Credit Card Processing Blog

Update: Cell phone credit card processing is now provided by:

Original Article:
For years, there have been talks of the United States entering a new technology market which would enable consumers to use their cell phone instead of a credit card in the checkout line to pay for their purchases. Technophobia is probably the biggest reason why we still aren’t using phones as a payment method.  The credit card processing of the future would be similar to what has already been taking place in Southeast Asia, Scandinavian countries and even several Third World countries can make payments from phone to phone.  The ability to pay for purchases using a cellular phone is not exactly new; but as it has not become commonplace in the United States beyond a few trial runs in select areas, it’s a future technology that may make it’s way to the country soon.

Original discussions for paying for purchases with cell phones involved the prospect of placing stickers on the back of phones, that could be scanned and used to make a payment using a single credit card account; to the use of key chain swipe cards created by Visa and MasterCard.

The Payment Technology in Mobile Phones

Currently, the major telecommunication companies of AT&T, Verizon and T-Mobile are looking at making it possible for consumers to make payments with any of their linked credit card accounts simply by “swiping” their cellular phones at checkout.  It’s actually more like ‘waving’ the phone in front of a reader.
The cell phone technology would involve a radio frequency identification tag (RFID) embedded into the phones.  Customers could link their credit card accounts with their RFID tags, possibly set up password protection which would require that the password is entered before every purchase, and a remote shut off for RFID tags – in case a phone was lost or stolen.

Using the RFID tags, multiple payment methods could be linked to each consumer’s phone.  When they wave the phone at a reader to make a purchase, they’d then have the option of selecting from their linked accounts to determine which credit card they want to use to make the payment.

Mobile Processing in Retail

For retailers, it would mean purchasing new equipment to read the embedded radio frequency identification tags in user’s telephones.  For consumers, it would mean less time searching through wallets for the card you want to use to pay for; and possibly less opportunities for identity theft through credit card use.

As retailers are expressing increasing levels of concern and unhappiness with the amount of interchange fees they have been paying for credit and debit card companies on each of their customer’s purchases, perhaps the use of cellular phones as mobile payment devices would alleviate some of those fees for the retailer.  It is still unclear as to how much the wireless companies would charge retailers in fees, if anything, or if the fees would be passed on to the cell phone user, but if the credit card companies had competition in the industry of payment methods – it stands to reason that the total cost per transaction would become more competitive.

As of right now, there are several pilot programs running in select cities at a handful of merchants, including Starbucks in San Francisco and Seattle and in Target stores.  The pilot will expand to about 300 stores in New York City.

The Starbucks Card Mobile Payment Pilot Program

A small scanner is placed on participating Starbucks counters, which is used to read a 2-D barcode displayed on participating customer smartphones.  Currently, Starbucks Card Mobile is available for iPhone and Blackberry cell phone users.  The cell phone application lets customers make payment simply by holding their phone displaying the barcode up to the scanner.  It allows customers to add funds to their Starbucks Cards from their phones, as well.

As a business owner, this pilot program should interest you as it may indicate a coming trend for the future.  Will you place scanners on your own checkout counters for credit card processing via your customers cellular phones?

Starbucks Credit Card Processing Pilot Program Success

Customers are indicating that they enjoy using their cell phones to pay for their purchases.  Already, one in five in-store transactions at Starbucks are paid with Starbucks Cards rather than other forms of payment, including both the physical Starbuck card and the digital mobile version.

Starbucks offers free WiFi in store, and reports that nearly 50% of all logons to the network while in the store come from mobile phones.  Of Starbuck customers carrying cellphones, 71% have iPhones or Blackberry’s, meaning 71% of cell phone carrying customers of Starbucks could potentially begin using their phone to make payment in store.

Cell Phones to Become Digital Wallets

Already, our cell phones have changed how most American’s live their lives.  Consider that it’s much more than a way to stay in touch with family and friends while you’re on the go – but you probably also use your phone as a digital music player, portable internet source, text messages, GPS, digital camera and video camera.

It only seems a logical extension of the cell phone’s usefulness to replace your wallet for making payments at retailers.  As a retailer, you should be on the look out for opportunities to process credit cards with scanners that read the information from cellular phones. Consider getting in on pilot programs to test it out.  If and when everyone moves to using cell phones in place of credit cards, time spent checking out should speed up,  but without extensive upgrade costs to you as the retailer.

Contactless Technology Credit Card Processing

Customers have been making use of various contactless technology payments, maybe without thinking about it much.  ExxonMobile has offered SpeedPass for years, allowing you to wave your keychain card at the pump scanner to make payment.  Tollbooths in a variety of states, including New York, Florida, California and Washington, DC area have allowed credit card processing through a contactless payment system connected to the windshield of a car that is scanned as you drive through the tollbooth.

It’s only a matter of time before most credit card processing taking place in retail stores will be done through contactless methods, including using a cell phone as a digital wallet.

In February of 2010, new credit card regulations went into effect that were designed to benefit the consumer.  While many of the changes have indeed made it easier for credit card users to avoid going further in debt, it is still important to be your own advocate when using credit.

