Cutting Debit Card Fees-Durbin Amendment

Via CSPnet.com:

Federal Reserve seeking comment on rules to cut debit-card fees up to 90% 

WASHINGTON -- The Federal Reserve, fulfilling a Congressional order to examine whether merchants were being charged excessive fees to process debit-card transactions, has proposed new rules that analysts said could cut those fees as much as 90%, reportedThe New York Times. "It's bad for the issuers and the card networks," Rod Bourgeois, a payments analyst at Sanford C. Bernstein, told the newspaper.

As part of the Dodd-Frank Act's overhaul of the financial code, Congress directed the central bank, which oversees the regulation of electronic payments, to ensure that the swipe fees charged by the banks and payment card networks like Visa and MasterCard were "reasonable and proportional" to the cost of processing the transaction.

The Fed has proposed limiting interchange fees from 7 cents to 12 cents per transaction, or approximately 0.3% of the face value of a purchase. Merchants now pay debit-card processing fees averaging about 1.3%, according to the Times, citing the Nilson Report, a payment industry newsletter. Smaller retailers are charged more because of lower transaction volume and limited bargaining power, said the report.

The Fed proposed that it re-evaluate the fee cap every two years and asked for more time to consider whether it should be increased to reflect the costs of fraud protection.

The National Association of Convenience Stores (NACS) called the Fed's proposed rulemaking related to debit-card swipe fees a "positive step" and said it will continue to push for the reforms demanded by Congress and consumers alike. "The proposed rules are a positive step in addressing the anti-competitive behavior of the banks and credit-card companies and an acknowledgement of the voice of American small businesses and consumers," said NACS president and CEO Hank Armour in a separate statement.

Both Visa and MasterCard argued that the Fed had not considered all the costs incurred to operate debit-card programs.

Visa said it had "concerns that the [Fed's] proposal includes artificial caps on debit interchange that do not realistically reflect the value of card acceptance."

MasterCard went a step further and openly criticized the proposal, saying it would simply shift costs to consumers from merchants. "This type of price control is misguided and anticompetitive and in the end is harmful to consumers," Noah J. Hanft, MasterCard's general counsel, said in a statement cited by the paper.

Gate Petroleum, which operates about 100 gas stations in the Southeast, has seized on a separate piece of the Dodd-Frank Act that lets merchants charge different prices to customers using different forms of payment, said the Times. This fall, Gate began offering a discount to customers who used cash to buy one of the company's new prepaid fuel cards. Just over two months into the discount program, about 20,000 cards are in use, the company said.

David Dill, the company's vice president for sales and marketing, said Gate saved about 4 cents a gallon whenever it made a sale that did not touch a Visa or MasterCard payment network. Customers receive a discount of 3 cents a gallon; the other penny goes toward the cost of operating the card program. "It's really a loyalty program for the customer," Dill told the paper.

For years, some stations charged higher prices when customers used credit cards, sometimes simply in defiance of the card processing contracts and other times taking advantage of legal technicalities, the report said. In many states, stations could comply with the rules by posting separate prices for cash and credit.

Dodd-Frank lifted that barrier by allowing merchants to steer customers toward the payment method that is cheapest for them to process, without having to post separate prices.

Dodd-Frank also forces Visa, MasterCard and others to compete more aggressively for merchants' business by requiring that all debit cards run on the networks of at least two different payment companies. So when a customer uses a Visa debit card, for example, the merchant could process the transaction on a network other than VisaNet.

Through exclusivity agreements, many debit cards run on the network of only one payment company. The change will take effect in July, after a review by the Fed.

Taken together, these measures significantly strengthen the hand of merchants. Analysts expect merchants to negotiate sharply lower prices with the banks and reclaim a portion of the tens of billions of dollars they spent last year on processing fees for debit and credit cards.

"All of the sudden, the merchants have bargaining power," Bourgeois said. "They have an ability to drive prices down because there will be multiple payment brands on every card, and on top of that, the merchants will have the ability to use the lowest-cost route of whatever payment network they choose."

The banks are setting out to make up for the expected drop in card processing fees, the report said. Bankers say they may offset part of the lost revenue by assessing higher monthly fees on deposit accounts. Debit cards offering rewards points, which cost merchants more to process so they can cover the cost of the programs, could be another casualty, added the report.

The Fed has requested comment on a proposed rule that would establish debit-card interchange fee standards and prohibit network exclusivity arrangements and routing restrictions. The Fed's proposal would implement the debit-card interchange fee and routing provisions of the Dodd-Frank Wall Street Reform & Consumer Protection Act.

