Why are some businesses more high-risk than others?

In the world of payment processing, the Credit Card Associations of Visa and MasterCard make all the rules. Banks have to be members of the Card Associations in order to issue credit cards or acquire card transactions.

When it comes to risk assessment, Visa and MasterCard rely mostly on historical data. The biggest component of their risk evaluation toolkit is the probability of generating chargebacks. A chargeback results when a cardholder disputes the validity of a transaction, posted on his or her statement. The dispute sets in motion a validation process, which is illustrated in our diagram and involves all of the participants. The cardholder has to file an official dispute with his or her card issuing bank, who then returns the transaction to the merchant bank, through the Card Associations. At this point the merchant bank can either resolve the dispute, or, if they need additional information, they will contact their merchant and ask for a proof that the transaction is valid (a receipt would answer just fine). The merchant will then provide (represent) that proof, if available, and the representation will find its way through the chain back to the card issuer and their cardholder, thus resolving the dispute. Now, whether the dispute is valid or not, it generates a certain amount of expenses that the Associations will have to incur. That is the main reason for the premium high-risk businesses have to pay on their processing rates.

Naturally, businesses that transact in a non face-to-face environment, tend to generate higher levels of chargebacks. Web-based and direct marketing merchants are automatically included. Higher average tickets add an additional amount of risk, due to the larger amounts that are moved around and the resulting higher transaction fees that are generated. New merchants too add to the risk, due to their limited processing experience. There are other factors as well which can lead to some businesses being completely unacceptable to US-based merchant services providers. For example gambling websites are extremely risky, simply because cardholders may feel like victims and dispute a charge, even if the gambling site played by the rules. Adult-oriented websites, on the other hand, are prone to generating higher levels of chargebacks, because customers may be uncomfortable to admit using their services, even if they have.

The Associations require payment processors to closely monitor their merchants' chargeback levels. Processors get penalized if their merchants' chargeback levels exceed certain limits and, in extreme cases, merchant accounts can be suspended.

UniBul Merchant Services Launches New Website

UniBul Merchant Services posted a new press release today. Text below.

UniBul Merchant Services Launches New Website

UniBul Merchant Services, a provider of credit card processing services to US-based businesses, announces the launch of its new website.

Boston, MA – UniBul Merchant Services announced today the launch of its completely redesigned website - https://www.unibulmerchantservices.com. Its main goal is to help educate US-based merchants on the basics of credit card processing, explain what payment processing costs consist of and offer concrete, customized payment solutions.

The visually pleasing design features an embedded Flash introduction video, which can only be played if the visitor elects to. A conscious effort has been made to stay away from flashy signs and oversize action buttons to ensure a relaxed experience for all visitors.

New merchants looking for payment acceptance capabilities and established businesses in search for better alternatives to the solution they currently have, will find it very easy to locate the information they are looking for. From the home page they can easily navigate to review the card processing basics, processing rates, fraud protection tools, chargeback management solutions, gift card programs and frequently asked questions.

A special emphasis has been given to the educational side of the website. At the Card Processing Basics page, visitors will find a detailed description of the stages every card transaction goes through. A diagram has been added for better understanding. Merchants can clearly see all parties involved in the process and how and when they transact with one another. At the Chargeback Management page, visitors will find a diagram, representing the chargeback cycle, a description of the process and an explanation of the causes and potential remedies that can be implemented. A list of manuals and available tools for chargeback management is included as an additional resource.

One of the most important additions to the website is the new Payment Card Acceptance Best Practices Guide. It is developed to help online merchants process transactions in a way that is compliant with the latest industry regulations for protecting cardholders’ personal information and verification of the validity of transactions. It includes a thorough examination of the new MasterCard and Visa regulations on gathering, storing and managing sensitive personal information when processing credit and debit card payments. It offers concrete steps businesses need to take to be in compliance and to ensure lowest transaction costs as a result.

Included in the sidebar of the website is a link to UniBul Merchant Services’ new Facebook page. All visitors are encouraged to visit and share their experiences as customers, make suggestions, give advice or just hang out.

