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    Please Take Caution and Avoid These ItemsThere are numerous fees, terms, requirements, deceptive sales practices, and other aspects you as a merchant must avoid in order to protect your business and perhaps your own personal credit worthiness.  The “MerchantFeeSavers Guide” goes into great detail on the steps to needed select the right merchant account provider and avoid the pitfalls that have cost some merchants thousands of dollars. Below are some of the most common ones. Termination FeesLiquidated Damages – We recommend that you NEVER sign a merchant agreement that has a Liquidated Damages clause or a Liquidated Termination clause in the accompanying Terms and Conditions.  Some merchant account providers charge the merchant liquidated damages should the merchant terminate the agreement early.  Liquidated damages are calculated based on a formula used by the individual merchant account provider and may include risk they took on the account, transaction cost, lost revenue, etc.  What does this mean?  Say you signed a 3-year contract (3-years is the most typical length in the industry).   Also say the merchant account provider’s formula states they deserve to make $2000 per month on your account should you terminate early.  If you terminate after 12 months, the merchant account provider will…
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    A:Account Number: A unique sequence of numbers assigned to a Cardholder account that identifies the Issuing Bank and type of financial transaction card.ACH: Automated Clearing House – An electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches and transfers electronic funds into and out of the merchant’s bank account.Acquirer (or acquiring bank):  A member of a Card Association, for example MasterCard and/or Visa, which maintains merchant relationships and receives all bankcard transactions from the merchant.Acquirer Processing Fee (APF): A Visa per-item fee since July 2009. The fee is on all Visa branded authorizations acquired in the U.S. regardless of where the issuer/cardholder is located. Currently this fee is 1.95 cents per authorizationAddress Verification Service (AVS): When a card is not swiped, the address must be verified to combat possible fraud. This feature is used primarily by mail or telephone order and ecommerce merchants but can be used by retail merchants when a card cannot be swiped. A prompt appears on the software or terminal asking the merchant to enter the numerical value of the cardholders billing address, the Zip Code and, on occasion the CVV / CID code of…
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U.S. Merchants Can Now Add A Surcharge for Credit Card Transactions, But Be Cautious.

In November 2012, the U.S. District Court for the Eastern District of New York preliminarily approved a proposed settlement agreement with Visa and MasterCard. As part of the settlement, Visa and MasterCard were required to allow merchants to surcharge certain credit card transactions beginning January 27, 2013. The surcharge is being called a “Checkout Fee.”

• The checkout fee is a surcharge of up to 4% which merchants can add to the sale in order to cover credit card processing cost.
• The checkout fee cannot be added to debit card or prepaid card transactions.
• As you are aware from previous articles and emails I have written, I do not believe the settlement as it stands is in the best interest of merchants. I agree with several trade associations and large merchants that the settlement does not go far enough in resolving the issue of transparency and fair rates/fees in the card processing industry.

Be very cautious of surcharging

1. This is a “preliminary” approval. The final settlement could be prolonged and could impact surcharge capability.
2. Surcharging is a two-edged sword. Yes it may help pay for the merchant’s cost to process a credit card transaction. However, it can also drive customers away from the merchant’s business. It can also drive customers to pay with something other than a credit card. This may sound advantageous. However, industry studies show that customers spend more when using a credit card.
3. So far, some of the largest retail merchants have already stated that they do not plan to surcharge.
4. Currently, 10 U.S. states have surcharging restrictions including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

Understand all the rules if you plan to surcharge

For a complete list of rules and regulations visit our Educational Resources page.

Following are some of the key rules and regulations you need to know before surcharging:

1. Visa and MasterCard require merchants to notify them and the merchant’s acquirer 30 days prior to implementing a surcharge.
2. To notify Visa, go to the Visa site above and click on “Notification of Intent to Surcharge” and complete the form. Your merchant account provider may be the acquirer. However, contact your provider to determine if they need any specific information.
3. To notify MasterCard, go to the MasterCard site above and follow the directions under “Merchant Registration with MasterCard and Acquirer.”
4. U.S. merchants may assess a surcharge on credit card purchases that does not exceed the merchant discount rate for the applicable credit card surcharged with a maximum surcharge more of 4%.
5. Brick & Mortar merchants must disclose surcharging at the point of entry and point of sale. Also, the final surcharge amount must be identified separately on the receipt.
6. Ecommerce merchants must alert shoppers about any surcharge on the first page that references credit card brands
7. Merchants must surcharge Visa and MasterCard on the same terms and conditions as any equal or higher cost competitor that imposes limits on surcharging. This may mean that if the merchant accepts a card brand which does not allow surcharging the merchant will not be allowed to surcharge the Visa and MasterCard credit card transactions. Merchants need to review the regulations with their provider.

Be careful of misleading sales tactics and incorrect savings analyses

In 2011 the Durbin Amendment was implemented lowering the debit card interchange rates for most debit card transactions. At that time, I cautioned merchants to beware of misleading sales tactics fostered by the Durbin Amendment. I have seen all of the misleading sales tactics I predicted would take place.

I now caution merchants to beware of misleading sales tactics that will be fostered by this preliminary settlement. Those misleading sales tactics may include:

1. Salespeople informing merchants that the recent Visa/MasterCard settlement means they now get better pricing from Visa and MasterCard then the merchants current provider so they can offer the merchant a lower rate.
2. Terminal leases or terminal set up fees to implement the required surcharge notification.
3. Savings analyses that have some amount of surcharging implemented to enhance the providers projected savings.
4. Merchants being informed of certain mandates or stipulations that just are not true.

Summary

I do not believe this settlement is an automatic win for merchants. Merchants need to fully understand the consequences of surcharging and be on guard for misleading sales tactic as a result of this preliminary settlement.

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