The proposed new "Regulation II, Debit-Card Interchange Fees & Routing" would establish standards for determining whether a debit-card interchange fee received by a card issuer is reasonable and proportional to the cost incurred by the issuer for the transaction. These standards would apply to issuers that, together with their affiliates, have assets of $10 billion or more. Certain government-administered payment programs and reloadable general-use prepaid cards would be exempt from the interchange fee limitations.

The Fed is requesting comment on two alternative interchange fee standards that would apply to all covered issuers: one based on each issuer's costs, with a safe harbor (initially set at 7 cents per transaction) and a cap (initially set at 12 cents per transaction); and the other a standalone cap (initially set at 12 cents per transaction). Under both alternatives, circumvention or evasion of the interchange fee limitations would be prohibited. The Fed also is requesting comment on possible frameworks for an adjustment to the interchange fees to reflect certain issuer costs associated with fraud prevention.

If it adopts either of these proposed standards in the final rule, the maximum allowable interchange fee received by covered issuers for debit-card transactions would be more than 70% lower than the 2009 average, once the new rule takes effect on July 21, 2011.

The proposed rule would also prohibit all issuers and networks from restricting the number of networks over which debit-card transactions may be processed. The Fed is requesting comment on two alternative approaches: one alternative would require at least two unaffiliated networks per debit card, and the other would require at least two unaffiliated networks per debit card for each type of cardholder authorization method (such as signature or PIN). Under both alternatives, the issuers and networks would be prohibited from inhibiting a merchant's ability to direct the routing of debit card transactions over any network that the issuer enabled to process them.

According to the recently released 2010 Federal Reserve payment study, debit card use in the United States now exceeds all other forms of noncash payments and, by number of payments, represents approximately 35% of total noncash payments.

Comments on the proposal are due by February 22, 2011.

NACS and other organizations that are part of the Merchants Payments Coalition (MPC) will carefully study the rules the Fed has proposed and offer its suggestions for strengthening the final rules, which the Fed expects to publish in April 2011 and go into effect June 21.

Click here to view the Federal Reserve's official statement.

And click here to view the full text of the Notice of Proposed Rulemaking.

The Problem With Paypal

Many small businesses use PayPal because they are not familiar with a traditional merchant account. PayPal may be a cheaper option for someone that only processes $500 a month, since there are no monthly fees. PayPal makes money on their high percentage rates which range from 3-4% depending on the credit card type. One of the major issues with Papypal is their lack of real customer service and thier ability to just hold on to your money with little reason. Take this email I recently recieved:

Your payments will be held in a pending balance

We're writing to let you know about a change to your PayPal account.

Starting Nov/23/2010, money from payments you receive will be placed in a pending balance for up to 21days. By doing this, we're making sure that there's enough money in your account to cover potential refunds or claims.

Even though you can't access the money right away, please ship orders quickly and communicate with your customers. After 21 days, you can withdraw money from each payment as long as the customer hasn't filed a dispute, chargeback, claim, return, or reversal.

The money may be available sooner if:

1. We can confirm that the item was delivered.
2. Your buyer leaves positive feedback. (Applies only to eBay items)

This change isn't necessarily permanent. We'll review your account every 35 days and re-evaluate if we should continue to hold your payments. If we decide to stop holding payments, we'll email you to let you know.

Why are my payments being held?
We reviewed your account and determined that there's a relatively higher than average risk of future transaction issues (such as claims, or chargebacks, or payment reversals). We understand that it may be inconvenient to have your payments temporarily held but please know that we didn't make this decision lightly.

Before deciding to hold payments, we consider many factors. These factors include account and transaction activity, the rate of customer disputes, the type of business a seller runs, average delivery timeframes, customer satisfaction, performance and history.

Many people after seeing letters like these,  will see the light and switch to a traditional merchant service provider. Try to find the phone number to PayPal and you"ll begin to understand why it's so hard to find.

Square Mobile Credit Card Processing. How good is it?

Square has certainly been making a big splash in the news. With promises of allowing just about anybody to accept credit cards simply by signing up and getting their little square plastic swiper to accept credit cards. Before you jump on the square bandwagon however, there are some things to consider. How serious are you about accepting credit cards? If you think you'll only be processing $1,000 or less a month it might be a good move. If however you are processing more than that,  you may be best be served with a traditional merchant account. The reasons are many:

1) Square rates are expensive 2.75% for swiped and 3.50% for key in:traditional merchant accounts could get you rates of  as little as 1.29% for debit cards and 2.15% for key in.

