Fraud and high fees are scary to any small business beginning to initiate electronic payment handling; however, it is imperative for a company to have credit card payments as a consumer option. Processing these types of transactions provides an opportunity for increased sales and returning customers. How can a merchant ensure better protection when starting a merchant services company advancing to small business credit card processing? There is no easy answer to this question. Even with the best security measures in place, fraud is still possible. People committing such criminal acts become smarter as new protective measures are put in place. Just as computer viruses, people can find ways around safety precautions if they have the desire. Still, there are ways to protect a business and its customers from fraudulent occurrences and by taking a few precautions; any company can increase the safety of each accepted transaction. These same safety measures also lower associated transaction handling costs.
Credit card merchant account services provide protection within the gateway and services provided. They focus on security in order to keep card information safe as it is entered for processing. Manual entry is a common way to receive an invalid payment. A card may be damaged when stored in a wallet or purse. This damage prevents the stripe from being read by a machine. Manual entry is the only way to run the transaction in these scenarios. Fees increase based on the number of manual entries a business makes each day. These transactions are considered to be riskier for both account providers and merchants. Data entry errors in addition to fake transactions increase the fees associated with manual entry. A business can decrease the amount of manual entries by training the staff to request an alternative payment. Manual processing should only occur if no other payment form is available. Compare income and card statements to ensure invalid charge backs do not exist. Customers should return a product and ask for a refund, but this does not always happen. Instead, they request a charge back on the purchase when they determine it is not what they wanted. Any business experiencing these issues will be responsible for unnecessary charge back fees. Comparing statements assists with identifying these issues so appropriate measures can be taken. This is more of a credit card merchant account cost saving measure than one for preventing fraud.
Simple procedures during time of payment can greatly reduce the chances of card fraud. The card holder’s identity should be verified before running the transaction. Staff members need to be trained to ask for a license or another valid form of identification. They should check the signature on both items to ensure it is the same person. Attempt to reduce the number of manual transactions. Post a sign stating identification is needed at time of purchase. This will inform customers allowing them to have it ready upon payment. A business should also reevaluate their return policy if invalid charge backs seem to be occurring regularly. These combined measures decrease the risk of fraudulent purchases and can drastically cut costs associated with small business credit card processing.
In the eyes of credit card processing companies, a business is either classified as normal risk or high risk. Normal risk level businesses can seek credit card processing from just about any company in the industry and will receive the best rates available. If your business is labeled as a “high risk”, you will pay higher credit card processing fees and may even find it difficult to get a merchant account all together. This is a horrible headache that business owners face all too often, so here’s what you should know about being classified as a riskier business and getting processingHow Risky Businesses are Classifieisky businesses tend to have a large number of card chargeback requests from customers, and accept card-not-present transactions like internet or phone sales. Some types of industries themselves cause a business to be classified as higher risk, like gambling or casino websites, auctions, adult services, or telemarketing.
The ability to accept credit cards as a method of payment is not always an option for all merchants. Certain businesses are considered high risk and as such find it difficult to qualify for a merchant account or card processing services. Merchants in industries considered high risk must either consider other payment options or pay a much higher price for the privilege of accepting credit cards.
There are several factors which may deem a business “high risk” in the world of credit card processing. In some situations it may simply be the credit history of the business owner, however in most cases it is the type of industry or business in which the company operates. Online merchants or e-commerce businesses are considered high risk as well as any adult businesses or travel businesses. One specific industry targeted by processors as high risk is the medicinal marijuana industry- which is legal in 16 states as well as the District of Columbia. These merchants have had their card processing rights reduced or eliminated to the point where accepting cards for payment is difficult if not impossible.