Change: Over-the-limit Charges

One of the changes involved over-the-limit charges posted to credit card accounts.  This occurred when a transaction was presented for processing through the credit card processing system that did not have sufficient credit to be approved.  Depending on how your credit card account was set up, that transaction may have been approved, despite the lack of credit, resulting in an over-the-limit fee that is automatically posted to your account.  Should you be unaware of how close you are to your credit limit, this could quickly add up to some significant charges.

Today, credit card companies are not permitted to charge over-the-limit fees unless you consent to over-the-limit protection.  While most credit card account holders can see the benefit of not being charged these fees, many have become accustomed to that little cushion of protection that allows transactions that would otherwise be declined to go through the credit card processing system.  Here we look at a few reasons why you should not consider over-the-limit protection.

  • Manage your finances better–  Let’s face it, if you can’t manage to keep your credit card balance below your credit limit, you have bigger issues than worrying about a pesky $39 fee.  If you are considering authorizing your credit card company to charge you for going over your limit, it may be time to focus on some other areas of your personal finances.  Don’t worry, you are not alone, millions of consumers have either gone through or are going through the same shift from overspending to responsible money management.
  • Pay down debt–  If you want to avoid the chance of having your credit card declined and the embarrassment that ensues, you can use this opportunity to pay down your debt, thus avoiding the issue all together.
  • Fees add billions to bank coffers–  You may wonder what the big deal is about a small charge added to your account.  While this fee could add up to billions of dollars for banks each year, imagine what that amount of money could do for the average consumer.  In a day and age when everyone seems to be paying “extra” for any available service, putting more money in your savings account (even $39) per month can make a huge difference in your future finances.

What is the Benefit?

As you can see, the only benefit you will see by opting “in” to over-the-limit protection is avoiding declined credit card transactions.  Clearly this should be a motivating factor to rethink the way you view your credit card and begin a new path toward financial freedom.  It is important to remember that credit cards, nor the credit card processing system get people in debt.  People get themselves in debt.  Avoid falling for tactics that will keep you on the path toward financial insecurity.

If you regularly open booths at vendor fairs and flea markets, you may not have considered the idea of setting up a way to accept credit cards from customers.  Many people will spend more money when they can swipe a card rather than get cash out of their pockets.  If you make it possible for customers to pay using credit card at flea markets and vendor fairs, you are likely to experience an increase in sales than when you attend the same events on a cash-only basis.

(Update:) The following products are now available.

Small Businesses Have Concerns

If you are a new business or don’t have a huge budget for expanding your business at this time, you might be concerned about the price of equipment that would allow you to swipe a credit card at your booth or other nundinal location.  Luckily, there are several ways for you to accept credit cards without having to purchase special equipment, and sometimes, there isn’t even a need to open an official merchant account with the bank to make it happen, either.

Methods of Accepting Credit Cards at Flea Markets and Vendor Fairs

1. Telephone Credit Card Processing

One of the easier ways for a small business to begin accepting credit cards while on-site at a vendor fair or flea market is through a phone-in service.  There are some merchant accounts through banks that offer a toll free number to call in with credit card orders. An automated system verifies the credit card details you enter and let you know whether the funds are available to make the purchase.  Phone credit card processing merchant accounts are often offered with lower fees than traditional merchant accounts.

2. Process Credit Cards by Internet

If you have an iphone, ipad, laptop or other mobile device which allows you to connect to the internet while at a vendor fair or flea market, you can use a system which allows you to process credit cards online.  Most of these services offer a form you can fill out including your customers name, address, and credit card details.  The form would be submitted and then instantly  show you whether or not the card is valid or declined.

3. Mobile Devices (see list above!)

Many of today’s modern cell phones allow business owners to accept credit cards on the go using their phones.  Apple’s iphone, ipad and ipod touch products can process credit cards from anywhere using the iSwipe app.  The credit cards are processed through a Paypal account, which makes it extremely easy to set up and get started.

When you make it possible for customers to buy from you with credit cards at vendor fairs and flea markets, you will increase the amount of your average sale.  People spend more when they can buy with credit cards.  Now, when people say they don’t have cash on them but they want to make a purchase, you don’t have to refer them to your website or give them your card and hope they come back to make the purchase when they have the money; you can just offer to accept payment by credit card and get the sale taken care of right then and there.

If you have been considering starting a business from home, or are already the proud owner of a home based business, you should learn about the various options for accepting credit cards as payment from your clients.  It used to be that accepting credit cards from customers was too expensive for the average home based business owner; but now there are a number of inexpensive methods for accepting credit cards thanks to the internet and the popularity of e-commerce.

Whether you operate your business entirely out of your home, or have an internet presence – you’ll notice an increase in sales when you start accepting credit cards.  Many people make impulsive purchases with credit than they wouldn’t make when paying with cash or check; and many people just don’t carry cash on them anymore – preferring to use their credit and debit cards.  Make it easy for your customers to purchase from you by accepting credit cards.

Merchant Account Providers

Many traditional merchant account providers have discovered the need for credit card processing by home business owners. With a merchant account, you can begin accepting credit as payment from your customers.