2) Square has had issues working with new Iphones.Square only has 128 bit encryption as opposed to a blue-tooth reader which has Features Triple DES data encryption.  

3) Square for many is considered a very fragile piece of equipment. 

4) They may have issues with their underwriting departments. 

5) Square might be promoting drug use (ok maybe, maybe not). 

5) Square being a new company may not have the best customer service.

Mobile Credit Card Processing: So Easy Even a Caveman Could Do It!

It amazes me that more people are not taking advantage of this fabulous new technology. There are applications that can turn your smart into a mobile credit card machine. This will allow many business to really get out there and pound the pavement and accept new business in ways they couldn't afford to before. It's really inexpensive and rates can be especially low  if you are swiping the credit card. You can now avoid having to lease or purchase a very expensive wireless credit card reader and also pay wireless fees. This technology is a must for people who accept credit cards on the go i.e. plumbers, electricians or even people who simply want to sell outdoors. You no longer have to carry a laptop either. This technology can be used on droid and Iphone, Itouch type phones. You do need to open a merchant account to get one but that's easier than opening up a bank account in most cases.

What College Students Should Know About Credit Cards

I always hated the way credit card companies would prey upon college students. They would set up shop right on campus, offering free items if you signed up. You could get a nice credit limit regardless of you credit history. The college of course gave no courses on finance that dealt with debt-to-income ratio or credit scores.Here is a great article on the 10 things college students should know about credit cards. Click here for the article.

PayPal Deals with Security Issues

According to Forbes, A new XSS (cross site scripting) vulnerability was identified on Paypal.com. It was discovered by a researcher and was disclosed on both Security-Shell and XSSed. That bug would allow a malicious hacker to insert code on the site that could potentially be used to access a user’s account.

The problem, technically, is found in the parameter sender_country in a transaction called nvpsm. NVP is Paypal’s API for Merchants to use when interacting with the Paypal web site, it stands for Name-Value Pair. SM is short for ’send money’. A problem such as this can be used to capture a user’s session (essentially log in as that user) and perform privileged actions (money transfers) as that user, as well as send a user a valid Paypal URL but then redirect them to a malicious third party site (phishing, malware, etc.).

As if PayPal doesn't have enough problems.

SEO Tips from Google!

Google has provided a very detailed explanation of SEO for beginners. Entitled the Search engine optimization starter guide. The pdf from Google provides  step-by-step instructions of how to handle many of the seo 101 concepts. I found it to be a good refresher as I'm sure you will too. To download this valuable information click here.

Credit Card Companies Battle for Technology

As Visa has acquired Cybersource (including it's well know payment gateway subsidiary, Auhorize.net) it has it's competition scrambling to catch up to buy up technology in the credit card payment industry. Rival MasterCard purchased payment services company DataCash Group for $520 million in August to expand its online commerce business. MasterCard has also created MasterCard Marketplace: a discount web site for card members in conjunction with e-commerce company NextJump. DiscoverCard already has a site for discounts as well.

Credit Card Processing is a $40 Billion Dollar Industry

Just how much money is involved with the merchant service industry? The answer in the US is $40 Billion. According to a report by Research and Markets a leading industry intelligence company:

The US credit card processing industry includes about 2,000 companies with combined annual revenue over $40 billion. Major companies include Banc of America Merchant Services (a joint venture between Bank of America and First Data), Alliance Data Systems, Total System Services, Heartland Payment Systems, and Global Payments. The industry is highly concentrated: the top four companies account for nearly 40 percent of industry revenue.

COMPETITIVE LANDSCAPE

Demand is driven by consumer spending. The profitability of individual companies depends on efficient operations, as services are sold largely based on cost. Large companies have big economies of scale in processing and can provide more services; small companies can compete by specializing in industries and providing custom services. The business is capital-intensive: average annual revenue per employee is about $330,000.

PRODUCTS, OPERATIONS & TECHNOLOGY

Processors provide transaction services to banks that issue credit cards and to merchants that accept credit card payments. Merchant products include authorizing, capturing, and settling merchants’ credit and debit card transactions, and handling chargebacks. Chargebacks occur when a consumer disputes a charge and charges it back to the merchant. Processors also sell or lease point-of-sale (POS) terminals. Card issuer products include transaction authorization and posting, statement generation and printing, and card embossing.

