cards are RFID compatible, call your credit card company and ask.

Credit card rewards can offer customers all sorts of bonuses, from airline miles to gift cards, often times enticing users to charge many purchases in hopes of obtaining these perks, but cost you more as the vendor.

The Durbin amendment to the Dodd-Frank Act limited swipe fees at 24 cents per transaction, which is estimated to cut profits for banks by the billions, effectively making debit card transactions significantly less profitable.

The amendment was created by Sen. Dick Durbin as a means for businesses to keep more of their profits but has sparked a flurry within banks to recoup their projected losses. For instance, Bank of America announced a $5 a month debit usage fee which was rescinded after public and political outcry, but has hinted that they will recoup the fees one way or another.

In this economic climate, credit card usage is declining and many shoppers are using cash or debit transactions to make purchases. Shoppers are less willing than in previous years to go into debt around the holiday shopping season, silently expressing their doubts or fears regarding the economy, and for some, their employment.

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In banking’s infancy, deposits of grain and cattle were made at temples because of the safety that comes with a sacred, well-constructed, building that was “well-staffed” with monks. Since that time, banking has evolved dramatically to become its own institution separate from temples and religion (unless, of course, you are like a few people on Wall Street who consider capitalism to be a religious movement). Modern banks are able to accept deposits from many entities, like corporations and partnerships, which are not limited to people alone.

When a company is incorporated or a partnership is formed, the owners will quickly realize that they need to create a bank account that lets revenue flow in from sales made with credit and debit cards. Banks have been kind enough to create a product for these entities known as business checking, or a merchant account. There is a confusingly large amount of web resources in helping consumers choose accounts, and seemingly just as many banks offering some variation of a merchant account that claims to fit your needs.

Ken Tumin, the owner of DepositAccounts.com, was kind enough to let us interview him and ask some of our questions in regard to picking the right account for our business needs. Ken started DepositAccounts.com as a hobby to help people find the best deals at banks and credit unions – as well as a place to give advice in dealing with banks and his experiences in opening accounts:

What sort of services or information does DepositAccounts.com provide for consumers as well as small businesses?

DepositAccounts.com tracks rates on all types of personal and business deposit accounts. We also track the health of banks and credit unions. In the DepositAccounts.com blog I report on the best bank deals and on banking news relevant to depositors.

In your experience, what are some of the problems that small businesses face when looking for cost-effective merchant and checking accounts?

In the past banks were not allowed to pay interest on most business checking accounts. However, this changed in July, and now banks are free to pay interest. Not all banks have started offering interest on their business checking accounts, but a few have and the interest rates are competitive.

Are there any absolutely “must-have” features that a business bank account should have that small businesses should look for?

Small businesses should make sure their bank provides good online account security. In addition, they should make sure they are aware of their bank’s security policies for business accounts. Federal regulations don’t provide the same level of protection against fraud on business accounts as they do on personal accounts. Small businesses are more likely to be liable for losses caused by fraud.

Are there any other important factors, in addition to the above, that a small business owner should have in mind when finally choosing an account?

Business checking accounts tend to have more fees than personal accounts. Businesses should be aware of not only monthly fees but also transaction fees and cash deposit fees. Businesses should also look to credit unions. Many credit unions offer business accounts and they often have fewer fees than the large banks.

The financial products banks create are meant to entice you enough to deposit money with them so they can then turn around and loan most of it out, but these financial products, however simple, will usually always come with a fee. Whether you’re depositing grain, cattle, or looking for an account to accept the flow of credit and debit transactions, banks are a necessary part of the business process, and it is extremely important to tread prudently when finding the right merchant account and hosting bank for your business.

School Spirit Pays is a credit card processing company that wants to give back to schools. The founder and president of School Spirit Pays, Denise Senter, says “The needs schools have are greater than ever.”

How “School Spirit Pays Credit Card Processing” Works
Every time a customer makes a purchase with a merchant using School Spirit Pays credit card processing, a percentage of the transaction fee is donated to schools. Most credit card processing companies keep a portion of the transaction fees to give commissions to marketing companies who recruit new business; School Spirit Pays uses that money to give back to schools.

In place of paid-marketing companies, volunteers from local PTAs help recruit businesses to use School Spirit Pays for their credit card processing needs. Businesses require a credit card processor, and many are willing to use a company if they know it helps local schools each time a customer pays with a credit card and it doesn’t cost them anything.

The average merchant using School Spirit Pays credit card processing generates about $25 per month that is donated to the school system. The company is looking to expand with other school districts in and around North Texas, with potential plans of nationwide expansion in the near future.

Bank of America is reconsidering its proposed monthly $5 debit usage fee after an outcry and call to arms from both consumers and politicians.

The bank has yet to make any firm decision on the issue, but has said it may expand the number of customers that would be eligible for a fee waiver.

Bank of America proposed introducing the fee as a means to recoup their losses from the Durbin Amendment which put a cap on transaction swipe fees, with estimated losses set at $6 billion across the entire industry.

“Vote with your feet,” Sen. Dick Durbin, author of the amendment said, “Get the heck out of that bank.”

Credit unions have soared in popularity in the last month as people are looking for alternatives to big bank fees and questionable policies. CULookup.com, a credit union locator engine has reported a 350% increase in traffic in the last month alone, echoing the growing dissatisfaction and dwindling trust in big banking.

A Facebook event set for Nov. 5th entitled “Bank Transfer Day” currently has 70,000 “attending” and 14,000 “maybe attending.”

Sentiment toward “too big to fail” banks has changed recently among Americans becoming sympathetic to the cries of the Occupy Wall Street movement, which insists that banks that irresponsibility spent their bail out money should be held accountable for their actions. Chase Bank and Wells Fargo were both testing their own debit fees but have ended their programs in fear of losing more customers.

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• plumbers
• home improvement contractors
• electricians
• dog fence installers
• landscapers
• door to door sales
• home party / direct sales
• flea market or vendor events
• even a garage sale!

Benefits of Mobile Credit Card Processing

In the past, businesses providing services to customers in their homes, or selling products at flea markets or vendor events would collect credit card information to process once they returned to their office.  At that point, if the credit card did not go through, the business had to decide on a plan of action for getting another form of payment for the customer who probably already received the product or service.  When you swipe the customer credit card on-location, you know right away whether the payment is valid.

Payanywhere.com Mobile Credit Card Processing

If you have a smartphone, you can use Pay Anywhere.  The application is currently supported on iPhone, iPad, and Android.  Applications for Blackberry will be available shortly. It’s a credit card reader that connects to your smartphone and a free app that lets you swipe a credit card and receive payment.

No minimums: businesses of all sizes, and even individuals who want a way to get credit card payments can use Payanywhere.com because there are no monthly processing minimums to meet.  You don’t pay a set up fee or a cancellation fee.

Track inventory: organize the items you sell into categories with or without photographs of the items, and keep track of how many items you have left to sell with the phone app.

Reporting and searching: browse recent sales to see individual transactions, run reports for top selling inventory items, or see top customers all in real-time.

Email receipts: the app will email receipts to your customers for sales or refunds, and each receipt includes detailed description of purchase and images if you have them in your inventory.

Additional Benefits and Features for PayAnywhere.com Users

Once you start using PayAnywhere.com to handle your mobile credit card processing needs, you will receive an online account area for running more extensive transaction reports of your sales.  In this merchant portal, you can create custom reports and alerts and have them emailed to you.  If you need additional receipts, you can log in and find and either email or print customer receipts, refer other people to PayAnywhere.com and receive commissions, and view all of your monthly statements in one place.

