Wells Fargo found that they were ripping off customers?

Surprise! Wells Fargo found out that after an internal probe, some of it's account executives were ripping off customers and charging some very high fees as per the WSJ. Unfortunately this practice is all too common among processors. I have seen companies that sent in statements where for some credit cards they were being charge 14%! This happens at the big name firms all the time as they take advantage of a merchant's trust in their established name. The bottom line: always make sure to deal with a reputable merchant service provider.

Customer Fights First Data Over Teaser Rates!

This is just in the news today! A small business owner was being taken advantage by First Data processing. The story explains that Rohan Shetty owns a small hot dog stand in Sussex County, NJ.As a small business owner she can't afford to be paying lots of money in merchant service fees.She figures out that the rates she was told were not the rates she was getting! Unfortunately this is a common practice for a credit card processor to offer teaser rates and then hike them up very quickly. They usually try to lock you into a contract so you are stuck paying those high fees for years. This is why if nothing else always avoid a contract. Few companies advertise no contracts but some merchant service providers will offer it.

EMV Technology: Hurting Merchants?

One of the latest discussions many merchants have been having is the new implementation of the EMV technology for credit card processing. One of the biggest issues that are arising for merchants, is how slow the chip readers can be. This will be detrimental to sales when the holiday season comes around. Imagine long lines of people many of whom will simply ditch their shopping carts and go elsewhere as the readers take forever to approve a transaction? The problem stems from the platforms the merchants are using to process the chip readers and not the reader itself. If you are looking for a solution to your chip reader issue and want one that is the fastest you can find, contact Prestige Merchant Services. The platform they utilize has a median time of 1.60 seconds for the terminal interaction with the chip. Chip reading does not have to be slow any longer.

Processor is Sued by Merchant over $28,000

I was not surprised to learn that EVO Merchant Services was sued by a plumbing business:

 GALVESTON – Parker & Pompa Inc. has filed suit against EVO Merchant Services LLC, Discovery Bank, Discover Financial Services and Do It Best Corp. in an effort to recover nearly $30,000 in back credit card payments. Recent court papers filed Oct. 8 in Galveston County Court at Law No. 2 explain that the defendants failed to remit $28,490.97 generated from Discover Card charges from the plaintiff’s customers from Oct. 7, 2008, through April 9, 2009. The suit shows the complainant, doing business as Ideal Plumbing Co., entered into a contract with EVO, doing business as Bank Card Depot Inc., which called on the former to submit information pertaining to Discover Card charges made in Galveston County during the special time period. In turn, according to the agreement, EVO promised to acquire and process the charges. Meanwhile, the plaintiff and Do It Best executed a contract to which the latter agreed to accept the funds released from the proceeds in question and place them in an account attributed to the complainant as well as disburse and forward the subject money to the former. EVO received written statements itemizing the dates and amounts of the aforementioned charges and forwarded the documentation to Discover Bank and Discover Financial Services, which supposedly processed the information and gave the amount in dispute to Do It Best, the suit states. Parker & Pompa alleges it did not get the $28,490.97, insisting the defendants “have failed and refused, and continue to fail and refuse” to pay. Attorney Michael L. Wilson with Rider & Wilson in Galveston is representing the complainant, and Galveston County Court at Law No. 2 Judge Barbara Roberts is presiding over the case. Cause No. 68,458

Evo has many complaints listed against it. I happen to know they have some of the most corrupt practices
when it comes to hidden fees and padding their pockets.

Merchant Service Providers: What Have They Done for You?

Most credit card processors are good at one thing: deception. This is one of the main reasons I started this blog. I wanted to expose the myth of what businesses think they are getting as opposed to the deal they actually got. As I mentioned previously, most companies really don't know what they are truly paying as the statements you receive seemingly require a forensic accountant to figure out. There is a reason the majority of provides have a 3 yr contract that they may or may not tell you about. They don't want you to know about all those hidden fees and they are hoping if you do figure it out, it will be too late as the contact has you locked in.


