Maybe you've just opened shop. Or maybe you've been in business for years. Either way, if you're about to accept credit cards from your customers you're in good company. Here's why:
This article will help you get the most from credit card processing. It explains your responsibilities… and how to control the risks. (Yes, there are risks.)
Definitions of Credit Card Processing:
Every business has its vocabulary. This is ours, starting with the parties in transactions:
When a credit card is used for payment, the following process occurs (usually in a matter of seconds!):
You've seen how transactions work. Now we'll step back and review what keeps the whole credit card system together, namely:
Credit cards offer protection for you, your customers, and the banks involved. In fact, protection is why credit cards are safer for everyone.
When you accept a credit card (and the transaction is authorized) you can be sure you'll receive the funds. (Later, we'll discuss disputes where funds go back to the consumer.)
The credit card system protects issuing banks from unscrupulous merchants. When you submit a deposit, you are promising the issuing bank that you have delivered the goods and services promised to the cardholder. If you don't, the issuing bank has the right to charge back the transaction.
Cardholders are protected from merchants who fail to keep their promises. They're not liable for payment if a merchant fails to deliver as expected.
Trust holds the credit card world together. The issuing bank doesn't ask a cardholder if he is satisfied before you get your money. They TRUST that the cardholder will be satisfied. Here's how you earn that trust: When you sell by credit card, you must deliver on the cardholder's "expectations" (note that word!) of your goods and services.
"What expectations?" Think about it. Either by policy or by practice, implicitly or explicitly, you tell customers that they can expect a level of quality, delivery times, etc. By accepting a credit card for payment, you are promising the issuing bank that you are going to "make good" on those expectations. If not, your customer can get his money back
Almost everyone has an idea how a credit card sale works. But even some experienced merchants don't know the other side of the system: Chargebacks. Understanding chargebacks can save you a lot of money, and help to salvage customer relationships.
If a cardholder believes a charge isn't legitimate, or her expectations weren't met by the good or service provided, she could come to you for a refund. But she has another, more troublesome, option: Chargebacks.
Here's how chargebacks work: Regardless of merit, the issuing bank is obligated to investigate complaints from cardholders, including:
In these circumstances, the issuing bank initiates a Retrieval Request and/or a Chargeback to resolve the matter.
Some common causes of chargebacks can be avoided easily:
Traditionally, the dispute process begins with a Retrieval Request that asks for documentation.
If you don't have documents for the retrieval, or if you don't deliver a copy of the documents to your processor in time, the cardholder is deemed to be right. When this happens several things occur:
Besides the obvious financial loss to you, chargebacks are also bad because of that final step. Here's why.
Everyone in the credit card system knows that eventually a few transactions will result in chargebacks. They're a cost of doing business.
But, if you cause too many chargebacks, the credit card system will start to doubt you and your standing as a credit card merchant. When chargebacks become too prevalent, your merchant account may be terminated by your sponsoring bank. Then you may find it impossible to find another sponsoring bank. In other words, no more credit card acceptance. Ouch!
In most cases, chargebacks must be initiated within 120 days of the original transaction.
However if a merchant is alleged to have violated Visa or MasterCard rules, a "compliance" case can be disputed up to 180 days after the rules violation.
Preventing credit card losses is not only good for you, but it is also part of your responsibility. Here are some general guidelines on how to prevent fraud and avoid chargeback situations. For more information, ask for our booklet, "10 Plus Ways to Beat Credit Card Crooks."
Your processor and sponsoring bank expect you to be honest with your customers (thereby managing "expectations"). And you're expected to live up to your bargain. This translates into four requirements:
MPRO supports its merchant customers with round-the-clock access to highly-qualified assistance. To reach customer support:
E-mail Customer Support at:
Rule No.1: Every sale requires both an authorization and a deposit.
Rule No.2: Always note the Authorization Code.
An Authorization Code indicates that the cardholder has the credit to pay for the purchase. This assures you of payment, as long as
When the goods or services are provided at the time of the sale, the authorization and deposit are simultaneous. However, if the customer is paying hours or days before she'll receive the goods or services, process the authorization first. This reserves the amount from the cardholder's credit balance for you. Perform the deposit transaction when the goods or services are delivered.