PayAnywhere.com provides customers with 24/7 customer support via a live, toll free phone number.

Merchants that conduct transactions exceeding $20,000 or 200 transactions a year will be required to fill out the form for 2011 come April 2012. The move is perceived by many as a means to end untaxed and “underground” transactions, as its passing was largely concealed in The Housing Assistance Tax Act of 2008 which was labeled as “a bill to provide needed housing reform and for other purposes.”

Unfortunately for the unsuspecting public, the new requirements on merchant reporting slipped through without much attention. Merchants will be receiving the 1099-K from their transaction processing companies in early 2012.

The law’s stated purpose is to “improve voluntary tax compliance by business taxpayers and help the IRS determine whether their tax returns are correct and complete,” though nothing about it is voluntary. Its true purpose is to close the “tax gap,” which is the difference between profits reported and actual earnings.

Naturally, because this is the first time these transactions will be reported in full, there will be many errors and miscalculations to account for. The biggest concern revolves around the fact that the form reports the total amount paid without considering returns, chargebacks or debit transactions which involve cash back. Merchants are expected to keep tallies on all information for disputes with the IRS.

The effect this will have on ecommerce is yet to be seen, but expect companies with large discrepancies to receive audits from an eager-to-collect IRS.

• Creditor Web – This site details the credit card processing options for home-based business owners.
• About: Home Business – A great resource for home-based business owners who are in the process of getting a merchant account and accepting credit card payments.
• Paynet Systems – This site offers a customized payment system suited for your home-based business. There is also a live help feature if you would prefer to discuss your options with a staff member.
• Franchise Payments Network – The leader in payment processing for franchise chains.
• CcNetPay – Credit card processing for business owners at home.
• IntelliCollect – This article presents several pros and cons of credit card processing for the home-based business owner.
• Power Pay Services – This article provides an overview of the credit card processing options for home-based business owners. They also offer merchant accounts and credit card processing services at the guaranteed lowest price.
• Noble Payment Systems – The benefits of credit card processing for those who work from home.
• Credit Card Processing – A helpful article on credit card processing for small online businesses.
• Home Business Resources – Increase your competitive advantage with good credit card processing.
• Credit Card Processing Fees – Learn how to decipher costs and which areas of expense to attack when it comes to selecting your credit card processing service and save money in no time.
• Lakeshore Branding – This article explains how small online businesses can accept credit cards.
• Home Based Business Merchant Account – Learn how to choose an inexpensive home-based business merchant account for your online business.
• Bright Hub – An in-depth look at the various credit card processing options that fit all types of home based businesses.
• Active Venture – Online credit card payment processing software and services.
• Zimbio – An insightful article on the details of credit card processing.
• North American Bancard – This piece delves into the reasons why small businesses should look into credit card processing.

Image credit: flickr

McCrohan also predicts merchants will revolt against the major card networks after a transaction fee hike that large.  Neither Visa or MasterCard have publicized their specific rates and changes, but MasterCard mentioned in July it will be releasing a two-tiered pricing structure for debit transactions and Visa indicated it will roll out a series of changes and strategies to reduce fees for handling debit purchases to fixing current variable fees, to help make the network more favorable to merchants.

Why Card Networks May Increase Fees

Analysts like McCrohan have several theories why credit card networks would be increasing rates, including as a means to help banks  issuing the debit cards with Visa and MasterCard logos recover lost revenues coming from debit card fee limitations; or perhaps to pressure merchants into accepting mobile payments such as Google Wallet and other smartphone/wireless payment methods.

Google recently launched “Google Wallet”, an app that allows users of the Google Nexus S 4G phone on Spring’s network, to store their Citi Mastercard information directly on their smartphone, and then make purchases by swiping cards at the store. Google eventually wants to roll out the service to Visa, American Express and Discover card users, too. While this may be the payment method of choice in the near future, merchants and consumers are wondering if the credit card details are safe using this method of making payment.

Security of Mobile Payments

Google’s wallet app is protected by PIN technology.  Each PIN is only valid for a short period of time and if users enter it wrong five times, the app will become disabled and unusable.  The card details are stored on a computer chip that is kept separate from the phone’s Android operating system, which is considered more secure since hackers can get into software but not hardware.

A computer science professor from the University of Massachusetts at Amherst, Kevin Fu, says that there are additional layers of security used with mobile payment technology.  These extra layers could potentially reduce credit card theft, but it is important not to assume the data is being encrypted before it is sent – as Fu and other researchers discovered just five years ago a number of no-swipe credit cards marketed as encrypted were not.

Google Wallet indicates that credit card information is encrypted so wireless card readers cannot read it – but with any new technology, there is not yet enough evidence for anyone to claim it is 100% secure and private.

Privacy Concerns of Mobile Payments

One thing to consider before using smartphones to make payments is the ability for retailers to collect information about customer shopping habits.  As a retailer, having access to information about your customers is invaluable, as you could send targeted advertisements for a new latte just as your customers are walking by your coffee shop, with GPS technology and information that shows the person is a latte-drinker.

Future of Mobile Payments

The mobile payment market is currently a $240 billion annual market; and is projected by Juniper Research to reach $670 billion globally by the year 2015.  PayPal is planning to release a mobile payment system, and “Isis”, a networked backed by Verizon, AT&T and T-Mobile is planned to launch early in 2012.

Police say credit card information was stolen via “skimmers,” people hired at businesses who took the information and created blank credit cards through suppliers in China, Russian, Libya and Lebanon. The cards were then used to purchase electronic goods, the majority of which were Apple products, which are easily re-sold overseas.

“The schemes and the imagination of these thieves is mind-boggling,” said police commissioner Raymond Kelly at a news conference about the operation.

From the 85 already in custody, police seized $650,000 in cash, guns and computer components. The operation was centered in Queens, NY, with detectives having to translate communications in various languages including Russian, Farsi and Arabic.

If you have any information on the case, please contact New York Police Department or 1-800-577-TIPS.

Source Los Angeles Times

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Durbin’s remarks come after Bank of America announced last Thursday that it will be charging $5 a month fee for debit card transactions, causing many customers to voice their concerns with the already troubled bank.

“After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers,” said Durbin last Thursday in a statement. “It’s overt, unfair and I hope their customers have the final say.”

The fees are an attempt for the bank to fill missing revenue generated by the Durbin Amendments of the Dodd-Frank financial reform law that went into effect on Oct. 1, capping debit card transaction fees at 21 cents, down from a national average of 44 cents. Bank of America estimates its losses to be more than $2 billion annually.

“The economics of offering a debit card have changed with recent regulations,” said spokeswoman Betty Riess of Bank of America in a statement released Thursday. “This new fee allows us to continue to offer the convenience of a debit card with the full range of added features customers have come to expect.”

The fee will only apply to customers who use their debit card during a billing cycle, but will not be applied for cash withdrawal from ATMs. The fee can be waived by possessing a home mortgage with Bank of America or by keeping a combined balance of $20,000 in all accounts.

The new policy has many customers considering their options, including changing banks. For those wanting more information on the process of switching banks, check out the Move Your Money project or findabetterbank.com.

Credit Card Networks

To better understand how processing works, one must first identify the parties involved in the process. On one end you have a card user who initiates the transaction. By choosing to use your card, you authorize the movement of funds from the bank issuing your card to the merchant providing a product or service. Connecting these two are card networks and credit card processors. Card networks like Visa, MasterCard, Discover and American Express have long held control over the processing. Now, as the industry faces new changes, control over payment processing may become even more competitive.