The newly redesigned website is a big step forward for the young payment processing provider. The fresh look and professional touch are sure to attract positive feedback and, as the management hopes, more new customers.

UniBul Merchant Services is a Boston, MA-based Independent Sales Organization (ISO), registered with Visa and MasterCard as a provider of payment processing services for US businesses.

Contact:
UniBul Merchant Services
617-861-6101
https://www.unibulmerchantservices.com

What are the effects of credit card debt on your credit history?

I recently had to answer this question and here is my answer.

That is really a very broad question, so I will focus only on the effects that bad credit card debt has on your credit file and some of the potential consequences. By bad debt I mean the outstanding account balance on which even the minimum payments have not been made.

There are stages in the delinquency of credit card debt. If even the minimum payment has not been made for up to 90 days, the account will be still at the card issuing bank. It will be reported in your credit file simply as a late payment and it will be specified how late (30, 60 or 90 days). Your credit worthiness is slightly damaged and your credit score will drop a little bit.

If no payments have been made for more than 90 days, the account will be "charged-off". This refers to a debt, declared to be uncollectible and removed from the bank's balance sheet. Once charged-off, the account is sent to a collection agency and reported to the credit bureaus as a charged-off account. This is a lot more damaging than being late on a payment and your score will drop substantially.

The collection agency usually has the account for no longer than 60-90 days and their settlement parameters are very rigid. Typically they will not accept a settlement for an amount smaller than 80%-90% of the outstanding balance (including interest and other financial charges).

After 60-90 days, the bank will recall the account from the collection agency, place it in a pool of charged-off accounts, that have already gone through the same cycle, and sell it to a debt buyer. A typical bank sells such accounts quarterly.

Once a debt buyer gets the account, they become the new creditor and can report the account again to the credit bureaus. So 1 account can generate several derogatory notes in your credit file, each one further damaging your score.

If it remains unpaid, the debt buyer can and will sell the account to another debt buyer and the story will repeat itself.

The earlier in this cycle the account is paid, the better for the credit history. It will be updated as a "paid collection" account, which is a great deal better than showing as a collection account. Yet, it will take time for the credit score to get back to where it was before the delinquency.

How has credit card debt affected your own credit score? How did you deal with it?

Payment Card Acceptance Best Practices Guide

I've just posted our Payment Card Acceptance Best Practices Guide on Squidoo, please take a look at it and tell me what you think. Here is an excerpt:

Payment Card Acceptance Best Practices Guide

UniBul Merchant Services' Payment Card Acceptance Best Practices Guide was developed to help merchants process transactions in a way that is compliant with the latest industry regulations for protecting cardholders' personal information and verification of the validity of transactions. Complying with these rules will ensure that merchants increase their profitability by:

- Getting the lowest possible processing rates.
- Minimizing fraudulent transactions.
- Reducing chargebacks.

1. Presentment Requirements
Certain content or features should be clearly displayed on your website. These elements are intended to promote ease of use for your customers and reduce potential disputes and chargebacks.

1.1 Customer service contact information.
Customer service telephone number as well as email address should be clearly displayed on every page of the website, on shipping materials and on monthly statements. If customers cannot contact you, they will contact their card issuer which may result in a chargeback.

1.2 Policies.
Return, refund, cancellation and delivery policies should be available to online customers through clearly visible links on your home page. You should also provide "click-through" confirmation for important elements of the policy. For example, when purchasing tickets for a sporting event, customers should be able to click on a button - Accept or I Agree - to acknowledge that they understand the tickets are non-returnable unless the event is postponed or canceled. This will help your processor fight chargebacks and win representments. Any restrictions on delivery should be clearly posted on the website.

1.3 Order and refund confirmations.
Send email confirmations and summaries within one business day of processing orders and refunds. State time frames for refunds and indicate that a full billing cycle may be needed for the issuer to apply the credit to the cardholder's account.

1.4 Billing descriptor.
It identifies you on the customer's credit card statement. For example:

ABC SERVICES 800-111-2345.

Your customer must be able to easily understand which purchase the billing descriptor refers to. Otherwise he or she might contact their issuer and possibly initiate a chargeback. Also you need to be sure, and confirm regularly, that the phone number is listed correctly, so if the cardholder needs to call you to verify the charge, he or she can do so.

