The Key to Not Getting Gouged by Your Credit Card Processor

It's rare for me to come across a business owner that knows more than the most basic of details about his credit card processing account. Depending on the type of business, anywhere from ten to almost 100 percent of revenues come in through a credit card terminal or gateway- thus, every business owner should be well versed    on his or her account.

Here are six things every business owner should know about their merchant services account:

1) Most merchants had the opportunity to see a big decrease in their debit card rates when The Durbin Amendment took affect in October. Did your processor make you aware of these potential savings, and did you receive them?

2) Does your statement have any odd sounding fees like 'TIN fee', 'TFN fee', 'IRS fee', etc., and do you know what the fee is for?

3) Since a majority of card types used today are rewards cards, do you know the surcharge you pay for processing those cards?

4) Are there miscellaneous fees like 'Compliance Fee' or 'PCI Fee' that shows up on your bank statement but not your processing statement?

5) Are you currently paying monthly and/or annual fees for PCI compliance, and do you why you are paying those fees?

6) Are you under contract with your processor, and if so, does your contract have an early Termination fee? Does it have a roll-over provision?

When it comes to your merchant services account, knowledge is power. Only when you understand your processing statement in full, rather than just knowing the rate you pay for the most common transaction type, can you negotiate from a position of strength for the best possible rates.

Processing companies and representatives know this (that's why they make the statements so hard to read) and use it to their advantage, counting on you giving up in frustration before you find the factors that add up to you over-paying for your processing to the tune of $1500 a year.

Make sure you know the answers to these questions. Call your account representative and make him go over your statement with you, line by line. If your rep. has already come in and back out of the industry call the customer service number and ruin some CSR's average call time by making them explain it, line by line.

Also, feel free to contact me. I'll find the answers and explain your statement, no strings attached. But one way or another, get knowledgeable about your account.

What the Visa/Mastercard Settlement Means to You

On July 13 a proposed settlement was reached between a group of retailers and Visa, Mastercard, and some of the nation's biggest banks. The settlement was an attempt to reach a conclusion to over 50 lawsuits that have been filed since 2005 alleging collusion and anti-trust practices in the way the card companies set their interchange fees (the fees they charge for using your card, as opposed to monthly fees, transaction fees, batch fees, etc.).

How will the settlement affect you? First of all, it's not a settlement yet. It still has to be approved by a federal judge, which could take up to a year or longer. Also, merchants have the right to withdraw from the settlement, which would allow them to pursue additional suits in the future.

Already some heavyweights in the processing arena are voicing disapproval of the settlement. Trade groups like the National Grocer's Association and National Association of Convenience Stores have voiced their displeasure. And some big box retailers, including Target and Wal-Mart have come out against it. This is important, because if enough merchants withdraw from the settlement, even if they weren't involved in the lawsuit, it could derail the whole agreement.

If the settlement ever comes to pass, Visa, Mastercard, and a few banks will have to pay merchants more than six billion dollars. In addition merchants will see a .10 of one percent reduction in their interchange charges, estimated to be worth another $1.2 billion. There is a blizzard of issues surrounding the implementation and disbursement of these funds, if they ever come to pass at all. Figuring it all out could take to 2016.

The settlement also lifts the ban surcharges applied by merchants for credit card transactions. A business would be able to impose 'check out' fees on credit card transactions at the point of payment. The surcharge would be capped, probably at around three percent of the transaction, and he merchant would have to have prominent  signage announcing the surcharge and allow customers to opt out of the transaction. This wouldn't apply in the 10 states that already ban surcharges at the state level. Kansas and Oklahoma are among those states. Payment experts question the practical ability of merchants to implement surcharges given the complexity of the credit card rules, and how customers would react to the new charges is another question mark.

So that's the nuts and bolts of the settlement. Bottom line is that it is a complicated, fluid situation with many issues still to be resolved. I'll keep you filled in with news and changes as they occur.

Tax Identification Numbers and Your Credit Card Processing Account

The IRS is scheduled to start backup withholding in 2013 for businesses that have invalid or non-matching Tax Identification Numbers (TINs). Backup withholding was supposed to start in 2012, but the IRS postponed it for one year. It's been on the back burner, but its time to start thinking about it again.

The IRS requires that processors have a valid TIN on file for each business they process for. If a processor doesn't have a valid TIN, or it doesn't match the number on file with the IRS, the processor is obligated to institute backup withholding- they will keep 28% of the merchant's gross sales.

This is going to sit terribly with merchants, primarily because when a merchant corrects the issue with an invalid/mismatched TIN they are going to expect the withholding to stop. However, this is not the case. Merchants will not be refunded until they file their tax return and the IRS determines they are eligible for a refund.

In addition 2013 will be the year the IRS rolls out the new 1099-K for merchants that contains a line for the merchant to report their gross credit card sales. That figure must match the gross sales amount reported by the merchant's processor.

These reporting requirements represent a big expense for processors, and most have reacted by passing on a new reporting fee to merchants. This fee will go by different names on your processing statement, but is usually some variation of IRS Fee or Reporting Fee. The most common amount of the new fee is $5.00 a month; unfortunately there are a few processors who never miss out on a chance to gouge their merchants and are charging as much as $25-$35 a month.

Ideally merchants have proactive processors or account representatives who will contact them this fall to make sure that their TIN numbers are valid and guide them through the new reporting requirements. If not, don't wait until 2013 to handle the matter yourself. Contact your processor and make sure the TIN numbers they have for your business are the same ones you will use to file your 2013 taxes.

Processors have until February 1 to provide you with documentation of the the amount of gross sales they reported for your business. Be on the phone to your processor the morning of February 2 if you haven't received the documentation.

Feel free to contact me with any questions, concerns, or problems you may have about your TIN requirements and reporting requirements- it can seem very confusing. The IRS don't like to make things easy.