New Players Change Industry

Already widely used in other nations, near field communication technology will change the way cards are processed. In coming years, the way in which you use your card will change dramatically. The introduction of smartphones and technology allowing users to simply wave their cell phone in front of a reader opens the door to new players in the industry. Traditional credit card processing will likely be affected as more companies, businesses and credit card processing parties join the industry. Although many anticipate a great ease of use for credit card users and merchants, there is always the chance of negative results as well. If changes in the industry create additional costs for merchants, the possibility is there to see costs passed onto consumers. This may affect all consumers if the cost of goods and services rise as a result. On a positive note, with more competition within the industry, there is also a chance that the cost of credit card processing may actually decrease. If this is the case, merchants who currently avoid credit card transactions due to high processing fees may make the switch to accepting credit cards.

Adjusting To Change

To fully understand how changes in the industry will affect you, it is important to pay attention to how and when these changes will take place. Card users are encouraged to read card agreements and any news relating to the use of smartphones or near field communication. Security will remain a priority for all those involved with the processing of credit cards to ensure these changes do not open up the window for fraud and unauthorized use of consumer credit card accounts. Meanwhile, credit card processors and other parties involved in the processing of payments must prepare increased competition in the industry and how it will impact business models.

A Utah-based company, Invisus, serves businesses with less than 200 employees on risk management and identity-theft prevention programs. The CEO of Invisus, Jani Harrison, says Cybercrime and identity theft is a higher risk to businesses than fire or flood.

Consider the following scenario that happened in California: Thieves rented an office in a building that also housed a law firm. The law office and thieves then had the same address, just a different suite number, which enabled the criminals to order $70,000 of computer equipment and office furniture under the law firm’s line of credit and have it delivered to the building. The criminals quickly loaded their items onto a truck and disappeared before the law firm even knew what had happened.

Another example of identity theft to businesses is the theft of personal data of the company’s customers. Business owners who keep their customer information on file – from customer credit cards and addresses to their history of purchases – are at risk. Computer hackers can access this information in databases, and then the data is sold on the black market for $50 to $100 per person.

Protecting Business Data

As a business owner, you have a responsibility to protect your customer’s personal information. Identify all data within your company that requires encryption, and seek the appropriate software and hardware to protect your customer’s from criminal activity through a data breach of your system.

Additional Business Identity Theft Prevention Tips

• All business computers should have up to date anti-virus and anti-spyware programs running, and your computer network should be protected by a firewall.
• Make sure you are regularly updating software and browsers with security patches as recommended.

Ensure all of your employees are trained on proper handling of sensitive business or customer data; and that they are aware of the common scams criminals use by phone, email or internet in an attempt to gain access to confidential information

Deputy Assistant Secretary, Don Graves, announced on the Treasury Notes blog that $2.4 billion in funding had been distributed to 191 banks under this program.

The letter from the American Bankers Association was expressing concern regarding the number of banks who applied to the fund last year who are just now receiving rejection notices. They claim the rejections do not offer any details as to why the applications are being refused; and request that through the remaining days of the program that the Small Business Lending Fund provides more details for how the rejected banks can address concerns leading to the rejections; and ultimately be approved for funding.

Last month, The Independent Community Bankers of America, sent a letter to the Treasury Department with a request to roll out the approved funds faster. Applications were approved as early as last July. A treasury spokesperson responded to the letter, saying , “To best protect this taxpayer investment, Treasury evaluated all SBLF applications using a thorough review process.”

Merchant Account: What business owners need to set up in order to process credit card payments. There are numerous account options available and you will want to shop around to find one to fit your business needs.

Application Fee: The fee that some processing companies charge to businesses when they open a merchant account.

Annual Fee: A fee that is often charged by payment processing companies on an annual basis in order to keep your merchant account active.

Transaction Fee: Fee charged by the processing company each time you process a customer’s card for payment.

Interchange Fee: The fee that the credit card companies charge for converting a card payment to cash and transferring the cash to your account.

Card-Not-Present: any transaction that takes place online, by phone, or through mail where a credit card is used for payment but the merchant doesn’t physically see the card or swipe it through a credit card reader.

Authorization: process completed for every credit card sale to make sure the card has enough money available to pay for the transaction. The merchant receives an approval response that verifies the card has funds available for the purchase and the sale is authorized.

Authorization Response – response received by merchants when a credit card is presented for payment. Possible responses may include:

• approval – payment is made
• decline – transaction is not approved
• call center – merchant must call a toll free number to provide more information

Address Verification Service (AVS): Term related to account security. It is a process that verifies a card holder’s address before accepting payment. Address verification is most often used to help prevent fraud on both on line transactions and phone orders.

Card Verification Code: The card verification code is used to help with fraud prevention. Just like address verification it is most often used with on line transactions. The card verification code is a 3 or 4 digit number found on either the front of back of a credit card. When paying on line the card holder would need to enter this number in order to be able to use their credit card for payment.

Automated Bill Payment: An automated bill payment is an agreement between a business and a customer that allows the business to automatically bill the customer’s credit card for ongoing products, services or subscriptions. The customer’s credit card is automatically charged on the contracted renew date which can be weekly, monthly, yearly or whatever other time frame the business and the customer have agreed to.

Chargeback: A chargeback is when a transaction is billed back to the business after payment has already been processed. A chargeback is in favor of the customer and often occurs when a card holder is not satisfied with the product or service they received.

Mobile Credit card Processing: Mobile credit card processing is a way for businesses to accept credit card payments from customers when they are on the go. Mobile credit card processing uses a wireless processing machine to process credit cards and can be used just about anywhere,

Online Payment Gateway: An application that businesses use on their website that allows for the secure processing of credit cards. It is the means of connecting a customer’s shopping cart to the credit card processor.

Third-Party Processor: A third party processor is a company that will process credit cards for you. They then most often keep a per transaction fee and deposit the rest of the sale into your account. PayPal is a popular third party processor.

Mail Order / Telephone Order (MOTO): card-not-present transactions where payment is made through the mail, by phone, or internet.

Magnetic Stripe: the magnetic tape on the back of credit cards which contains cardholder data and the account number, and can be read by credit card readers.

Private Label Credit Cards: sometimes called proprietary cards, private label credit cards only work in a certain retailer store.

Point of Sale (POS)/POS Terminal : equipment merchants use to process credit cards for card present transactions. Credit cards are swiped and read magnetically, and the signature of the cardholder is obtained. Point of Sale transactions are considered the most secure type of credit card transactions.

Mobile Credit Card Processing

If you use credit cards for purchases, you may be already be using mobile credit card processing.  Mobile credit card processing is really a rather simple concept, at least in terms of ease of use for consumers.  With mobile processing, a credit card user keeps their plastic holstered and uses their mobile phone for credit card transactions.  Basically, instead of giving a store clerk your credit card to swipe, you simply present your phone which is set up to connect with your mobile bank (credit card information) and viola, the transaction is made.  No muss, no fuss, but is it really a better practice for card users?

Drawbacks Of Mobile Credit Card Processing

The first and most commonly feared drawback to mobile banking is the fear of fraud.  What happens if your phone is stolen and all of your personal information is stored ready for use by whomever finds it?  Or consider the near field communication issues with “skimming”.  This occurs when a device or reader is used to capture your credit card information as it is transmitted from your mobile phone to the credit card reader.  Clearly security is at the top of the list of possible drawbacks, but there are other concerns that are not as easily acknowledged.  According to a recent article appearing in Time’s Moneyland, there is a real danger of consumers using credit irresponsibly due to ease of use.  Consider how easy it is for some individuals to spend “money” when they are not actually forking over cash.  It is not difficult to see how impulse purchases occur.  In fact, as reported by Time’s Moneyland, “The relevance to mobile payment systems is that there is considerable evidence to suggest that the farther away we get from spending money that’s actual money, the more likely we are to spend it more easily.”  As you can see, mobile credit card processing can certainly make life easier for those who use credit cards for purchases, however it is important to understand the possible downside to this easy method of payment.  By doing so, consumers can enjoy the benefits while practicing fiscal restraint which will surely help improve personal finances.

