Visa Allows Surcharging; Why You Should Think Twice Before You Surcharge

Beginning Monday business owners  are going to be deluged by sales people offering to make their credit card processing more profitable by adding 'surcharging' to their processing account.

And while it's true that as of Monday Visa has changed it's rules so that it is no longer against the card rules to add surcharges to credit transactions- to add a $1.00 fee to each card you process to cover your processing costs, for example- it is not a cut and dried situation.

First of all, surcharges are illegal in Kansas and Oklahoma by state law. Secondly, Visa's instituted  a myriad of rules and regulations that you must follow if you are going to add surcharges- it can only be done on credit transactions, not debit, you have to follow guidelines that tell you how much you are allowed to surcharge, and several others. The regulations that accompany surcharging are complicated, and I suspect that Visa will be watching very closely for a few months and coming down hard on violators, whether they intended to break Visa's rules or not.

And thirdly, I would urge you to really consider whether you should be surcharging at all. Your customers are not going to like it. Unless you think it wise to anger a broad section of your customer base you may not want to participate.

If you genuinely feel you are paying too much for your credit card processing and have to recoup some of those costs (and if that is the case you need to redo your processing agreement) there is a better option- you can always offer a small cash discount. That will encourage more customers to pay with cash, and allow you to cover some of the costs accrued when customers do pay with credit. (Just remember to adjust your pricing accordingly.)

If you are in a state where surcharging is illegal and someone claims it isn't or has a way to get around the law, contact me immediately. I'll get you the law's title number and exact wording- you don't want to be breaking the law. And if anyone has any questions or concerns about the rules and regulations that Visa has in place, feel free to contact me anytime.

Barnes and Noble Reports PIN Pad Fraud at 63 Locations

Barnes and Noble Inc. reported Wednesday that a "sophisticated criminal effort" was able to tamper with 63 PIN pads in nine states. The company indicated that in addition to personal identification numbers, debit and credit account data may have been compromised.

The chain discovered the breach more than a month ago and promptly disconnected every PIN pad in all of it's nearly 700 stores. They said the held of disclosing the breach on the advice of federal authorities, who are investigating.

"Barnes and Noble has completed an internal investigation that involved the inspection and validation of every PIN pad in every store," the company said in a press release. "The tampering, which affected fewer than 1% of PIN pads in Barnes and Noble stores, was a sophisticated criminal effort to steal credit card information, debit card information, and debit card PIN numbers from the customers that swiped their cards through PIN pads when they made purchases."

The New York Times reported a senior company executive said some customers had unauthorized purchases on their credit card accounts.

Barnes and Noble did not say specifically how the pads were tampered with. "The criminals planted bugs in the tampered devices, allowing for the capture of card and PIN numbers," the release said. The bugs might have been razor thin devices with a chip and an antenna that captured the PIN numbers as they were entered on the pads.

Criminals have used such methods before, according to technology analyst Avivah Litan. "Its not that hard to plant them." she added. "Its pretty easy to distract a clerk or find an unattended terminal."

Steve Elefant, a credit card industry consultant, theorized another way the fraudsters could gain access to the PIN pads. Since much of today's payment hardware is tamper resistant a likely scenario is the criminals replaced PIN pads with what he called "malicious PIN pads" that captured customer data. Fraudsters often do this by sending someone dressed as a technician out to a store claiming that the company is repairing, replacing or upgrading terminals.

However the fraud occurred, there is no doubt Barnes and Nobles has a hard road before it. In addition to law enforcement the company said it is working with payment card networks, banks and card issuers to identify accounts that may have been compromised. Most certainly Barnes and Noble has already been or will soon be declared out of compliance with the Payment Card Industry (PCI) data security standards even if it was compliant on its last quarterly assessment. They are looking at non-compliance fines in addition to breach related fraud and card re-issuance reimbursements sustained by card issuers. They will also have to go through a re-validation process to regain PCI compliance.

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.

Take Advantage of Auto-Recurring Billing

Auto-recurring billing is a system by which you receive payments from your customers on a regular basis. It not only greatly reduces the amount of time and money spent on billing and collections, it also provides your customers a convenient  way to pay you on time, every time.

The process is easy, and all you need is an internet gateway. Once you have written permission from your customer to begin an auto billing program, you simply upload their information into your gateway. (You only do this once, reducing the opportunity for data entry errors). You set your customers up to pay you an agreed upon amount at regular intervals, and after that their payments flow in with no effort on your part.
Most gateways are can be customized with different billing periods, and flexible if your customer needs to change her payment date or amount.

Once set up, you get your money on time, every time. Cash flow variances are reduced, and you have a determined amount of money coming in on a regular basis. The time and money associated with printing and mailing invoices is eliminated, and past due accounts and their accompanying collection calls are a thing of the past.

Your customers will appreciate that auto billing makes doing business with you simple. They will be able to pay you automatically without the hassle of receiving an invoice, writing out a check, and finding time to get it out in the mail.

Although anyone can use auto-recurring billing, it works best for two types of businesses. The first type is service providers who charge the same amount every month such as daycare providers, contractors who pro-rate their billing out over time, attorneys, fitness centers, storage facilities, etc. The other type are businesses who generally carry accounts for their customers- doctors, dentists, bars, hospitals, etc.

As we hurtle onward toward a cashless society the businesses that succeed are going to the ones that offer flexible payment options- auto-recurring billing is a great way to do just that.

Visa Warns Merchants of Email Phishing Scams

Visa USA has detected an increase in email "phishing" scams directed at merchants. These scams use fake emails that appear to originate from legitimate financial institutions, processors or other businesses that often conduct business with merchants.

Through these fake emails criminals attempt to convince merchants to  provide sensitive information such as account information, passwords, logins, or other payment information, which then can be used fraudulently.

In most of these phishing emails the merchant is asked to click on an internet hyperlink embedded in the fake email. This link connects to a fraudulent website or server and may lead to the installation of  'malicious software' (malware) on the merchant's computer.

Visa has posted several examples of phishing emails as well as a list of signs that the email you are looking at may be fraudulent at Visa.com.

They ask that you remember that neither Visa nor it's personnel will ever ask you for  personally identifiable information by email or by telephone. Any merchant the receives a suspected or actual phishing message should contact their financial institution and Visa. To notify Visa send an email to phishing@visa.com with the phishing email attached.