All this aside, what are these processors really doing for you other then eating into your bottom line? Prestige Merchant Services is the only merchant service provider that offers a way to expand your business at no cost to you. They offer free SEO (search engine optimization) consultations which can be essential especially for small and medium sized businesses. Perhaps you have a nice website but how easily can you be found online? Are you on the first page of Google for all the major keywords in your industry? These are just some of the questions Prestige can assist their customers in. Need a website? Let Prestige assist in setting one up for you at a very competitive rate. This is truly ground breaking within the industry and you should be sure to contact them for more information.

News: Small businesses are getting ripped off

Fox News has an article and video that discusses how small businesses are getting ripped off bycredit card processors:

"I'm almost embarrassed I fell for their scam," said hair salon owner Magic Munson. 

She was approached by a salesman representing a company called Payment System Corporation who promised the halve her costs for processing credit cards and debit cards. It's a strong pitch to small businesses that are struggling in a bad economy.

But after she signed up, the company couldn't help her hook up several card swipers. She began getting bills even though the machines weren't hooked up.  The salesman was nowhere to be found and the friendly faces pictured in a list of customer service representatives were missing in action.

"If you try to call any of these people, they'll put you on hold. It's a fight to talk with a real person. i was on hold for 20 minutes (once) and after 20 minutes, they just hang up the phone.  She also began getting bills for services that she never used and was denied refunds that were promised.

There are  a 2 things one should take from this article that differ from what the article implies:

1) Never sign a contract! If there is no contractual obligation you will never have an issue going elsewhere, which should make the company you are with bend over backwards to keep you business by servicing you and doing it well. It will also make it less likely that they are hiding fees.

2) If the rates you are being quoted seem to be good to be true...they probably are.

Rates like 1.09% for credit cards are simply impossible as that is below the actual cost.

Be careful out there and only deal with the most reputable company.

Although few companies have  a no contract policy a merchant service provider that advertises as such is Prestige Merchant Services.

More Deceptive Practices to Watch Out For

If you are not aware by now from reading this blog the credit card processing industry is one of the most deceptive. Most of the time  "what you see"  is not "what you get". In this article Phil Hinke describes some more of those very deceptive practices among sales people in the industry and how they hurt merchants:

I have seen merchants deceived on the actual discount rate they received. I have seen merchants deceived on the "terms and conditions." I have even seen a “1” in the discount rate on the merchant application mysterious change to a “7” after the merchant had signed the agreement. 

Most processors will attempt to lock you into a contract because they have hidden fees they simply don't want you to know about. They also have statements that are impossible to understand because they want to keep you in the dark. Make sure to stay clear of those problems so if something does arise you can leave without penalty.

Move over Square! Here come Jumio!

We have discussed Square and it's credit card processing via a smart phone from the makers of Twitter. Well they may be getting pushed out a bit by Jumio. Jumio from the Co-Founder of Facebook, is threatening to take a chunk of the pie from Square. This new technology allows the simply a picture of a credit card to be used as a way of making a transaction. The smart phone simply scans the card similiar to the way a barcode scanner would work on your smart phone. How can this be you ask? The technology behind Jumio allows it to sense things such as if the card is actually plastic and if the hologram is real and if the numbers are embossed. They claim it is not only secure but has the ability to interface with E- Commerce. This means that if implemented, instead of entering credit card information you simply upload a picture of your card.  I'm not sure how many customers will feel comfortable about the idea of their credit card picture floating around out there. Time will tell....

Square: Getting a Boost from Visa

The latest big news for Square is Visa coming on board as an investor. This no doubt gives the mobile credit card service a boost of credibility and warning shot to potential competitors that it is here to stay. What's in it for Visa? As Forbes explains they get  a piece of the action when it comes to really small business who normally use cash and are switching to credit cards. Square is a fantastic solution for people with a small side business that perhaps use it for small dollar amounts and use it somewhat infrequently. Square does not accept Amex nor can it deal well with larger dollar amounts on a daily or monthly basis (as explained here). It also does not work with a blackberry. For those who are serious about accepting credit cards they should be seeking a merchant service provider who can provide software and/or hardware for your smart phone but stay clear of contracts and termination fees.