What Is Identity Theft?

Identity theft is when someone gets a hold of your personal information, like a credit card number, social security number, etc. They then take this information and use it in a way to make gains financially. They may use your credit card to make purchases or even worse they may use the information they have obtained to open new accounts in your name. They might open a new credit card, receive a loan or get a line of credit all in your name. Of course they do this without the intention of repaying and since the accounts are connected to your identity, your credit can be destroyed before you even realize it has happened. Your cleptophobia should be the driving force to make you keep your information as safe as it can possibly be.

Millions of Americans have had their identity stolen at one time or another and it seems to be an increasing issue with new technology being so powerful. If your information is not secure, it is easy for a trained identity theft to steel it and run with it.

Is There An Increased Security Risk With Mobile Credit Card Processing

While you might think there would be an increased risk of having your card processed on a mobile device, your fears are truly not founded. In fact, you should feel completely safe when you hand over your card for mobile processing and here is why.

• Your card is in your sight at all times. Unlike in a restaurant, for example, when you give your card to a server you are putting your trust into a stranger as to what they are going to do with your information. When you hand your card over to a merchant who is using mobile processing, you are able to keep your card in your sight, which increases your security.
• Your credit card number is not being saved: In the past, it was common for merchants on the road to take credit card numbers from customers with pen and paper, a huge security risk. When your card is processed with a mobile device your card number is not stored and this risk is eliminated.
• Transactions are encrypted: Finally, when your card is processed by a mobile device, data transmitted is encrypted, making it highly unlikely to be stolen.

Mobile credit card processing is here to stay and very likely will become the norm for many businesses. The great news is that customers should feel completely secure with the process.

As stated in the press release, “Citadel EFT, Inc. which offers U.S. Merchants credit card terminals and online,mail order, and retail credit card processing services, announces that it is offering iPhone, Android, Blackberry swipes and credit card processing terminal machines free.”

As previously stated, in this highly competitive industry, any opportunity to reduce costs and save money is something which should be considered by all merchants accepting or thinking about accepting credit cards as a method of payment.  With the costs associated with credit card processing in the thousands for most businesses, combined with a tough economy, the cost effectiveness of this process has been questioned by many small business owners.

With this offer there are no set-up fees nor programming fees for credit card terminals and swipes.  According to Gary DeRoos, CEO of Citadel EFT, this sets Citadel ahead of the competition in the marketplace.  This offer works especially well with business owners who traditionally would have found it difficult to accept credit card payments on the go.  Consider your plumber, electrician, contractor, vendor or any other business that does not have a physical location from which they sell their products.  These business owners in the past may have been limited to cash or check transactions which reduced the payment options for many customers.  By having access to mobile processing that is free of cost, these business owners can now access a portion of the population that previously may have been off limits as customers.

It is important to note that just because certain aspects of credit card processing through this offer are free, there are charges that will be incurred.  As with all other credit card processing options, merchants are encouraged to carefully consider all costs and compare them to other offers to ensure they are in fact getting the best deal possible.

According to the press release, “Citadel EFT is also organizing affiliate sites so people can make a business out of referring their friends, family and associates and receive a $250 referral fee.  Anyone can call Citadel EFT and even refer themselves and they too receive a sign-up bonus of $100.  Processing Rates are at 1.1% for debit, 1.6% for credit and 0% for debit with pin with no monthly fees.”  In addition Citadel EFT will pay the PCI compliance fee for merchants.

For more information about this offer, view the press release and compare the benefits and drawbacks before making a final decision.  For some merchants, this deal may in fact be a money saver allowing mobile merchants to accept credit card payments and reach customers who prefer paying with plastic.

What Types Of Businesses Can Benefit From Mobile Credit Card Processing

Mobile credit card processing is almost a necessity for some businesses today. If you are a business that is always on the road and needing to accept payments then you should highly considering mobile credit card processing.

On The Go Service Businesses

Just about any type of service provider that does business in multiple locations can benefit from mobile credit card processing. These include such professionals as:

• Photographers that use multiple sites and locations for sittings.
• Interior designers.
• Tutors that are on the go and tutor in homes, libraries, etc.
• Caterers who work in multiple locations.
• Professional speakers who travel and sell their own products while on the road.
• Authors who sell their own books when on the road.
• Plumbers, roofers, and all other handyman type businesses that do service calls to homes and businesses.
• Party planning businesses that are on the road doing birthday parties and other events in multiple locations.
• Personal trainers, dieticians and others in the health industry that might travel for personal consultations.

Businesses That Offer Delivery Options

Delivery service businesses also greatly benefit from mobile credit card processing including:

• Restaurants, pizza shops and any other food location that provides a delivery or even a curbside pickup option at their location.
• Flower shops or any other gardening type business that does local deliveries and needs to take payments upon delivery.

Business Owners That Sell At Flea Markets And Craft Shows

A final category of professionals that can benefit from mobile credit card processing are those who own businesses that sell items at craft shows, flea markets and other similar venues. These might include:

• Jewelry makers
• Antique dealers
• Painters or other artists
• Photographers that sell their work
• Individuals who make and sell arts and craft products
• Bakers who sell their baked goods
• Individuals who make and sell specialty clothing items

Benefits Of Mobile Credit Card Processing

There are numerous benefits for business owners who use mobile credit card processing including:

• Quick and easy options to get set up and started with accepting payments. Even a person with mechanophobia can work with mobile credit card processing.
• Cost effective. Mobile credit card processing can actually be cheaper than traditional credit card processing.
• Increase in customers and sales. Most people today do not carry cash and when you cannot accept credit cards while on the go you could be losing out big time in sales and profit. When you accept credit cards you will more than likely increase your customer base and increase your sales.
• Decrease in fraudulent actions. When you use mobile credit card processing you get real time validation reducing the risk of fraudulent payments.

Cell Phone Credit Card Processing

A number of mobile wireless payment processing units exist which turn your cellular phone into a credit card machine, complete with a card swiper.  This is important because a card swiper requires that it is a “credit card present” transaction, which gives you a better processing rate as it is less risky than card-not-present transactions.  This type of mobile processing will work with a variety of merchant account providers and processing companies.

For business owners processing cards less frequently, it may not be necessary that you have a physical card swiper.  Some cell phone processors allow you to manually enter card details into your smartphone application or via a web browser into a web-based processing system.  This type of processing generally charges higher than standard rates because the card does not necessarily need to be physically present, which is a slightly increased risk.  If you only need to process the occasional credit card while you’re out of your office or storefront, however, this may be a sufficient solution.

Laptop Credit Card Processing

Many card swipers exist with USB connections to work with your laptop. You can process credit cards anywhere that you have access to an internet connection.  This is convenient if you need a laptop anyway, to access documents or give presentations, for example.  If it comes time to make a sale – you’ll just plug in your USB credit card swiper, and open the processing program to accept payment.

Again, if you don’t have the need to process cards frequently, you may be just as happy with a web-based form that allows you to enter the customer’s credit card details manually rather than swiping the card through a reader.

