Ever been excited about a big sale, only to see how much you paid in credit card processing fees?  Stop seeing your margin erode with high processing fees.  There may be things you can do to lower your rate.  You know that by offering credit card acceptance you win more sales.  Multiply this effect by lowering your processing costs.  To get the best rates on every transaction, your merchant account needs to be configured correctly.  You also need to handle transactions in a specific way.  Your merchant bank is charging you based on the type of credit card you run, the way you run these transactions, and your type of business.

Use These Best Practices as applicable to Your Business

All Merchants

  • Settle your batch within 2 business days of transaction date.  This ensures that the cards you authorize are charged in a reasonable time frame.  Your customers expect this.  If you hold authorizations for too long, customers are likely to forget their purchase, and not recognize your transaction when it does come through on their statement.  It may sound like it will never happen to you, but this can result in a chargeback.  Knowing this risk, the card associations reward merchants who follow this best practice with lower rates.
  • Unless you are set up with a special merchant account type such as a restaurant or beauty parlor, never modify the transaction amount after receiving an authorization.

Internet Merchants (and Key Entry)

  • Perform address verification (AVS) on every transaction.  When the AVS response is “match”, you know that the person entering the transaction knows the correct billing address on the credit card.  This provides you some assurance that the cardholder is the one making the purchase.   Your merchant bank may qualify more of your cards for your best rate.
  • Enter an invoice number or purchase ID number, and send it with every settlement transaction.  Visa recognizes this number, and it helps in customer communication.   Most eCommerce providers will automatically include an invoice number, but make sure to check with them that this is the case for your shopping cart.
  • Settle transactions within 7 business days of the original order date, and hold them in your gateway queue in the interim.

Best Practices to Avoid Incidental Costs

Incidental costs are costs incurred after the transaction has processed, and are additional to the processing fee.  They may include chargeback fees, retrieval fees, PCI non-compliance fees, and ACH rejection fees.

  • Require that your customers read and agree to your return/refund policy prior to checkout.
  • Check the AVS response for each transaction, and follow these steps to avoid chargebacks:
  • Look more closely at the entire transaction if the response is “no match”.
  • If suspicious, ask for further information from the customer, such as the name of the bank on the front of the card, to validate the charge.  Your merchant processing bank or the issuing bank can then tell you if that matches.
  • If your instincts still tell you something is wrong, void the charge, and do not ship the product.  Merchants learn from experience that if something feels wrong, it probably is.
  • Check to see if the shipping address matches the billing address.
  • Require a signature on delivery (SOD).  Again, this provides further protection to you in the event of a chargeback.
  • When you change your business name, make sure that you inform your payment processor.  They will need to update your record so that your new name travels with your card charges.  If you leave your old name in that spot, customers will not recognize the transaction.
  • Make sure that your business is Payment Card Industry Data Security Standard (PCI DSS) compliant.  The cost to you for a data breach can be over $100,000 per incident.

Your Merchant Bank and Vendor Responsibilities

  • Your acquirer needs to include specific data within each settlement, identifying you as the merchant.  This ensures that a cardholder can contact you if they are unclear about the charge they are seeing on their credit card.
  • Any vendor storing, transmitting, or processing cardholder data – even if only for a nanosecond – also needs to validate their compliance with the PCI DSS.  Be sure you are using compliant providers.

How to Shop for the Best Rates

  • Get a quote that’s specific to how your business processes transactions.
  • If you have two distinct methods of processing, you may need a quote for each.
  • Ask if AVS is available.
  • Understand Visa’s rules regarding location and merchant processing type, as these factors contribute to how your rates are determined.
  • Ask questions about any set up fees, annual fees, cancelation fees, etc.  You may find a merchant account with low discount rates, but be careful that your savings are  not eroded by recurring fees.
  • If it’s been a while since you set up your merchant account, research current industry rates, and then ask your merchant bank for a rate review.

Good payment processing practices boil down to common sense.  Train your staff to always think about the customer, and their expectations.  They expect to be charged the amount that they authorized. They expect their card to be charged within a reasonable time frame after the order, and they expect you to ship product in a timely manner.  Your procedures should be right in line with these considerations.  The credit card associations, similarly, expect you to use these best practices.  They can, and do, penalize you with higher rates for not following them.  In the long run, it will create happy customers, save you money in processing and incidental fees, and reduce your risk of chargebacks.

Understand that the measures you take to get the best rates should save you money on processing costs.  At the same time, not every transaction you run will qualify for your lowest rate.  Many factors contribute to how your rate on any one card is determined.  You may be a merchant selling primarily to consumers, and have a fabulous low rate for qualified credit cards.  When you do take the occasional order from a business, their corporate credit card may downgrade to a higher rate.  This is the case even when you perform AVS and settle your batches in a timely manner.  To be within Visa rules, most merchants need to accept any card with a Visa logo on it, regardless of type.  You also can not charge more or penalize a customer for the type of card they give you.  The exception would be if you decide not to honor a sale, due to suspected fraud, lack of inventory, or the like.  In these cases, you may void the authorization.  However, if it is solely a matter of processing costs that may be incurred, Visa frowns on penalizing a customer for offering you their chosen payment type.  Instead, use all of the tips above consistently for a higher chance that more of your cards will qualify for a low rate.

About the Autor:
Our guest author, Mary Clare Ferber is  Account Manager at BankCardServices Worldwide. For more information about Merchant Services, visit http://www.3dcartmerchant.com