Large processors such as First Data Corporation and Total System Services provide services to both sides of the transaction. Small processors typically offer either merchant or card issuing services, and may specialize ...

Bridging the language gap in business....Translations

Here is one tip that can help you run your business better potentially:

I recently was dealing with a potential client who spoke Spanish but not much English. She could understand me but speaking for her was difficult. I told her not to worry and I would email her all the information she needed to be set up for a merchant account. I then went ahead and wrote my whole email into Google translate and it spit out a translation which I then emailed to my client. She must have liked the Spanish email, because she sent in her application without question. The translations available are quite extensive and I believe you'll find this web site to be a very useful tool.

Costco Merchant Services: Is it a Scam?

If you are searching for great merchant service rates, you may come across Costco and it's promise of rock-bottom merchant account rates. Costco, known for it's low prices on almost everything so why not credit card processing, right? I'll let you decide that for yourself. The first thing you should know about the costco merchant service program is they don't have anything to do with it other than their name. They have partnered with Elavon, a large processor to handle all the heavy lifting. With all the claims of great rates and service, you would not be doing your due diligence if you did not at least give Elavon the once over. When you do of course, you may not like what you read. These complaints should not come as a surprise however, as it follows the old adage, " if it's too good to be true, it probably is".

US Credit Cards: Slow to Stop Hackers?

As I mentioned previously, there is a movement to proliferate a new credit card that will minimize fraud. This article seems to think that the US is slow to adopt measures that will put the breaks on fraudulent credit card activity.  Heartland Payments,  a processor that had been hacked and led to a large data breach in 2008 is now in the news yet again.

 As per the article: In Austin, police are investigating a series of frauds that affected customers of Tinos Greek Cafe, a local chain whose credit card transactions are processed by Heartland. Police said they think the Tinos-related problems were caused by a security breach in the network linking the restaurants and Heartland. Some Tinos customers reported phony credit card charges on purchases made in this country and overseas.

What's the bottom line? US banks are not willing to deal with the costs associated with advance technology that will make credit cards more secure. They feel the amount of loss via fraud does not justify the expense.
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Opening a Merchant Account? Some Inside Info.

Here is a short recap of what to watch out for when opening up a merchant account:

1) Contracts

Most companies will require you to sign a contract (usually 3 yrs.). This guarantees the processor 3 yrs. of guaranteed income. They also don't have to worry about you finding their hidden surcharges, fees or perhaps the lousy customer service  they provide since it will cost you too much to leave. Be very careful if a company "claims" not to have a contract. They may simply refer to it as a "termination fee" or something else entirely simply to fool you. Unless a merchant service provider actually advertises on their site that they have "no contracts" they probably do and it's somewhere in the fine print.

2) Fees

Credit card processors have all different kind of fees for various services. Make sure they are competitive and be smart about which fees matter most to your company. Many companies will advertise a really low  rate but you may find after much digging that it only applies to debit cards.
Remember a quote is useless unless it's the actual paperwork you will sign to apply for the account it self. Companies will often give a quote  while leaving out hidden fees. They can add  them after they send you the actual contract they want to lock you into. Be Carefull!

If you don't really process a lot of credit cards (10k or less) you may find that the monthly fees a merchant service charges, is more important than the actual rate. In other words, if one provider has slightly lower rates but much higher monthly fees do the math! Usually the lower rate will cost you more as the monthly fees are eating up most of the money.

3) Reputation

If a company has a bad rating on the Better Business Bureau or you see many things written about them on web sites like Ripoff Report that should raise a red flag. Take Costco for example. They advertise low rates but things are not what they seem. Read here for more details.

Another Mobile Credit Card Processing Unit Available

Yet another credit card reader to hit the market for iPhone for mobile credit card processing:


As per TMCnet.com

We already know there are a nearly unlimited number of applications for your iPhone , iPad or iPod Touch, but the good news is that if you are a merchant or a professional who works on the road or in clients’ homes, soon you can use any of these devices as a kind of cash register. Indianapolis-based company PhoneTransact.com this week begins shipping a peripheral device for iPhones, iPads and the iPod Touch that essentially acts as a credit card reader. The reader is designed to work with the company’s existing iPhone point of sale (POS) application, iMerchantPro.

