Credit Card Processing Blog

This rectangular piece of plastic has the capacity to provide us with all the luxuries of life and simultaneously spiral us farther and farther into piles of debt. Here are some facts every credit card user may find interesting… or possibly frightening.


The economy may have brought to the forefront the dangers of using credit cards irresponsibly, however consumers are not likely to give up the convenience and ease of use associated with credit cards anytime soon.  For this reason, credit card processing services will continue to be something that merchants look to in order to accept credit cards for products and services.

Some merchants are considered high risk as a result of the type of industry in which they operate.  For those businesses, credit card processing may pose a higher risk than your “normal” vendor, therefore special steps must be taken to ensure credit cards can be accepted safely

What makes a business “high risk”?

Businesses that have a very large volume of sales and transactions may be considered high risk.  If that business also operates in an industry that is particularly vulnerable to fraud, they are also considered high risk.  Here are a few examples of businesses that would be considered high risk and therefore require a special merchant account and credit card processing.

  • Travel services
  • Gaming and gambling services-online services especially high risk
  • Adult services or products
  • Telemarketing services
  • Collection agencies
  • Shopping clubs
  • Lotteries
  • Escort services
  • Check cashing services
  • Home based business
  • Online services; tobacco and cigarette vending, auctions, debt, dating and detective are just a few of the online services that are consider high risk.

The type of businesses you see here are just the tip of the iceberg of businesses that find it difficult to open a standard merchant account.

Why do high risk merchants have trouble getting a merchant account?

Any business that is considered high risk by domestic banks or traditional merchant account providers will have more difficulty opening a merchant account than a business that is not considered high risk.  Any usage of online services increases the risk of fraud due to the unpredictable nature of the web environment.  While there are dozens of ways for a business to safeguard against fraud, many conventional merchant account providers simply are not willing to get involved with a high risk business.

Where do high risk merchants turn?

Regardless of the nature of their business, those who are considered high risk still want the benefits resulting from credit cards as a method of payment.  Credit card processing is not impossible for high risk merchants, however finding a merchant account provider and credit card processor requires a bit more diligence.  There are companies out there, many of which are found offshore that specialize in high risk merchant accounts.  Understanding the unique situation high risk merchants face, these companies offer credit card processing services to companies that would otherwise find it impossible to do business with customers who pay by credit card.  It is important to carefully review high risk merchant account providers for the same reasons you would a regular merchant account provider.  Who you choose to do business with and entrust with your credit card processing can make the difference between increased profit or increased problems when dealing with credit card transactions.

Photo via bloo_96

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.