The Debit Card Trap on Campus

With evolving technology, the student ID card is becoming more versatile. For example, colleges have partnered with financial institutions, enabling students to make financial transactions using their IDs, both on- and off-campus. While this all sounds convenient, is it fair to students? The guys over at OnlineDegree.org have created an amazing infographic on just that subject. Here it is:

MasterCard's Excessive Chargeback Program

At UniBul we can work with high-chargeback businesses, but here I will explain exactly what that term refers to. MasterCard considers a chargeback level to be excessive if in each of two consecutive calendar months (the "trigger months"), the merchant has a minimum chargeback-to-transaction ratio (CTR) of 100 basis points and at least 50 chargebacks in each month. This designation is maintained until the merchant's CTR is below 100 basis points for two consecutive months. The CTR is defined as the number of chargebacks received by the credit card merchant processor for a merchant in a calendar month divided by the number of the merchant’s sales transactions in the preceding month acquired by that processor. (A CTR of 1% equals 100 basis points.)

Credit card processing companies are responsible for monitoring their merchants' chargeback levels, calculating the CTR for each calendar month and reporting to MasterCard any merchant that is a Chargeback-Monitored Merchant (CMM) or an Excessive Chargeback Merchant (ECM). In addition, credit card payment processing service providers must submit separate reports for each of their Chargeback-Monitored Merchants (CMM). A merchant qualifies as a CMM if it has a CTR in excess of 50 basis points and at least 50 chargebacks in a calendar month.

Within 30 days of the end of the second trigger month, and on a monthly basis thereafter, the credit card processing service provider must submit a separate ECM report for each of its ECMs (in lieu of a CMM report) until that ECM’s CTR is below 100 basis points for two consecutive months. The acquirer also must provide a copy of the ECM report and these ECP Standards to the specific ECM merchant. MasterCard will assess the acquirer a reporting fee of $300 for each ECM report submitted.

In addition to any applicable assessments for CMM reports, ECM reports, or late report submissions, MasterCard may assess the merchant account processor for issuer reimbursement fees and violation assessments for excessive chargebacks arising from an ECM. The issuer reimbursement fees and assessments are applied in each calendar month that the ECM exceeds a CTR of 100 basis points, including the two trigger months. The reimbursement fees are calculated as the number of chargebacks that account for the CTR above 100 basis points are multiplied by $25. The violation assessment is calculated as the issuer reimbursement fees are multiplied by the CTR (expressed as basis points) and divided by 100.

It is clear that merchant account service providers have a powerful incentive to rigorously monitor their merchants' chargeback levels. Typically, if your chargeback levels exceed a CTR rate of 100 basis points for more than two consecutive months, your small business merchant account will be suspended.

Billing Descriptor

The way your company's name appears on your customer's credit card statement is called a billing descriptor. In order to qualify for the lower interchange rate offered to merchants operating in a card-not-present credit card payment processing environment (Visa: CPS; MasterCard: Merit 1), the company name and a customer service number must appear in this field. If your company offers a single product or service this descriptor would be sufficient. For example:

ABC SERVICES 800-111-2345.

This is the default billing descriptor. Your small business merchant accounts provider will set it up for you. There is also the soft billing descriptor which allows the description field in the cardholder’s statement to be modified to include a more detailed description of the transaction. The merchant’s name is usually truncated to three letters plus an asterisk followed by a short description of the service or product that your company provides. Keep in mind that this field is usually limited to 25 characters plus the phone number. Be sure to check with your credit card merchant processor to see if they support this feature and for their format requirements. For example:

ABC* Instant Oil Change 800-111-2345.

The importance of using the correct billing descriptor in your merchant account processing activity cannot be overstated. If your customer does not recognize your company's name on his or her credit card statement, the transaction may be disputed and lead to a chargeback. Consult with your credit card processing account provider on the most appropriate way to set it up.

Are merchants responsible for fraudulent orders placed with them?

Unfortunately, in the case of a fraudulent transaction, the merchant it was placed with bears certain financial responsibility (this is an especially big problem for certain industries). The merchant is just as much a victim as the cardholder whose card information was used to place the order is, yet there are certain transaction fees that have been incurred in processing the payment.

When you set up a small business merchant account, you agree to pay certain credit card payment processing fees and charges on every transaction that you accept. It is important to understand that payments are not actually at your processor until you submit your daily batch at the end of your day. The reason it is important is that it gives you some extra time to try and verify the validity of every payment that you accepted that day. Your credit card processing company will provide you with a set of tools to help you fight fraud. They have a financial incentive to minimize fraud, just as you do. If you employ these tools, along with CVV2 and AVS verification services, you will be sure to reduce and possibly, eliminate fraud.

It is a good idea that you establish a set of credit card transaction processing best practices to fight fraud. Make it a point of always using AVS but try not to use voice authorizations because they bypass the credit card merchant processor’s system and cannot be used as supporting evidence in chargeback representments. Also, personally check a new customer's payment details and make sure there is nothing suspicious. Often, common sense is your most effective fraud protection asset.