Touch Tone Phone Credit Card Processing

Another type of mobile credit card processing option involves a touch tone phone.  It can be a home phone or a cell phone.  Some people keep this feature available as a back up processing system, while others – like home party consultants – may use it as their primary form of credit card processing.  They simply dial an access number, enter the customer card details and wait for confirmation that the card has been processed.

Visa’s Big Plan

As reported by DigitalTrends.com, “Credit card processor Visa has unveiled big plans to introduce mobile payment technologies to the United States market, announcing plans to roll out dual-mode chips in its credit card processing infrastructure that will support both Near-Field Communications (NFC) and Europay, MasterCard, and Visa (EMV) standard that has already seen strong adoption internationally.”  The challenge for Visa is convincing US merchants who may be hesitant to embrace “new” technology to make the leap from the familiar to something that is new and somewhat untested in the US.

Benefits Of New Technology

Visa’s goal is to educate US merchants to the benefits of adopting new technology and they are willing to use incentives to make it more tempting.  By embracing new technology already in use elsewhere around the world, US merchants and consumers would have to adjust to a new method of credit card processing which is believed to be more secure and convenient for all involved.  The emerging trend in the US is the more widespread use of NFC and mobile phones as the main method of using credit cards for purchases.  This would include the sale of new terminals equipped with the technology to process these transactions, something many merchants are hesitant to adopt.

Why The Push From Visa

Visa is encouraging merchants to embrace this technology by eliminating the need for PCI compliance certification by October 12, 2012 for those merchants who achieve 75 percent of their transactions from chip-enabled terminals according to DigitalTrends.com.  This push is just the first of many, with a April 1^st 2013 deadline which will require processors to accept these transactions.  What happens if merchants and processors do not respond to this push from Visa to speed up acceptance of what many consider an inevitable transition to new technology?  By October of 2015, Visa will  no longer hold merchants responsible for point of sale fraud, instead shifting the responsibility to the processor.  This move will surely encourage processors to push their clients (merchants) toward accepting this new technology as soon as possible, least they find themselves on the hook for fraudulent transactions.

Merchants Are Hesitant

While there is a clear push for adopting new technology and processes, this does not change the fact that many merchants remain unsure of its use in the US.  Security issues have always plagued the industry and surely merchants are wondering how this new technology will improve or hinder secure credit card transactions.  Despite widespread use in other countries, US merchants will likely ask for evidence that this technology will not cost them more money or worse, open them to more liability in terms of fraud or other security issues.

What You Need To Look For In A Merchant Account

When you select a merchant account for your hotel, inn or other accommodation location you will first need to make sure that the account you select can meet all of your credit card processing essentials. Depending on what your needs are you may need to accept payments over the internet, once guest arrive at your location and even over the phone. You may also need to be able to take a deposit that you can refund once the guest checks out, be able to add on incidental charges during the stay and more.

Many merchants will offer special accounts tailored toward the accommodation industry and its specific processing challenges. You will want to specifically seek out one of these accounts.

Pricing

Pricing will be your next area to look at. Pricing can range from one credit card processing company to another and you will want to make sure that you choose an account that offers competitive pricing. You will want to check for application and start up fees along with monthly fees, minimum transaction fees, fees per transaction and more.

Credit Card Processing Equipment

Next you will have to decide what type or types of credit card processing equipment you will need. You most likely will need to be able to process customer’s credit cards on the internet if they are making their reservation on line, on site and maybe even over the phone. You will need to make sure you merchant account will have the capacity to cover all of your processing needs. Additionally, you will have to purchase or rent processing equipment for on site.

If you are a small inn or bed and breakfast you may want to consider an on line third party processor for your internet payment needs. If you do not do a lot of on line transactions you can usually save money by going this route. PayPal is one of the more common third party processors and it is fairly easy to set up an account with them.

Additional Items to consider

Many hotel owners also look for their merchant accounts to have additional services and benefits. You may want to consider looking at accounts that offer the following:

• An account with fast transaction capabilities. While some accounts you may have to wait several days to get your money, others may be instant or in just a few hours.
• A merchant account that has the capabilities to produce multiple reports that make running your business easier.
• A merchant account that has the capabilities of dealing with guarantees and when to charge the card.
• A merchant account that will help you with meeting PCI compliance.

Investing In Security

According to Symantec, for every second last year, nine new threats were unleashed onto the Web.  This is an ongoing issue for those working to provide a secure environment for consumers, merchants and other businesses who operate on the Web.  With these new threats constantly undermining the security measures in place, it becomes difficult to maintain a secure environment for credit card processing.  Despite this, credit card transactions are generally considered very secure, however the level of security depends on the processing that the merchant chooses.  If the merchant attempts to cut costs by teaming up with a less expensive processor who in turn offers less security, the end result could be very costly for all.

Security Doesn’t Have To Break The Bank

While it is definitely implied that the better the security provided by the processor the more expensive the fees, this is not a hard and fast rule.  The cost effectiveness of higher security depends on where the security is found.  Internal security measures are usually more expensive than those that are outsourced, giving e-commerce merchants an affordable option without increasing the chance of security being breached.

Top Challenges For Online Merchants

Merchants operating exclusively or predominantly online face more challenges when it comes to secure credit card processing than those who have more person-to-person credit card transactions.  For as long as consumers have been buying things on the Web, the concern over credit card fraud and identity theft have topped the list of security concerns.  Now merchants can add to this list information protection and cloud security.  As the way we do business continues to evolve, it becomes even more important for all parties involved in credit card processing to focus on security and how to reduce the chances of the wrong people stealing personal information.

Consumers Absorb Costs

There are some cases where the higher cost of security is indirectly passed onto consumers who make purchases from online merchants.  Fees may be added at the end of the transaction which may be used to offset the higher cost of processing fees.  Although this practice is prohibited by the credit card issuers, many consumers willingly pay the higher price for the ease and convenience of shopping online.  This is not to say all merchants pass the cost onto their customers, however if you are seeing additional fees tacked on when its time to checkout, you may want to ask yourself exactly what you are being charged for or find a merchant who does not pass the cost onto their buyers.

Webcam Card Reader

Recently announced by Jumio, the latest trend in credit card processing which involves near field communications (NFC) will add webcams to the arsenal of equipment aimed at eliminating fraud.  With NFC, consumers no longer have to physically swipe their card in order for account information to be captured and forwarded to the processor.  Much like other technology used in grocery stores or anywhere items are scanned, NFC allows card users to swipe their card in the vicinity of the reader and go about their business. Unfortunately until Jumio’s announcement, fraud was still an issue even if a criminal didn’t gain access to the physical card.  With the introduction of Netswipe, a product which turns a webcam into a card reader, criminals will no longer be able to simply copy credit card data or key in account information.  In order for the credit card transaction to be complete, the physical card must be presented for the webcam reader to scan information.

Security Issues

E-commerce will undoubtedly be changed by the introduction of this new product.  It will now be possible for individuals at home or at work to make online purchases that can be verified before processing.  A common concern with card readers and data storage is the security of credit card information once it has been captured.  The beauty of Netswipe is no image is taken or stored, therefore it cannot be stolen at a later date.  This product will increase the confidence of consumers who may be wary of making online purchases due to security issues.  In addition, online merchants will lower their exposure to fraud, knowing that at minimum the physical card was present at the time of the transaction was completed.

According to Vator.tv news, “Jumio bridges the gab between security and trust of credit card payments at the point of sale and the ability and convenience of modern day online transactions” as stated by Jumio founder and CEO Daniel Mattes.  “Consumers love the ease of use and the smooth experience associated with completing a transaction. At a time when both consumers and businesses are looking for more efficient and safe ways to make credit card purchases, Netswipe promises to usher in a new era of disruption that makes online payments easier than ever before.”