Previous to the introduction of the reader, merchants could use iMerchantPro to type in card numbers and expiration dates. With the introduction of the company’s Credit Card Reader, which attaches to the device via a dock connector, the need to type in card numbers is eliminated and merchants can process payments quickly and more easily, much the way merchants in brick-and-mortar stores use card swipe devices linked to traditional cash registers. To meet security and encryption rules, the device uses 3DES (Triple DES) encryption mandated for the electronic payments industry. iMerchantPro is compatible with almost any merchant account, features bi-directional card reading and magnetic fingerprint technology to confirm the authenticity of a credit card and meets ANSI/ISO standards. Users must have a decryption-enabled gateway.

The company identifies the new card reader and its supporting iMerchantPro software as critical for merchants who frequently work on the road at festivals, flea markets and trade shows, and for professionals who do their work in private homes such as repairmen and contractors, private tutors or home health care professionals. The solution allows payers to add tips to the total charges. And here’s an extra fun detail: in case merchants miss the old-fashioned sound of a cash register, iMerchantPro can replicate it.

In addition to processing payments, iMerchantPro allows merchants to facilitate refunds, credits, voids, e-mail receipts, GPS map-enhanced receipts, multi-business environments, sales charts and statistics, password protection, audio feedback, fraud protection and recurring billing. The solution can be installed on up to five iPhone, iPad or iPod devices at no additional cost.

The new reader is debuting at a list price of $130 and begins shipping on August 15th.

New Debit Cards Coming to Prevent Fraud: LCD Screens.

In an attempt to further prevent credit card fraud MasterCard is marching out a new generation of debit cards. These cards will feature a LCD screen and a possible 12 digit keypad.This will allow for one time passwords that should curb fraud tremendously as per the press release:

MASTERCARD and NAGRAID Security Introduce new Display Cards with Extended Features for Secure Banking Applications

NagraID Security developed a new family of MasterCard financial cards with integrated display screen allowing:

Optimized security for online transactions thanks to strong owner authentication
Display of the card balance on the card’s screen

La Chaux de Fonds, Switzerland, 10th June 2010 – NagraID Security, a subsidiary of the Kudelski Group (SIX:KUD), is pleased to announce that its families of display cards passed MasterCard’s (CSI – Card Structure & Integrity) approval process, thus demonstrating the required levels of durability, safety and compliance to ISO standards required for the commercial launch of banking cards and the introduction into MasterCard’s brand standards and rules.

The innovative Debit and Credit MasterCard Display Card looks and feels like a normal credit or debit card but comes with an additional small display and a button that enables card holders to use the same card for standard banking payment functionality and to generate second-factor one-time passwords (OTPs), thereby providing strong authentication.

The cards are very reliable and extremely simple to use. They offer optimal security to achieve banking transactions outside payment terminals using one single device.

This password generation technology complies with the requirements of MasterCard’s 3D Secure Chip Authentication Program (CAP). Optionally, a touch-sensitive keypad with twelve keys permits access to advanced functionality such as electronic signature and authentication modes, as well as to enhanced security features such as challenge-response applications and PIN code card protection.

Historically, banking institutions who protected access to their services with a One-Time Password required the use of a separate cumbersome token.

“Cards were born from cardboard, they’ve been ‘mag striped’ and ‘chipped’ and now we enter their silicon age, with an LCD display and touchpad opening up a multitude of possibilities. With NagraID’s recent achievements to demonstrate compliance to industry standards, the stage has well and truly been set to deliver the next generation consumer’s card proposition” says Eric Tomlinson, MasterCard Europe.

“This display card is designed to provide a very high level of security and reliability as well as ease of use. Users simply press a button to generate an OTP for secure access to their online services,” commented Philippe Guillaud, Executive Vice President and CTO of NagraID Security. He also added “The programmable nature of this platform makes it future proof and one can expect to see even more exciting and fantastic functionality in the near future.”

MasterCard directed promotional initiatives and large scale roll-outs will ensure that market price expectations are achieved. “As the world evolves towards increasing online and cashless transactions, the timing of our partnership with MasterCard is ideal, as it enables the growing security expectations of a rapidly expanding base of digital technology users to be quickly addressed via a secure, reliable and unified solution in a familiar and convenient form-factor.” said Cyril Lalo, President and CEO of NagraID Security.