For more: http://www.squidoo.com/CreditCardAcceptanceBestPracticesGuide

Chargeback Reason Code 74: Late Presentment

Definition. Chargeback Reason Code 74 is issued when card issuers receive a transaction after the 30-day time frame, within which a transaction needs to be deposited, and the account number is blocked or closed. Time frames exist to ensure that transactions are deposited in a manner that will allow for timely payment processing and billing to the cardholders' accounts. It is easy to imagine how a transaction, deposited a month after it was generated, will not be remembered by the cardholder and will prompt him or her to file a dispute a initiate a chargeback. There are no remedies for chargebacks on payments deposited more than 181 days after the transaction date.

Most Common Causes. As the definition suggests, a Reason Code 74 is issued when the merchant does not deposit the sales receipt with its merchant account provider within the time frame specified in its merchant processing agreement.

Merchant Actions.

• Back-Office Staff.
  
  
  
  • Sales Receipt Deposited on Time. If the sales receipt was deposited within the 30-day time frame, you should provide your merchant services provider with a copy of the sales receipt to be represented to the card issuer.
  
  
  • Sales Receipt Deposited Late - Account Closed. If the sales receipt was not deposited within 30 to 180 days of the transaction date and the cardholder account has been closed, there is no remedy and you should accept the chargeback.
  
  
  • Sales Receipt Older than 181 Days. If the sales receipt was deposited more than 181 days after the transaction date, even if the card account is not closed, there is no remedy and you should accept the chargeback.
  
  
  • Deposit Timing Guidelines. Your back-office staff is responsible for the timely deposit of sales receipts with your merchant account processor and they should do so as soon as possible, preferably on the date of the transaction and not past the time-frame, specified in the merchant processing agreement.
• Owner/Manager.
  
  
  
  • Manual Deposit of Paper Sales Receipts. It is the responsibility of your organization's senior management to train the back-office personnel to deposit sales receipts on time. If your business deposits paper receipts, which take more time to handle, make sure that they are deposited within the time frame specified in your merchant account processing agreement.
  
  
  • Transaction Data Capture Terminals. Transaction data capture systems can be set up to automatically deposit your daily transaction batches, saving you time and substantially reducing, possibly eliminating, the probability of a chargeback Reason Code 74.

What is the lowest eCommerce merchant account rate?

Every now and again I would see this question posted in a forum or discussed in a blog. Probably there is a definite answer and, if one could go through the pricing pages of all small business merchant accounts providers, it could be found. I have seen adds for 1.59% eCommerce merchant account rates and probably this is the lowest one I've encountered. Now, in order to make an informative decision, it is important that you are able to understand exactly what is being offered at the advertised rate.

Usually, when you see a credit card payment processing rate that is conspicuously lower than the rest, you will be well advised to read the fine print notes that are likely to accompany the add. In the above example, a 1.59% processing rate will apply to debit card transactions which make up a small percentage of the overall card volume. What you really need to know is what the credit card transaction processing rate is. Here the rate will be above 2% and I am yet to see one lower than 2.13%. You will need to make sure that your credit card merchant processor does provide separate rates for debit and credit cards, in order to take advantage of the lower debit card acceptance cost.

Be advised that the credit card processing rate is just one component of the processing cost, although the most important one. There are a number of other fees and charges and you will need to be aware what all of them are and make sure that the low card rates are not offset by high charges elsewhere. We have developed a tool to help you estimate the overall cost of credit card processing for business. You will simply enter the pricing components that you have received in your proposals and it will give you the total amount that you will be charged by your prospective processor.

Find our latest rates here.

How Credit Card Processing Companies Handle Ticket Retrievals

Every now and then we at UniBul will get a request from one of its cardholders or directly from the card issuer for supporting data relating to some card transaction or other that was made at one of their merchants. The card issuer will particularly request documentation (what is known as a "Ticket Retrieval") from the merchant that pertains to the transaction at issue. When the request is received, the merchant is required to submit to its acquirer, who will then send it on to the issuer, a copy of the sales receipt or a refund invoice within 20 business days of the date of the request.