The company has found there is quite a demand for iPad devices to swipe credit cards. As the industry on the whole has been advancing in technology for years, allowing merchants to accept cards outside of a traditional store has opened the doors wide open for entrepreneurs of all kinds. As business heads quickly into the virtual world, on-the-go credit card processing devices are becoming more commonplace.

Credit Card Terminal is currently the leading credit point of sale application available for the Apple iPad and iPhone. Prior to the introduction of the swipe mechanism, the application only allowed merchants to key in transactions. While still convenient for those out and about, the swipe terminal advances the industry that much further.

The device works by attaching to the iPad dock connector. It can handle high-volume transactions with accuracy and is built to last. Those activating a new account can receive a new terminal device for free. Additional devices are made available through Inner Fence for $79.

The credit card industry has long been mobile but technology is making it easier for business to be conducted anywhere. With the swipe capabilities of the iPad and iPhone getting more advanced, merchants have less risk for errors in the transaction life cycle and also have more options for generating profits.

Credit Card Readers for the iPad devices are available to ship now and are supported by both the iPad and the iPad2. Apple has tested and certified the product as being compatible. Inner Fence also makes applications for the Credit Card Terminal to be used on a Mac, Android, or Windows Phone.

Credit Card Processing Errors

Credit card processing makes it possible for merchants to receive money from customers through a network of participants to include the processor, bank and card issuer.  When one or more areas of this network experience a problem or make an error, the information passed on to others in the network will not be accurate.  To ensure payment processing errors do not end up costing you money, take the time to check your monthly statement for accuracy.  You want to first look to see that each transaction is authorized by yourself or another authorized user.  Does the date, amount and location match your receipt?  If all the information is correct, no further action is required, however inaccurate information must be reported immediately.

Disputing Credit Card Charges

There are several reasons why a consumer might dispute a credit card charge.  In most cases fraudulent use of the card, inaccurate transactions or dissatisfaction over sale will be the reasons behind a credit card dispute.  Once again, several parties are involved in credit card processing therefore it helps to know where to start.  If you suspect fraudulent use of your card, contact your credit card issuer immediately and report your suspicious of fraud.  On the other hand if you have an issue with a product or service and which to dispute that transaction, you may want to contact the merchant to discuss a possible refund.  When disputing a credit card transaction for any reason, always keep a record of your dispute actions for future reference.  This will help you in the event you end up speaking to half a dozen representatives from different areas of credit card processing.  Knowing with whom you spoke and when as well as the general topic of your discussion may help you should the dispute carry on for a longer period of time.  As a general rule, when a consumer disputes a charge with the credit card company, a series of events is triggered which results in a decision within a few days.  Other disputes may take longer due to appeals and other actions which must be taken to investigate the matter.  This is why it is very important to check your statement immediately and always report any problems or errors you may find.

What Are Credit Card Chargebacks?

A credit card chargeback is when a customer refuse to pay for items purchased using their card.  They may initiate a chargeback if they don’t receive products they order, or because someone else made the purchase using their credit card, or because they received damaged items or items that were not as they were described.  The bottom line is that a chargeback is a process designed to protect card holders, but in the process can cost businesses that accept credit cards as payment.

Lifecycle of Credit Card Chargebacks

1) Cardholder receives their credit card statement, and notifies the card issuer that they dispute the transaction.

2) The card issuer reviews the transaction for it’s chargeback eligibility. If it is appropriate, the card issuer credits the cardholder’s account and charges the merchant bank.

3) The merchant bank receives the chargeback, and reviews the transaction. It will either resolve the issue, or charge the merchant who processed the credit card in the first place.

4) The merchant receives the chargeback and can re-present the transaction to the merchant bank under certain conditions, or if conditions aren’t met for reprocessing the credit card transaction, the merchant must accept and pay for the chargeback.

5) If the chargeback is resubmitted for payment to the merchant bank, the merchant bank will resubmit to the cardholder who will either pay for the item or resubmit it as an unresolved dispute. The cardholder will be debited the amount of the transaction if it has been resolved, or credited the amount if it is still disputed.

The Problem With Credit Card Chargebacks

Most merchants do not have a problem exchanging goods they sell that are damaged.  Many merchants will also not complain if a customer buys an item but later returns it for a refund, for whatever reason.  The problem with chargebacks is when they are abused by customers, and the end result is the potential for high costs and fees to the retailers accepting credit cards as payment.

Consider a customer who orders a product online.  If he or she initiates a chargeback request to the credit card processing company to say the item was not as described, or that they didn’t receive the item at all – it’s possible you will be forced to refund the customer.  If you really did send out the item ordered, this means the customer gets the item for free.

If a customer initiated chargeback request ends up in the retailers favor, meaning they don’t get a refund as they requested you are still often charged a chargeback fee between $10 and $25 for each chargeback requested.  If you start getting a large number of chargeback requests from customers, your merchant account or credit card processing company may increase the fees you pay and consider your company a higher risk retailer.

Reduce Chargeback Requests

1) Make sure your website or mail order catalog clearly defines how the credit card charge will appear on the credit card user’s statement.  Sometimes a customer doesn’t recognize the business name as it appears on their statement, and will initiate a chargeback request immediately assuming the purchase was fraudulent.

2) Also, ensure that your phone number appears on the credit card statement so customers can call you with questions before initiating a chargeback request to their credit card company.  This will eliminate a large number of chargeback requests for customers who forgot they made a purchase!

3) Take customer satisfaction seriously-  This is good business sense regardless of how your customers prefer to pay for products or services.  It is much easier to retain current customers than lose and replace customers on a regular basis.  Customer satisfaction includes properly handling complaints.  If a customer comes to you with a complaint, address the issue and do everything possible to resolve the issue at this level before it escalates to the point of the customer contacting the credit card company.

4) Pay attention during the transaction-  Whether you accept online orders or deal with your customers face-to-face, pay attention to details.  Does the credit card signature match that of the receipt?  Is the person signing an authorized user?  Does the address of the customer match the billing address of the credit card?  These are just a few of the ways you can reduce credit card fraud and ensure the right person is using the account.

5) Instead of charging for pre-orders at the time of order, wait to charge the credit card when you actually ship the items.

Reducing chargebacks will not only save you money in credit card processing fees but also ensure you are allowed to continue to accept credit card payments.  If a merchant experiences too many chargebacks to their account, it is possible they will be “blacklisted” and no longer allowed to accept certain credit cards at their place of business.

Many people aren’t aware that they can increase the amount of sales by providing a smoother transaction for the consumer. By changing a few key details on their online store’s page, you can increase the amount of transactions that are finalized and avoid buyer’s changing their minds last minute or getting annoyed with long a checkout procedure. Though some changes are more obvious than others, a quick read of each of these posts can start you down a path toward improved profits.

Eight by Eight — “Making sure people can efficiently order from you may be the most important thing you can do on your web site. Once they hesitate or become confused, there is an excellent chance you will lose the order and the good will of that customer. They will blame you even if you were not responsible for their bad experience. And, they may never give you a second chance…”

How Bits — “I can tell you with certainty that obtaining traffic to your website is easy to do, the hard part is converting that traffic into customers and clients. I would like to share some unique tips that can improve your website’s conversion rate…”

Elated — “It’s very common for shoppers to happily browse an online store and add products to their cart, then abandon their purchase when they reach the checkout page. Often, between 50% and 75% of shoppers give up during the checkout process…”

Activo — “One of the things that is very difficult to measure is user disappointment. Mainly because disappointed users leave and never come back but also because many small businesses do not perform enough testing on their shopping carts once the site is live.”

