Credit Cards 101

The customer swipes his card at the store.
 
How does the transaction work? 
What are some good practices for both the customer and the merchant? 
Read below to better understand how the whole process works as well as some good practices for consumers and merchants.

Colorful stack of credit cards and shopping gift cards.  Macro w
CREDIT CARD PROCESSING
An overview of the credit card processing world
 
 

We all go to the store, and we either default to our charge card, or if we have no cash, we use the credit card. How does the money go from our hands to the store? Read below to understand the overall process of credit card processing.

 

 

THE PROCESS: 

The first step is to acquire a debit or credit card. Both cards can be used at the store. The difference for the customer is whether the amount is deducted instantly (debit) or whether the credit card company sends you an invoice every month. 

 

When you swipe your card, the magnetic strip captures all the relevant information (cardholder name, card number, expiration, security code) and sends it along to the credit card processor. 

 

From there, they deposit the money directly into the store’s bank account (depending on the processor, but generally within 1-2 business days) and the store gets a monthly fee, based on the cards and amounts swiped that month.

 

SOME NOTES:

As a security feature, some machines require additional information (such as the last four digits on the card) to help avoid credit card fraud. 

 

Sometimes, your credit card company will put a hold on your card. There are different levels of holds. Some will stop the card completely from working, while others will not let a specific merchant to go through. Technology items are hot items to buy with a stolen credit card, so many times technology related purchases and especially large tech orders will get stopped by the credit card company. To resolve this, a quick call to your card company should resolve this issue.

 

Different stores require different levels of information. The more information they have, the more secure the order will be (with regard to charge backs and fraud) and therefore the store may pay a lower fee for the service.

 

Ever wondered why stores ask for your signature (either on the receipt or electronically)?

This is crucial for the store in case of chargebacks. When someone claims they never made that purchase, it is up to the store to prove the customer really placed the order. If the signature on the card matches the credit card receipt, this will help the store prove the purchase was legitimately made by the customer.  

BEST PRACTICES FOR REDUCING CHARGEBACKS
A glance at credit card processing
 
 

Chargebacks happen for a variety of reasons and can cost merchants a lot of time, money and even their merchant account. Here are a few simple tips from our friend Dovid at Fidelity to help reduce or eliminate any chargebacks you may receive.

*Be clear about refund and return policies. Make sure that the conditions of the sale are written on the receipt near the customer’s signature and that they receive a copy of that receipt. Also, display your refund and return policy near the register in a place that all your customers will be able to read it.

* Respond to inquiry letters as soon as possible. If you wish to dispute a customer’s claim all materials needed to resolve the issue should be sent by the date displayed on the inquiry letter. Even if the customer is wrong, if the merchant doesn’t reply to a dispute on time they are usually liable for the funds.

* Let customers know what name will appear on statements. Many merchants who use 3rd party processing companies have run into problems because the company name that appears on cardholder’s monthly statements is usually the name of the 3rd party processing company and not the company name of the site the cardholder made their purchase from. This isn’t always the case, but it is common.

* Take an imprint of the credit card. In instances where a cards magnetic stripe is unreadable or for delivery orders, making an imprint of a card is proof that the card was present and should be kept with your records of the transaction.

*Collect signatures upon delivery. You can use carriers that require signatures for delivery and allow you to also have a copy. Always retain these in your records.

*Request a copy of identification and credit card. Always see identification for face to face transactions, but you can also request to have a copy of an I.D. and credit card faxed to you. This works best when it is a business to business transaction.

*Never charge the card until goods are shipped. If the goods are not yet ready, delay charging the card until such time as the goods are ready and sent.

If you have any questions about what else you can do to reduce your credit card processing fees, and/or get your money faster from the processing agent, please call Dovid Winiarz  of Fidelity Payment Services at 718-983-9272  or emaildovid@dovid.com

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