The merchant and its acquirer need to submit the requested paperwork by mail, e-mail or fax. If the credit card processing company does not respond sufficiently to a ticket retrieval request during the stated period, the issuer will most likely return the transaction to the merchant in what is called a chargeback. The supporting paperwork, or a copy of it, obtained by the issuer has to be legible enough for submission to the cardholder for examination or for the verification of the card account number.

In response to a ticket retrieval request showing the cardholder's signature, the merchant can submit a legible copy made with the electronic signature capture technology. To be in compliance with ticket retrieval requests for certain types of transactions, the credit card processing company may submit a substitute transaction receipt, as requested to comply with applicable requirements. In such instances, however, the issuer may subsequently initiate a dispute if any of the requested data elements stated below are missing:

• 16-digit card number.
• Customer name.
• Card's date of expiration.
• Entire transaction amount, including tips and taxes.
• Date of the transaction.
• 6-digit transaction authorization code.
• Retailer's name and location.
• Description of the product or services.

For mail order or telephone order (MO / TO) payments:

• The delivery address.

For transactions completed at cardholder activated terminals (CATs):

• The CAT's locations number or city and state.

For transactions made at an automated fuel dispenser machine:

• The service station ID number.
• The invoice number.

Still, under certain circumstances the issuer can return a formerly paid credit card sale to the payment processing provider, which will then send it to the retailer for repayment. These returned sales are called "Chargebacks." If a cardholder claims that a billing error has been made in regards to a card transaction, or if he or she contacts their issuer and complains about the quality of the items or services bought with the card at a merchant's establishment, the retailer is mandated to act in good faith to try to resolve the problem with their customer. If the customer refuses to pay the issuing bank for items or services as a result of a quality dispute, the issuer may then initiate a chargeback for the whole sales amount or the disputed portion of it, as applicable.

Non-profit Credit Card Processing Basics for the Internet

The following article will overview some of the most important steps for managing non-profit credit card processing risk in online transactions. These processes can be identified as the basic structure for the bigger world of e-commerce merchant account best practices.

Setting Up the Non-Profit Credit Card Processing Structure

An organization's exposure to online non-profit credit card processing risk is dependent on its concrete business practices, operational procedures, fraud detection and prevention set-up, information security controls, as well as the kind of products or services being sold. The organization's entire staff will need to achieve a detailed understanding of the risks present in any online transaction and will have to be proficient in their specific risk control approach.

If the non-profit has not yet opened up an e-commerce website, it will have to contract with a non-profit credit card processing bank that can provide efficient risk management support and, just as importantly, a complete understanding of online payment acceptance fraud risk and liability. Each entity will also have to closely evaluate each merchant services provider prior to finalizing an agreement. What has to be clearly understood is whether or not the payment processor has the capabilities and expertise to keep the account information safe and minimize fraud losses.

Designing the Non-Profit Credit Card Processing Website

When developing a website for accepting donations, the non-profit have to always keep first in mind operational procedures and risk factors. They should carefully evaluate privacy concerns, service reliability, credit and refund policies, as well as donor support access.

The non-profit's donation processing function can allow it to efficiently and safely address a host of risk issues. The organization can collect necessary payment card and donor details through such processes as indicating required checkout information fields and verifying bank card and donor data that is collected over the internet.

Fraud-screening procedures can help non-profits limit fraud for big-item sale amounts and for high-risk transaction items. By screening such online credit card transactions intelligently, the organization can avoid fraud sales before they result in a loss.

Using sophisticated computer systems and other high-tech hardware, fraudsters can achieve access to the non-profit's shopping cart and payment gateway systems, attacking insufficiently well protected e-commerce non-profit credit card processing merchant accounts, and processing fraudulent transactions. By taking efficient proactive measures, the organization can quickly minimize the risks associated with this kind of attack.

To limit their exposure to online risk, the non-profit will need to select and institute the right combination of fraud prevention and detection services. There are any number of options available now to help non-profits do that.

(Read more.)