Scoosh — “When looking through your Google Analytics have you noticed that shoppers on your site will, browse your store, add items to their baskets and then ‘abandon’ them at the point of checking out…”

Think like a User — “…the ‘about us page’ is a key way to build online credibility – and as you’re already aware, customers only buy from people they know, like and trust. So lousy about us information = lousy sales!  This problem worsens, the more expensive the products and services are, so it’s vital that you get the about us page right…”

Innopay — “Here is some free advice for the online pizza merchant on how to improve the checkout process for the hungry consumer and increase sales…”

Theme Open Cart — “Improving the conversion rate of your website is exactly the same. Small changes – like improving your customer checkout process – can have a big effect on how many people end up buying from your site. By experimenting with new ideas you’ll quickly get a feel for what works specifically for your business, but here are a few proven strategies to get you started…”

Trinity River — “Several companies at the 2009 PayPal Developer’s conference said that giving consumers the option to make a donation to the charity of their choice at the point of online checkout, increased sales…”

Avactis — “Your store could be almost perfect and the conversion rate high, but there is always room for improvement…”

eM+C — “Seventy-nine percent of respondents to a recent survey said enhancing the checkout process was on the top of their to-do lists for the remainder of the year. This statistic was gleaned from The State of Retailing Online 2009: Merchandising Report, conducted by Forrester Research. Forrester surveyed 117 retailers for the report…”

Credit Card Tips 4 You — “Online shopping has easily become an economy of its own. In fact, as reported in TechCrunch, JP Morgan predicts that e-commerce sales will grow to $680 billion in 2011, a 19% jump from 2010. However, is your online store set up properly to ensure customers get the products they want and need? Here we provide you with 10 important eCommerce checkout process tips that can help you increase online sales…”

Conversion Doctor — “A behavior I’ve observed in multiple usability tests is website visitors who stumble across a “coupon code” field during checkout actually hitting the back button and searching the merchant’s site for a discount or coupon code…”

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What is a convenience charge?

When a merchant accepts a credit card as a method of payment, certain processing fees are incurred.  A merchant must not pass these fees onto the consumer if prohibited by the merchant agreement.  In some cases a consumer may see a notice upon checkout that a “convenience” fee will be added to the purchase price.  It is important for both consumers as well as merchants to understand when this is acceptable or what fees can be applied when processing a credit card for payment.

Convenience fee versus surcharge

Where the confusion occurs for most people is the understanding the difference between convenience fees and surcharges.  When a merchant routinely accepts credit cards as a method of payment, processing a credit card transaction is just part of everyday business.  As a regularly accepted method of payment, any fee added would be considered a surcharge as it is the direct result of choosing to pay with credit.  If the same fee doesn’t apply to cash payments or checks, it is considered discriminatory and in most cases not allowed per the agreement with credit card issuers.  On the other hand a service provider who does not routinely accept credit cards as a method of payment, may be allowed to charge a fee for the convenience of processing a credit card.  Because this type of transaction is outside of the normal payment processing of the merchant.  As a result, credit card issuers will allow a convenience charge to be applied to the transaction.

Credit Card Processing Fees Costly Expense

When you think of businesses which accept credit cards you may not differentiate between the type of business and the long term cost of accepting credit cards.  For example a retail store may see a majority of sales through credit card transactions.  For this type of merchant, accepting credit cards and dealing with the subsequent expense is generally a cost effective move due to the high volume of credit card transactions.  Now consider the same situation with a small business that chooses to provide consumers the option to pay with credit card but at a much smaller volume of sales.  That small business may find the cost of accepting credit cards is not offset by increased sales.  In this situation a merchant must either decide to stop accepting credit cards or find ways to reduce credit card processing fees.  By charging a convenience fee for a method of payment which is routinely accepted, the merchant may find their ability to accept credit cards terminated by the credit card issuer.

Swipe Fee Reform

The issue of swipes fees has caused much debate on the sides of merchants and banks in recent months.  With banks receiving over 15 billion dollars annually as the result of swipe fees, it is understandable why the push for a cap on swipe fees was not supported.  When banks are limited in the amount they can charge for credit or debit card processing, the loss in revenue is huge.  A decision in early June “to delay the 70 percent reduction in the amount banks can charge merchants each time a customer ‘swipes’ a debit card through a point-of-sale terminal to pay for a purchase” as reported by Orlandosentinel.com has caused banks to reconsider where they will make up lost revenue.

Consumers Pay For Merchant’s Savings

Merchants are celebrating the potential savings in processing fees as it will reduce the cost of doing business with banks that issue credit cards.  By not having to pay high processing fees, retailers and other merchants will see an increase in the profitability in accepting credit cards as a method of payment.  While it is quite common for increased costs to be passed on to consumers in one way or another, no one can be certain that merchants plan on passing these savings to consumers.  Not only is it possible for consumers to miss out on “swipe” fee savings, but the cost of doing business elsewhere may rise as a result of lost revenue for banks.  It is not beyond reason to look toward increased fees in other areas of banking in the near future.  An industry accustomed to receiving billions of dollars per year to process credit and debit cards will certainly look to other fees to offset this loss in revenue.  Consumers are advised to pay close attention to possible new fees which may crop up in standard banking operations.  Free checking accounts and other services that currently cost little or nothing to consumers may in fact begin costing money as banks scramble to recover from the loss of fee revenue.  At this time the new regulations only apply to debit card transactions, however this consists of almost half of the revenue banks receive from swipe fees.

Credit Card Transactions

When a consumer uses a credit card to pay for a purchase, the transaction is processed as offline transaction and cash-back options are not available.  In order to receive cash from your credit card, you would have to process your request at an ATM where a cash advance and possible processing fee apply.  For merchants accepting credit cards, the processing fee is usually 2% of the purchase price, regardless of the cash option.

Debit Card Transactions

Debit card transactions occur when a customer is required to enter their Personal Identification Number (PIN) to complete the transaction.  Unlike credit cards, a debit card uses money from your checking or savings account versus a revolving credit account.  Debit cards may also be used “as” credit if the Visa or MasterCard logo appear on the card.  In this situation the purchase is still debited from your checking or savings account, however the transaction is processed using the credit card processing network.  PIN numbers are not required for this type of purchase, however the option for cash back is also eliminated.  In order to get cash-back on purchases using your debit card, you must process the transaction using the PIN number.  When this occurs the merchant pays a much smaller processing fee than that of a credit card transaction, usually a few cents compared to a percentage of the purchase amount.

Merchant Fees

It is important to understand what fees may be charged and by whom when deciding whether to get cash from a debit or credit card.  Using a debit card at an ATM not affiliated with your bank will add processing and convenience fees to the amount withdrawn.  On the other hand, getting cash-back on purchases is usually the easiest way to avoid additional fees, however in some cases merchants are tacking on a fee for this option as well.  As the rules and regulations continue to change within the credit card processing industry, it is important to remain abreast of changes to avoid unnecessary and often costly fees applied to your account.  If a debit card user is unaware of fees posted to their account, it may reduce their checking account balance causing an overdraft which in turn incurs more fees.  Carefully read any information or signage provided by the merchant as well as your card agreement to ensure you are not paying processing or other fees that could otherwise be avoided.