Is a business checking account required in opening a merchant account?

When applying for small business merchant accounts with UniBul, applicants are asked for a checking account. Credit card processing companies need a bank account so that they can deposit the funds into it. It does not make a difference whether it is a business or a personal checking account, the money will go in either way.

So from a credit card processing perspective, there is no need to open a business account. You still might want to consider doing so, however, in order to separate your personal from your business finances. A separate account will allow you to easily keep track on your merchant services credit card processing activity and, come tax return time, to quickly find the information that you need. Moreover, using a check with the name of your business on it will give you a more professional look.

Although opening a business bank account is optional, there are compelling reasons to do it. Unless it is more a hobby than a business, your company will benefit from it.

Can I open a US merchant account if I live abroad?

In order to open a US-based small business merchant account, your company has to have legal presence in the United States. You don't have to live in the States but your business has to have at least a subsidiary, that is incorporated in any one of 50 the states. You will also need a physical address and a domestic bank account into which your funds will be deposited.

So as you see, if a foreign business wants to open a merchant services credit card processing account in the US, it will have to be prepared to invest a certain amount to cover the legal and procedural expenses. It also will need a locally-based officer to represent the company before the US authorities.

Clearly, it is a good idea that a foreign business should consider all available credit card payment processing options before deciding to open a US merchant account. Other possibilities are a third party credit card merchant processor, such as PayPal, and an offshore credit card processing account. Both alternatives have their advantages and disadvantages and may be suitable under certain conditions.

Third party processors offer credit card processing service accounts that are easy to establish and maintain. If your card volumes are going to be low, this is probably your best choice. The processing rates that these accounts offer, however, are substantially higher than a direct merchant account's. After the break-even point, the cost of establishing a domestic account will be offset by the savings that will come with the lower credit card processing rates.

Offshore credit card processing companies provide the convenience of a direct merchant account processing solution, without the hassle of dealing with the US legal and procedural requirements. The downside, however is a substantial rate premium that you will be charged, much bigger than the premium, charged by third-party processors. Processing rates, charged by offshore companies, are more than twice higher than the ones that domestic processors charge.

UniBul can help you set up a merchant account in the U.S.

UniBul Merchant Services Launches New Payment Processing Program

Press Release

June,04, 2008 - UniBul Merchant Services announced today the planned launch on June, 23 of a new small business merchant accounts program for eCommerce merchants.

Evaluation of the processing statements of fifty web-based merchants showed that, as a whole, the group was excessively overcharged by their credit card processing companies. Two thirds of all merchant services credit card processing rates were higher than 2.45% per transactions. Today the same merchants should easily get rates lower than 2.20%. In addition to that, 55% of them were paying various service charges, like a monthly minimum processing fee or a customer service fee, in the range $10 - $25. Such fees should not be charged at all. The biggest issue, however, was found in the large volumes of non-qualified transactions. Non-qualified is a transaction that is processed in accordance with the rules established in the Payment Processing Agreement, signed by the merchant and the processor, but does not meet the highest standards for credit card payment processing and/or complies with some applicable security requirements, but not enough in order to be classified as qualified. The average surcharge for non-qualified transactions was 1.10% over the qualified rate. The average volume of non-qualified transactions was 55%.

To address the issue, UniBul Merchant Services has created a unique payment processing program. The eCommerce will be segmented into multiple categories and merchants will be classified into the most appropriate one. Small support teams will be created that will specialize in working with just one of these groups to ensure that they become intimately familiar with each group's characteristics. UniBul Merchant Services' new Payment Card Acceptance Best Practices Guide is developed as a manual for the support staff and the merchants they work with in implementing a set of payment acceptance procedures into the sales process. These procedures will ensure that transactions are processed in a way that is in compliance with Visa and MasterCard regulations and significantly reduce or even eliminate the resulting non-qualified surcharges. Implementing these best practices will also reduce the high levels of chargebacks to which eCommerce merchants are particularly vulnerable. There is a provision for manual credit card processing merchants as well.

The first program to be launched is designed to accommodate the specific needs of online groceries. Later this summer several other platforms will be released for a wide range of different eCommerce merchant types, including auto part dealers, flower shops, airline ticket vendors, etc.

By launching this program, UniBul Merchant Services is seeking to bring eCommerce credit card processing costs down to acceptable levels and to contribute to a sharper focus on the processes and practices that are necessary to ensure that merchants get the best out of their credit card payment processing.

Contact:

UniBul Merchant Services LLC

617-861-6101, ext. 1170 - phone

sales@unibulmerchantservices.com - email

https://www.unibulmerchantservices.com - web

http://blog.unibulmerchantservices.com - blog

What are the benefits of having a merchant account?