How to Accept Credit Cards Online the Right Way

There are certain fraud-prevention policies, procedures, guidelines, and solutions for merchants that accept credit cards online. Implementing these tools will assist retailers protect their business from fraud-related issues and chargebacks. E-commerce merchants need to carefully consider designing internal fraud management policies and offering adequate training for their employees.

Authorization Guidelines

Transaction authorization is mandatory every time you accept credit cards online. E-commerce transactions are all zero-floor-limit ones. Authorization approval needs to be obtained prior to any merchandise being shipped or service delivered.

Card Expiration Date

Any time it is possible, e-commerce merchant account holders need to ask their customers for their card's expiration, or "Good Through," date and enter it in their authorization requests.

Entering the date helps issuers to validate that the card and payment are both legitimate. A mail order or e-commerce order featuring an invalid expiration date or lacking one can indicate fraudulent or otherwise unauthorized use.

Card Security Code

Card security code is a three-digit number printed on the back of bank cards (four-digit numbers on front of American Express cards) to help verify that a consumer is in physical possession of a valid card during an order.

Researches have showed that retailers that use security code verification in their authorization requests for non-face-to-face transactions can limit their fraud-related losses and chargebacks.

Address Verification Service (AVS)

The Address Verification Service (AVS) is an strong fraud prevention solution that allows merchants that accept credit cards online and otherwise non-face-to-face to verify a customer's billing address together with the electronic authorization procedure. Reports have showed that fraudsters often do not have any knowledge of the correct billing address for the particular account they are trying to infiltrate. Authenticating the address can, in turn, provide retailers with yet another, and very powerful, key indicator for whether or not a payment is legitimate.

To use AVS, retailers should simply ask card-not-present consumers for their billing address, at the checkout, as it is shown on their monthly credit card statement. This response is then sent, together with the other payment data, for electronic authorization to the issuer. Address verification, as well as security code validation and authorization, are processed simultaneously - in a span of a seconds or two - and the retailer will get an AVS response code with the authorization and security code responses.

Merchants should examine the AVS response code and take adequate action, taking into account all payment characteristics and any other validation information obtained with the authorization response (expiration date, security code, etc.).

(Learn more.)

How Processing Credit Cards Works

Besides the merchant and their customers, several other entities are involved in processing credit cards. The following information will assist you and your sales personnel to better understand who does what in the acceptance of payments.

Who Takes Part in Processing Credit Cards

The following entities take part in the cycle of processing credit cards:

• Cardholder is an authorized user of bank cards or other types of payment products.
• Merchant is any business or non-profit entity that is authorized to take credit cards and other types of bank cards for the payment of products and services.
• Processor is a bank or other financial institution that contracts with merchants to accept bank cards for the payment of products and services. A processor may also contract with third party entities to enable merchants to be processing credit cards.
• Card issuer is a financial institution that owns the cardholder relationship. It issues bank cards and contracts with its cardholders for the billing and payment of transactions.
• The Associations of Visa and MasterCard are publicly-traded entities that work with banks that issue cards branded with their logos and / or sign up merchants to accept bank cards. The Associations offer card products, promotes their brands, and set the rules and regulations governing the participation in their programs. They also operate the world's two largest electronic payments network for processing credit cards to facilitate the flow of transactions between acquirers and issuers.

Visa and MasterCard provide a collection of systems that includes:

• An authorization process through which the card issuers can approve or reject individual bank card transactions.
• A clearing and settlement platform that enables processing credit cards electronically between acquirers and issuers to ensure that:
  • Transaction data moves from acquirers to issuers for posting to the cardholder's accounts.
  • Payment for transactions is routed from the issuers to acquirers to be then credited to the retailers' accounts.

Rules for Processing Credit Cards

Merchants are required to follow certain basic rules for processing credit cards. The consistent adherence to these rules will help you to improve customer satisfaction and manage your business more efficiently.

• Include all taxes in the total sale's amount. Any tax that the retailer is required to collect from the customer must be added to the total amount and should never be collected separately.
• Accept all types of valid bank cards belonging to the brands listed in your merchant agreement.
• Check with your processor on the minimum sale's amount that you are allowed to charge.
• Comply with any maximum transaction amounts that may be established by federal rules.

(For more.)