Square and Smartphones Credit Card Processing

The latest product by Square’s creators is an iPad application that turns the iPad into a cash register.  They call it the Square Register.  Customers can pay for their products with their smartphones using Square’s Card Case application, but there is no need to physically swipe a credit card or sign a receipt.  It’s similar to how iTunes or Amazon allow shoppers to make purchases with “one click” – the payment information is stored and it allows you to quickly speed through the buying process without having to locate your credit card and slide it through a reader.

When merchants sign up and use Square the only fee they will pay is a 2.75% charge on each individual transaction. There are no other service fees, contract fees, equipment fees, etc.

Customers using the Square’s Card Case to pay for their purchases don’t incur any additional charges for doing so.

Open a “Tab” With Square

Let’s say you are a customer headed to a coffee shop.  The first time you visit, you’ll swipe your card and it will remain on file with Square.  Every visit after that, you can browse the menu and make your payment for your order with the press of a button on your smartphone – similar to opening a tab at the bar.  In the near future, consumers using Square’s Card Case app will be able to order ahead of time.

Card Case allows consumers to shop by giving participating retailers their name – as simply as “charge it to Dave”.  The chief operating officer of Square indicated in an interview that the company hopes to make point of service terminals and cash registers obsolete.
Currently, small businesses participating in the Square launch with the Square Register app  capabilities include small retailers, restaurants, food vendor trucks and hairdressers in New York, Washington, Los Angeles, San Francisco and St. Louis.  Customers who have installed the Card Case app on their smartphones will be able to view menus and inventory listings or special offers from merchants nearby who are using the Register app.  In fact, when a customer is within two blocks from a merchant, a merchant can tell they are nearby, see their past orders, and can even send them a coupon for their favorite item based on previous orders.

Will you use the Square and associated apps for your business credit card processing needs?  Will you allow your customers to open a “tab” and make payment with their smartphones? The receipts are stored digitally, customer behaviors are tracked (allowing retailers to keep track of how many people order a donut with their coffee, for example).

Square is currently processing over $3 million in payments daily.  They receive a flat 2.75% per transaction.  If you’re currently paying high tiered rates for credit card processing or are looking for a more mobile solution, you might consider the Square card reader.

Bogus Credit Card Charges

The Federal Trade Commission has posted information on their website regarding an International Scam which used unauthorized credit and debit card charges to rip off consumers.  According to the news post, over $10 million bogus charges have been discovered posted to credit and debit cards without the issuers knowledge or authorization.  More than a million consumers from five countries have been victimized by this scheme which a court order obtained by the Federal Trade Commission has since halted.

Internet Scams

The FTC has shut down this specific Internet scam consisting of 16 phony companies which facilitated the identity theft and subsequent charges on consumer credit and debit accounts.  According to FTC news it all began with a spam email which was used to find “money mules” who would be willing to form false corporations in exchange for payment.  These individuals then proceeded to form fake businesses to include bank accounts for credit card processing and merchant accounts.  Under the guise of a legitimate business, the scammers allegedly ran credit checks on identity theft victims to determine the creditworthiness of their victims.  Using credit card account information, small charges were then placed on the victims account.  In many cases the charges when unchallenged because they were either overlooked by the victim or not recognized as fraudulent.  The FTC is also warning consumers of another Internet scam using “free” offers to obtain credit card information.  This is a well known yet effective strategy used by con artists.  A recent complaint from FTC names Jesse Willms and companies under his control as using deceptive practices to obtain personal credit card data.  Offering free trial products or services to tempt consumers, this scam requires credit card information to complete the transaction.  Victims were then charged for the “free” trial and recurring monthly fees were charged to their credit card account as well.

Consumer Protection

Consumers are vulnerable to identity theft, credit card fraud and other scams using the Internet.  As such, it is important to learn as much as possible about the methods used by fraudsters.  Spotting a scam is the best way to avoid becoming a victim.  Another way consumers can protect themselves is by carefully guarding their credit card information.  Do not provide credit card information without first reading all of the terms and conditions provided.  If credit card information is requested, you can assume charges will be made to your account regardless of any “free” offers described.  These charges may appear as processing fees or in the form of a subscription which is recurring.  Finally, always read your credit card statement and be on the lookout for charges you do not recognize.  Many of these scams are successful because small charges are often unchallenged or overlooked.

The PCI Security Standards Council comes up with best practices and standards to help keep personal financial information safe, particularly in the world of online commerce. Every business dealing with credit card processing must meet the standards in order to continue accepting cards from their customers, from banks and financial institutions to payment processing companies to business owners.  The standards are not laws per say, but they are rules that must be followed or the retailer will face fines from PCI, or lose the ability to accept cards.

Not sure if you are currently PCI Compliant?

Here’s a checklist of the major areas that you must ensure you meet criteria in order to accept credit cards from customers as payments:

Network Security - The computer network involved in credit card processing must maintain the security of each customer’s personal details when in transmission.  You should not keep cardholder information longer than it takes to process the transaction; and your network must have a firewall installed.

Limit Access to Those Who Need it - Don’t allow everyone in your business access to the credit card information of your customers.  Only those who actually need to view it should have access.  This will eliminate some of the temptation and also make it easier to pinpoint any data breach problems if they do arise.

General Protection of Cardholder Data - If your business must store individual cardholder data (for example, if you are processing recurring orders) it must be encrypted when it’s stored so that even if a hacker managed to get into your database they would be unable to decipher the cardholder information stored in it.  Credit card processing companies use secure, 128 bit SSL certificate encryption (or better) when transmitting data.

Update Your Systems Frequently - As a business owner that processes credit card payments, you must keep your anti-virus software up to date, update computer hardware and software systems and operating systems to ensure you have the most up to date protections.

Test Security Measures on Your Network -To make sure your security measures have not been compromised, you must test the network regularly.  You should monitor network access to credit card data of your customers continuously, so you can identify any security problems as they happen and take appropriate action immediately.

Have an Information Security Policy in Place – Make sure all employees understand what their role is involving customer credit card information, and set rules for network and computer use by employees.  Having a policy in place ensures everyone is aware of expectations and hopefully it can eliminate any claims of ignorance in the face of information or data breaches.

Become PCI Compliant

Step One: Fill out a self-assessment questionnaire, in order to determine what type of business you own and the appropriate PCI compliance steps you’ll need to take.

Step Two: If it’s determined that your business requires a vulnerability scan (merchants with external facing IP addresses), complete and obtain a document of evidence that you’ve passed the vulnerability scan with a PCI SSC Approved Scanning Vendor.  You’ll need to do this if you store your customers credit card information electronically, or if your credit card processing is done over the internet.  Scan at least once each quarter.

Step Three: Complete Attestation of Compliance.

Step Four: Submit evidence of your passing vulnerability scan and your Attestation of Compliance to your acquirer.

PCI Compliance Improves Business Reputation

Having a successful business is more than just providing quality products or services and exceptional customer service.  In fact, some will say that having a good business reputation is more important than what your business is actually selling! You don’t need to have a case of alychiphobia to realize how important this can be to the future of your business.

Businesses which maintain PCI Compliance are taking the first steps to ensuring their customers information is safe, but you’ll want to go even further than that.  If there are any security breaches within your system that affect your customers, even if you are PCI compliant, you may be liable.  You’ll want to take all precautions to prevent security violations to maintain your good business reputation.  If you aren’t sure how to set up a strong security system to keep customer credit card data safe, if you’re not sure what scans and how often to run them or how frequently you need to update your records – hire an expert to handle these aspects for you.

Becoming PCI Compliant may seem like it takes a long time and is expensive to implement – but if you compare the potential problems of security breaches and expense of fines for not being compliant – the financial and time investment is well worth it.