Mobile Credit Card Processing: Written up in Information Week

Google Chrome Extension Powers Android-Based Payments

Android phones can now authorize transactions presented on a separate computer through the Chrome browser.
By Thomas Claburn
InformationWeek
July 6, 2010 05:20 PM

Google last week introduced an extension for its Chrome Web browser that enables computer-equipped merchants to complete Google Checkout transactions through Android devices.
The Android Payment Chrome Extension lets merchants with Google Checkout accounts generate a QR code image on their Google Sites-hosted Web store checkout page. When captured by an Android-based QR code scanning application, the QR code provides the Android phone with the necessary information to authorize the transaction.

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"While this payment method may not be perfect for all cases, we hope you find it useful for setting up a shop on the go and that it inspires further innovation in the mobile and payment developer communities," said Google Checkout engineer Peng Ying in a blog post.
Mobile payment innovation in the U.S. has been booming recently. Abe Solomon, CEO of Houston, Texas-based Prestige Merchant Services, says that mobile credit card processing is becoming more and more accessible. A year ago, he said in a phone interview, merchants who wanted a mobile credit card processing solution would have had to purchase ($500-$1,200) or lease ($60/mo or more) a wireless credit card processing device, and would have had to pay setup ($20-$50) and monthly access fees ($20/mo).

Explore why you should design, build, monitor, and manage integrations centrally from the cloud.

Taking Enterprise Application Integration Into the Cloud
Now, he says, there are mobile apps for smartphones from several different companies that make it easy to accept credit card payments on the go. "It has greatly cut down on costs and made it much more available for the typical mom-and-pop store," he said.

While Google Checkout and PayPal may have some fans, Solomon argues that traditional merchant accounts remain a better option for most small businesses. "Most people realize that if you're serious about accepting credit cards, the traditional merchant account is the way to go," he said.

A Google spokesperson wasn't immediately available owing to a company-wide holiday. Google Checkout is used by hundreds of thousands of merchants in the U.S. and the U.K, according to the company.

PayPal in particular, said Solomon, has had trouble with customer service issues, alienating many merchants as a result. He claims that Google Checkout is more expensive than a traditional merchant account.

Google Checkout fees are: 2.9% + $0.30 per transaction for transactions less than $3,000; 2.5% + $0.30 per transaction for transactions from 3,000 - $9,999.99; 2.2% + $0.30 per transaction for transactions from $10,000 - $99,999.99; and 1.9% + $0.30 per transaction from transactions of $100,000 and greater. There are no gateway fees, monthly fees, or setup fees.

Solomon says that fees for merchant accounts vary, based on risk. Payment card companies, he said, consider mail-order or telephone-order transactions (MOTO in industry parlance) to be riskier since the physical card is not present, so they range from 2.1% and up, depending on the card. The risk for swiped cards is lower, so fees might be in the 1.69% range for credit cards or 1.49% for debit cards.

The issue that he sees among merchants is one of awareness. "The problem is that I think not enough people are actually aware that the [mobile payment] technology even exists," he said. "Most people I speak to say, 'Wow I didn't even know you could do that.'"

In June, Gartner said that it expects the number of mobile payment users worldwide to surpass 108.6 million this year, a 54.5% increase from 2009. Mobile payment users are expected to represent 2.1% of all mobile users in 2010, though in the U.S. the figure is expected to be about half that, at 1.1% or 3.5 million mobile payment users.

Credit Card Processing at Hotels: Is it Safe?

Evidently any time you have a point-of-sale system that is computer based there is a potential for problems. As long as that computer is connected to the internet it has the ability to be hacked and have credit card information stolen from it. The story surrounding Destination Hotels is proof of just that: Guests who recently stayed at 21 of the resort's 30 hotels may have been victimized by the scheme, which appears to have compromised point-of-sale systems. The company refused to release many details of the incident -- citing an ongoing investigation by the U.S. Federal Bureau of Investigation -- but in a note posted to its Web site said that it had "uncovered a malicious software program inserted into its credit card processing system from a remote source."

Makes you think twice about giving your credit card information at a hotel doesn't it?

July 4rth is also Cash Only Day!

In an effort to thwart the Durbin bill in congress that will regulate interchange fees, there is a movement proposing July 4rth be Cash Only Day! Now of course you might want to take a close look at the bill Durbin has proposed. It's really difficult to say what the outcome of this bill will be at this point. Will it help or hurt the consumer?