Small business merchant accounts require a certain effort to apply for and set up and then they have a certain maintenance cost, in the form of a monthly statement fee and, in some cases, other credit card payment processing fees and charges. Moreover, merchant services credit card processing contracts are usually for two or three years (although UniBul offers month-to-month services). So it is a legitimate question to ask what benefits you get from your credit card processing service and is it worth the investment of time to set one up.

Well, the answer is that yes, it is worth it and you should consider establishing one as soon as your processing volumes grow large enough to justify it. By that I mean that there is a break even point, different for every business, beyond which the lower processing rates, associated with credit card processing accounts, fully offset the fixed monthly fees, which are absent with third party solutions. The main benefits of having your very own retail, direct marketing or PC based credit card processing are:

• Professional image. Every type of processing capabilities, including manual credit card processing is perceived as a sign that the business is of a certain size and it is committed to providing a complete shopping service. Actually, taking into account the strict requirements that credit card processing companies demand that applicants meet, it is true that a merchant card processing account comes with a certain level of commitment.


• Lower processing cost. The difference in processing rates that a direct merchant account provides over a third party credit card merchant processor is significant and cannot be overstated. A comparison between an eCommerce merchant account and PayPal shows that the difference can be as high as 0.8% + $0.05 per transaction for merchants that process less than $3,000 per month.


• Control over your account. With a third party solution, your processor has a complete control over your card payment processing activity. They can hold on to your money and even freeze your account if a suspicious activity is thought to have occurred. The direct solution gives you complete control over your account. CVV and address verification fraud prevention services help you decide whether or not a transaction is legitimate.

What documents are required when applying for a merchant account?

Different credit card processing companies may ask for different documents from their applicants (UniBul is different from others as well). Yet, all merchant services credit card processing providers are registered with Visa and MasterCard and have to follow their regulations. There are certain requirements that are mandatory and I have listed them below.

• You will need to have an incorporated business or at least a DBA-registered sole proprietorship. You can obtain a Tax ID (which is free) for your corporation or sole proprietorship but it is not required by payment processing providers. If you don't have one, you will use your SSN as a substitute.


• A completed Merchant Application. You will need to enter your business and personal information, including SSN and to sign it. Please note that even if you have a Tax ID, you will still need to provide your SSN in the personal information section of the application.


• A personal guarantee. Small business merchant accounts providers ask for a personal guarantee as an additional insurance against potential losses.


• Financial statements. Unless you are a new business entity, you will have to provide your financial statements for the last three years.


• Tax returns. Small business owners are required to provide their tax returns for the last two years.


• A voided check. Credit card payment processing providers need your checking account information for funding purposes. This will be the account you will be getting your money deposited into.


• Business license. If your business requires some type of permit or certificate, you will need to provide it.


• Processing statements. If you are switching credit card processing providers, you will need to provide your payment processing services statements from the last 2 months.

Assessments for Noncompliance in Account Data Compromise Events

If an account compromise was a result of a violation of MasterCard Standards regarding disclosure and securing of cardholder account and transaction data, the member bank may be subject to noncompliance assessments. MasterCard may assess up to $100,000 for each violation, with a maximum aggregate assessment of $500,000 for additional or continuing violations during any consecutive 12-month period.

If the member bank fails to comply with the procedures required in data compromise events, MasterCard may impose an additional assessment of up to $25,000 each day until the it achieves compliance. Continued, extended, or repeated noncompliance may lead to the suspension or termination of the member bank's participation in the MasterCard payment system.

In addition to the assessments listed above, MasterCard may assess all investigation and other related costs against the acquiring bank. With regard to accounts identified as potentially compromised, MasterCard may require the acquirer to reimburse affected card issuers.

• Potential exemption from noncompliance assessments. MasterCard may exempt an acquiring bank from noncompliance assessments and investigative costs, and other related costs; and MasterCard may grant up to a 100% reduction from the card issuer reimbursement costs. MasterCard will base any exemption that may be afforded on the the circumstances, including compliance with the Payment Card Industry Data Security Standard. The factors that MasterCard will consider are the following:
  
  • Verification that the merchant or TPP associated with the account data compromise event was registered in accordance with MasterCard's Registration Program.
    
  • Proof of compliance with the Payment Card Industry Data Security Standard by the merchant or TPP associated with the account data compromise event.
    
  • Demonstration by the acquiring bank that the entity associated with the account data compromise event was compliant with the Payment Card Industry Data Security Standard and applicable MasterCard SDP Program requirements at the time of the applicable account data compromise event.
    
  • Notification to and cooperation with MasterCard and, as appropriate, law enforcement authorities.
    
  • Verification that the forensics examination was initiated within 72 hours of the account data compromise event and completed as soon as practical.
    
  • Timely receipt by MasterCard of the forensics examination findings.
    
  • Evidence that the account data compromise event was not foreseeable or preventable by commercially reasonable means and that, on a continuing basis, security practices were applied.
  
  MasterCard generally will not grant a full or partial exemption for an internal compromise, which is a compromise facilitated by persons authorized to have access to the system or process compromised.