Deceptive Credit Card Processing Tacticts

Phil Hinke a veteran of the merchant service industry, has a great article at Practical E-Commerce.He goes on to discuss many of the various pricing methods used in the credit card processing business including tier and interchange pricing. Phil explains some deceptive interchange pricing practices:

"Interchange-plus pricing is typically the best way to go. However, there are some processors who claim to be offering interchange-plus pricing, but are deceptively offering something worse. The first are those processors who are offering interchange-plus pricing with the under-the-breath caveat that it is only for 'qualified' transactions. What they are really offering is a tiered pricing plan because there will be no qualifying transactions. Therefore, every transaction will downgrade at a much higher rate to one of their tiered pricing levels.

"The second deceptive interchange-plus pricing plan is the one that inflates the interchange rate. A salesperson recently sent me one of his own merchant statements to analyze — many salespeople do not trust their processor any more than merchants do. He felt something was not right but could not put his finger on it. I quickly figured out that the processor was adding 0.25 percent to the interchange-rate it was posting on the merchant statement."

He also discusses deceptive merchant statements:

Do not necessarily believe the numbers on your merchant statement. As previously mentioned, I analyzed a merchant statement where the interchange rates listed were not the true card association interchange rates. I analyzed a merchant statement where the per-item fee list was 6.2 cents, but after doing the calculations it was obvious that the merchant was being charged 6.5 cents; 0.3 cents may not seem significant, but for this large merchant it was.

"One of statement types I continually come across — which confuses merchants — is the one that does not show all the charges for the month on the statement, and in fact may delay showing all the charges for up to two months. I have spoken to salespeople who love this statement because when they sign up a new merchant, that merchant generally does a cost comparison after the first month to see how much money he or she is saving after switching processors. Unfortunately, the merchant does not realize that some of that month’s processing cost will not show up on the statement for up to two months. Therefore, a merchant’s total processing fees for April sales may not show up until the June statement."

Prestige Merchant Services offers potential merchants a free statement analysis so they can see how much they are paying and how much they can save by switching without a contract or set up fees.

Wondering Why PCI Compliance Is a Big Deal?

Cyber criminals are targeting point-of-sale terminals. 

POS devices read the magnetic stripe on the back of a card that contains account information, which is then transmitted for payment processing.

The POS systems that are connected to the Internet could fall prey to cyber attacks particularly  for small businesses. This is all according to Trustwave's global Security report of 2011:

Although there are rules for security controls that developers should use for the devices, such as the Payment Application Data Security standard (PA-DSS), Trustwave said that "these controls are rarely implemented properly."

Further, many small businesses rely on third-party integrators to support the POS devices. But those integrators often have poor security practices. In 87 percent of the breach cases it studied, the integrators make mistakes such as using default credentials in operating systems or with remote access systems, Trustwave said.

Phishing Campaign Targets First Data

(Via Softpedia)

Researchers from email security vendor AppRiver warn about a phishing campaign that targets merchant accounts from a payment processing vendor called First Data.

It the pool of phishing attacks targeting online banking accounts, credit card information, personal details and other online accounts, scams aiming at merchants are not very common.The rogue emails detected by ApprRiver bear a subject of "MERCHANT ACCOUNT UPDATE" and purport to come from "FIRSTDATA SERVICES."

The message contained within reads "Dear First Data customer, please update your login. Download the attachment in this e-mail and proceed."

The attachment is an HTML document called "Update Your Account Information.html," which, when opened inside the browser, displays a spoofed First Data Global Gateway login page.

The page contains a form for inputting the merchant's store number, user ID, tax ID, phone number and password.

"Once the hacker has gained access to the First Data account they will likely have gained control over that specific merchants account," warnsTroy Gill, security researcher at AppRiver.

The obvious danger here is that compromised merchant accounts might contain records of customer transactions, however, according to Mr. Gill, this aspect of the breach remains unclear.

First Data is an Atlanta-based provider of online and on-site payment solutions which caters to merchants, financial institutions and government agencies.

Its product portfolio includes credit and debit card processing, check acceptance and cashing solutions, international payment processing, automated clearing house payments processing and PCI compliance.

The company explains on its site that "the Global Gateway Virtual Terminal is an online payment application that allows you to accept credit cards and other payment types using your PC.

"The Virtual Terminal also acts as your Global Gateway account management application and allows you to view gateway processing reports, edit fraud settings, manage users, and more."

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.

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."