Processing Credit Cards on Your Cell Phone

It's unbelievable how many people are unaware that you can process credit cards on your smart hone.Mobile credit card applications are now available on the iPhone, iTouch, BlackBerry, Google Inc. Android and Microsoft Corp. Windows Mobile. Furthermore, while the service is obtained as a mobile download, it can be accessed through a Web portal on any computer, affording merchants a more encompassing view of reporting data than what's available on the tiny screen of a handheld phone. Merchants can also connect to the  gateway and conduct payments from desktop or laptop computers. The mobile application has a companion product in the MagTek Inc. encrypted card reader for merchants who want to conduct swipe transactions for even lower rates. For more information on accepting credit cards on your cell phone you can contact Prestige Merchant Services. This technology really affords people on the go, real affordable credit card processing options. Until recently you would have had to purchase a wireless card reader (cost-$499-$1200) and pay expensive wireless monthly fees ($15-20 a month) as well as set up fees ($20-50) or lease it ($60-100 a month plus wireless fees).

Inner Fence: Giving Square a Run for the Money?

Everyone is talking about the Square and it's capabilities to turn an Iphone into a mobile credit card machine.

Inner Fence along with Merchant Focus has acquired a competitor, Appninjas who had created the popular swipe program which allowed you to accept credit cards on various smart phones by keying in information. Now Inner Fence wants to promote hardware allowing you to swipe the credit card for lower fees. The problem is that now this is no longer an independent application perhaps. With the free software and hardware Inner Fence plans to give out there will surely be contractual obligations perhaps for 3yrs. That is why Merchant Focus was so interested in acquiring appninjas and their popular application as it will allow them to entice new merchants.       

Senate approves Debit Card Swipe Fee Limits

Bloomberg reports that the senate approved debit card swipe fee limits:

Lawmakers voted 64-33 yesterday to approve the measure from Senate Majority Whip Richard Durbin, who seeks to ensure that debit-card interchange, or “swipe” fees, charged to merchants “are reasonable and proportional” to the cost of processing transactions. Payment networks Visa Inc. and MasterCard Inc., which set interchange rates and pass the fees along to card- issuing banks, fell in early trading.

The amendment permits retailers to offer discounts for cash, checks or debit cards, or for a particular card brand, and would let merchants set minimums and maximums for credit-card purchases.

On one side you have the politicians stating that passage of the bill will help small business. Now they can fight against these high fees. You have MasterCard on the other side stating :“The Durbin amendment would give lobbyists for big retailers what they have been unable to achieve through other efforts -- the ability to maintain all the benefits they receive from debit-card acceptance while transferring the cost to consumers."

BBB Says " Beware of Credit Card Processing Scams".

Via the St. Louis Globe:

Several owners of small businesses say they were duped by a salesman who promised to save them money on credit card processing fees, but instead tricked them out of hundreds of dollars and locked them into long-term lease agreements they did not want.

The Better Business Bureau (BBB) suggests caution when dealing with Eric W. Sutton, who has operated under the name Providence Place Development. The firm has an “F” grade with the BBB, the lowest grade possible.


The owner of a sports card and collectibles shop in St. Peters, Mo., said Sutton reneged on promises to return a $350 deposit, pay off a $100 early cancellation penalty with the owner’s old credit card processing company, and pay him up to $400 for the shop’s old credit card terminal and check machine, which Sutton took from the store. The owner said Sutton also tricked him into signing a four-year, $117-a-month equipment rental agreement.

“He had me hooked like a big old bass,” the store owner said

Several other business owners recounted similar experiences with Sutton.

The owner of a West St. Louis County sunglasses business said Sutton promised him a flat $50 a month credit processing fee, with no percentage fees on his credit card sales. Instead, he said, he found himself locked into a four-year, $59-a-month contract with percentage fees. He said he has been paying on the credit card processing machine for nine months, even though it sits unused in a closet at his home. “He told me, ‘I will take care of everything.’ He did take care of everything; he took care of everything for himself.”

Michelle Corey, president and CEO of the BBB, said area business owners should be constantly on guard against salespeople who “promise huge discounts. While most salespeople are honest, business operators should get everything in writing and be sure they completely understand any agreement before signing it.”

The BBB offers the following tips for businesses dealing with outside salespeople:

• Do not meet with a salesperson during busy working hours. It’s too easy to become distracted. It’s important to listen closely to all terms of an agreement and read all documents carefully before signing anything.


• Do not sign a blank agreement or agreements that appear to be incomplete. Also, do not accept a salesperson’s word that you can ignore certain terms in a printed agreement.


• Never give a deposit to a salesperson unless you know how it will be used. If a salesperson promises your deposit will be refunded, make sure you get the promise in writing.