TIP: To avoid a pass-through fee on the transaction, make sure you deposit as soon as possible after the goods are delivered. After three days, the pass-through will be applied but that's no excuse to make the deposit before the goods are shipped. Do not wait longer than 7 days, or you'll need to obtain a new authorization.
Deposits take funds from the cardholder's credit line and deposit them into your account. For an in-store purchase, the deposit is simultaneous with the authorization (unless the goods will be delivered at a later date). With in-store processing provided by MPRO, this is a single sale transaction.
Remember: In mail-order or telephone- order business (MOTO), the deposit must not be run until the goods are shipped.
When Are Funds Available? We thought you'd ask. Visa/MasterCard funds are posted to accounts two business-days after the date of the transaction.
A sales draft is a legal and binding contract between you and your customer. If you have a retail store, a sales draft must be completed and imprinted for every credit card sale. So, even if you're not using a POS terminal that prints a draft for you, you should still imprint the card and obtain a customer signature on a sales draft, an MPRO processing form.
For your protection, a manual imprinter can be used to imprint the credit card when any of the following are true:
Information that MUST be on a Sales Draft
Keep drafts in a secure manner for three years (even if you sell your business). Check with your accountant for guidance before destroying them. In case of a chargeback, you may be required to produce sales drafts quickly, so file them so they're easy to find.
TIP: Keep the white copy of all receipts: They photocopy better. Also, handle carbonless paper and carbon/silver-back paper carefully. Pressure on the paper during handling causes black blotches that make your documents illegible.
TIP: You will be asked to find chargeback documentation based on the card number, transaction date, and the amount of the transaction. Therefore, filing your retrievals by cardholder name will make your research process more difficult unless you also have a cross-reference system.
IMPORTANT: Storing and destroying of sales drafts must be done in a secure manner to avoid the credit card information being stolen.
We've all heard about companies who have become victims of thieves who steal credit card information stored by merchants. To avoid this, your responsibilities to safeguard data include the following:
In the electronic commerce arena, a number of best practices to help protect data from unauthorized access include:
Skimming is the act of capturing card data and then using the data to create counterfeit credit cards, or to make purchases. Typically, a crooked employee such as a store clerk or restaurant waiter will use a small device, such as a Personal Digital Assistant equipped with a card reader, to swipe a customer's card when no one is looking. The data can then be re-injected onto a magnetic stripe on a fraudulent card.
While skimming is often a high-tech endeavor, it has a low-tech angle as well. Simply put, an employee who gathers credit card information and writes it down is just as much of a threat as his tech-savvy counterpart.
Prevent this from happening. MasterCard will assess fines on merchants who are determined to be a "point of weakness" in preventing employee fraud.
Meanwhile, Visa pays a reward of $1,000 to anyone who provides information leading to the arrest of a "skimmer," so it can literally pay to be vigilant about employee fraud.
You should review your credit card drafts at the end of each day or the beginning of the following day. No matter how reliable your processor (and we are reliable), you want to make sure that each transaction was properly processed. This can save you lots of grief at the end of the month, and help ensure you're getting proper credit for your sales.
Compare the total dollar amount of the drafts to the total amount you processed for the day. If you have a POS terminal printer, you can print both detail and summary reports of your day's transactions. For our other processing options, information can be obtained by using our online reporting service or by calling Customer Support at (888)573-1133.
Funds are deposited automatically to your sponsoring bank account. We recommend you always leave a balance in your bank account as a "buffer" to ensure funds are available for monthly transaction fees, chargebacks, etc.
Each day's Visa/Master Card transaction total will appear on your bank statement as a deposit described as "MPRO V/MC Trans." Since your Visa/MasterCard discount fee is deducted daily, the deposit shown is your net deposit.
Discover and American Express deposits are listed separately. Your processing agreements with these companies control the payment of your funds.
At MPRO you will receive a Monthly Statement ("Automatic Deduction Notice") detailing the month's total debit to your account. That debit to your bank account occurs on the first banking day of each month for MPRO's transaction fees, Visa/MasterCard pass-through fees, supplies, etc.
Merchant Processing Solutions
200 Harry S. Truman Parkway
Annapolis, Maryland 21401