It can be difficult to qualify for a merchant account.  It involves an underwriting process and a strong credit score; although many merchant accounts have different approval requirements for home based business owners than they do for traditional businesses.
Once approved, when your customers pay using their credit cards the amount of payment minus fees provided to the bank or merchant account provider are deposited into your business account. The higher your sales volume and credit card use, the lower your fees will be.

Third Party Credit Card Processing Options

Third party providers have merchant accounts with banking institutions; and then allow home based business owners to accept credit cards from their customers and process them through the third party.  There are usually higher fees associated with using third party credit card processors; but it may give you an option to accept credit cards if you were unable to obtain approval for a merchant account yourself.

Accepting Credit Cards Through Independent Sales Organizations

If you are considered a high risk home business, or have less than perfect credit that caused you not to get approved for a merchant account – an independent sales organization can help you collect payments from your customers online.  The fees associated with the service are typically much higher than those you’d pay to a merchant account directly, but if you need to accept credit cards this is an option.

Shop Around!

There are many different merchant account providers online today. In order to find the right one for you business, you need to research and compare the various programs. It is important to have an idea of everything out there to make the most informed decision. Check out the options offered from banking facilities, independent organizations, and third-party processes like PayPal.

Start Early

Don’t expect to be ready to process credit cards as soon as you sign up for service. Most merchant account providers will require approval for any business or individual wishing to set up and account. There is an underwriting process that needs to be completed. While merchant accounts generally have high rates of approval, there may be some issues you need to work out first before opening an account. If you need to start accepting credit cards for the good of your business, you need to start the process now.

Understand the Fees

Regardless of the method you select for credit card processing, you have to pay close attention and compare the fees each provider charges for services and individual transaction. There may be a monthly maintenance fee in addition to the individual fees that are processed for each transaction. If you select a service that charges significant fees, you’ll end up losing more money than you are making, especially on smaller transactions.

Understand the Terms

It is always essential that you read the terms and conditions – also known as the fine print – on any business service you sign up for as it is the only way to ensure you are getting what you need. If you have questions or concerns about the terms of any service, contact customer service directly and make sure you get a clarification.

Understand the Process

Make sure you are able to understand how the credit card processing works through the provider you select. You need to be able to address issues with customers who wish to use their credit cards for your business services. In order to be able to help them, you have to be able to understand the process yourself. Providers all handle money and transactions differently. You want to make sure you know how the funds are received from the customers, how soon the money is available to you, and how long the total transaction takes to complete.

Never rely on the merchant account provider to handle everything because you don’t feel like doing the research. Because of the amount of fees involved and the importance of providing reliable service to your customers at all times, you need to do the legwork and select the right credit card processing service to accommodate not only your business needs but the needs of your customers. Whether you are impecunious or not, credit card processing fees can result in huge losses if you sign the wrong deal. Take this decision seriously, evaluate all options and you will most likely succeed!

Photo via mccluskeyadrian

Gift cards are a big business. Any company that has a merchant account or sells gift cards can benefit from this popular trend that is not likely going to end any time soon. Gift cards are undoubtedly in higher demand during the holiday seasons, however there are plenty of other occasions throughout the year when individuals might opt for a gift card versus shopping for the perfect gift. Here we look at how gift cards can benefit your business.

Gift cards versus traditional gift certificates

Gift cards are the new generation of traditional gift certificates that have been available for years. There are many businesses that still offer traditional gift certificates, which, though convenient, are rarely consumers’ first option. While gift certificates still have a place in the gifting sector, gift cards offer many more benefits that their predecessors do not – benefits recognized not only by the seller, but also by those who buy or receive gift cards.

1. Gift cards can be reused.

When a paper gift certificate is issued, it is good for only the amount of the initial purchase. Many gift cards, though, can be reloaded, or have additional credit added to the card for continued use. While the benefits to the merchant are clear, convincing a consumer to tie up their cash in a gift card can be a bit of a challenge. A good marketing campaign can overcome this obstacle and many merchants have learned how to make reloadable gift cards attractive to their customers.

2. They’re easier to track and manage.

Gift cards are processed using the same credit card processing system in place for regular credit and debit cards, making them easy to redeem, track and manage for all parties.

3. Gift cards make good gifts.

Gift buying has always been a point of contention for some consumers. Not all people are born shoppers and the thought of pounding the pavement trying to find the perfect gift can often be overwhelming. Gift cards offer an alternative to shoppers who would otherwise opt for cash in a card.

4. They’re readily available.

Gift cards are usually available at cash registers, which makes it convenient and easy for customers to pick up at the last minute or as in impulse buy.

Gift Card Programs

There are several reasons why a merchant might want to initiate a gift card program for their business. In addition to the above mentioned benefits, it’s important to note that from a business prospective, gift cards can increase your sales beyond the purchase of the card. For example, 3 out of 4 consumers will spend more than the amount available on their gift card when they shop at your store. On the flip side, up to 21 percent of individuals who receive a gift card will fail to redeem the entire balance, which is still beneficial to the business. Refunds can be in the form of a gift card, therefore cash refunds can be eliminated for customers making their purchase with gift cards. Any business with a credit card processing system in place can benefit from gift card programs thanks to the minimal added expenses.