Target Credit Cards: No Longer Using Visa

Target has dropped Visa as a partner on it's store issued credit cards. The retailer has decided to opt for an exclusive in-store credit card that will be accepted at all Target stores and it's website: Target.com. The reason for this turn about is market research and testing.  Interestingly enough the testing showed that Target customers would spend more when using the in-store credit card vs the Visa issued credit card.

Appointment Setters Scamming Merchants

There are companies who are employed by corporations such as credit card processors to solicit retailers and set appointments for their sales reps.. The concept certainly makes sense and I guess if done correctly could be quite profitable. Perhaps as more merchants are getting these sometimes very obnoxious calls and tiring of them the call centers have to come up with a new ruse to hook them in for the appointment. One of these gimmicks is they use buzzwords like PCI Compliance (which most merchants are these days). They will try to convince you to make the appointment only to send in some dimwitted sales person to strong arm you into making the deal.

The call center gets a commission for every  appointment they set and this process allows them to increase their bottom line. Usually they fail to mention hidden fees surcharges and the fact that they lock you into a contract or getting you to lease equipment and pay 20 times what the machine is even worth.

Vermont Setting to Legalize Minimum Credit Card Purchases

The State Senate approved a bill allowing Vermont retailers to have a minimum charge on credit card purchases. Although many small retailers currenlty request a $10 minimum for purchases with credit cards, it is actually against their merchant account contract with Visa and Matercard. The Senate bill was actually altered from it's original version to allow for quicker passage through the House. The original version would also have allowed retailers to refuse credit cards that are assoicted with higher fees to the merchant i.e. reward and corporate cards. If the bill passes the house, it will  need  the Governor's signature to become law. Last year, 7-Eleven stores delivered 1.66 million customer signatures from a petition campaign urging Congress to stop unfair credit card fees. It was the most signatures ever delivered to Congress on a policy issue in American history. There has been a constant struggle between Visa/ Mastercard and merchants regarding interchange fees. The merchants claiming that these fees are simply raising their products pricing while the banks claim to providing a service and that the merchants are smply looking for more profit that customers will never see.

Hacker of TJX gets 20 years

As mentioned previously, hacker Albert Gonzalez had plead guitly and was convicted  and senteced to 20 years in prison for his role in a variety of computer fraud including TJX, Heartland payments 7-11 and other corporations. How did he do it you ask?

Using a SQL-injection attack, the hackers broke into the 7-Eleven network in August 2007, stealing an undetermined amount of card data. They used the same kind of attack to infiltrate Hannaford Brothers in November 2007, which resulted in 4.2 million stolen debit and credit card numbers; and into Heartland on Dec. 26, 2007. Of the two unnamed national retailers mentioned in the affidavit, one was breached on Oct. 23, 2007, and the other sometime around January 2008.

Once on the networks, the hackers installed back doors to provide them with continued access. They tested their malware against 20 different antivirus programs to make sure they wouldn’t be detected, and also programmed the malware to erase evidence from the hacked networks to avoid forensic detection.

With Merchant Services It's Not Always About The Rate!

It's important for small businesses to remember that when it comes to credit card processing, the discount rate may not be the most important factor. Depending on how much you actually process, it may ultimately be the fees, i.e. various monthly and miscellaneous fees could cost you more than another company with slightly higher discount rates but feature lower fees and don't nickel and dime you to death. always ask for a comparison to your current provider before you make the switch. If you have never accepted card before, read through this blog carefully before you get started.

Merchant Services and Amex: Why should you accept them?

Amex is the 3rd most popular credit card in the United States. Many businesses don't accept American Express because they feel the fees are too high. In truth they usually are no higher and could be lower than accepting a Visa coporate card. Chances are if a customer gives you an Amex it's because he wants the bonuses the card offers and may very well take his business elsewhere. You can decide for yourself if you would like to turn away that customer.

Accepting Credit Card Payments with Your iPhone

There is no question that credit card processing smart phone applications are changing the dynamic of credit card processing today.With new gadgets hitting the industry the mobile credit card processing industry is getting pretty crowded quickly. One of the most popular applications is the iPhone application that works in connection with a payment gateway service such as Authorize.net. Although iPhone has an application you can download for a one time fee for $49.00 there are credit card processors who have their own applications that are free and have Bluetooth rechargeable card reader for swiping cards, which deliver enhanced security, savings and convenience. These mobile smart phone applications work with other smart phones such as the iTouch and Blackberry and Storm.