Where is the CVV # on Credit Cards?
July 8, 2009 by Matthew Hunt · Leave a Comment
I have had a few merchants recently not understand what the CVV # is on credit cards and how they can use it to protect themselves from potential fraud and/or chargebacks. In the image (the left) shows you where to find the CVV number on credit cards.
It is a three or four digit security code on your credit card. If your customer is prompted to enter that and it matches the security code on file the transaction goes forward, if it doesn’t match it is flagged and the transaction is halted. It’s important to match this up on mail-order and telephone-order businesses. I’d also incorporate it into my e-commerce shopping cart too. It’s not a 100% fool-proof, but it is just one more measure that enables Merchants to protect them selves from credit card fraud.
What’s the Deal with: “Merchant Accounts & Personal Guarantees”?
June 28, 2009 by Matthew Hunt · Leave a Comment
This question comes up often from many merchants “Why do I have to sign a personal guarantee?” and it’s a valid good question. In this blog post I will try to shed some light on this merchant account subject matter.
Basically all merchant account providers will require that a personal guarantee be signed by the owner(s) before approving an account for credit card acceptance. Now I do know providers that will accept applications, but it requires 2 years worth of accountant ready financials (which most new companies obviously do not have) so any new company does not have this as an option and will have to make a personal guarantee to get approved on a merchant account.
Some business owners are justifiably reluctant to sign a personal guarantee, and I get that (and hear you loud and clear)… that is the point of having incorporations and limited partnerships, or other legal entities that are set-up to protect your personal assets from the business’s liabilities.
So what’s the big deal, right?
Well, what most Merchants do not understand is that these merchant accounts are consider short term loans (only with higher risk associated to them). A merchant account provider is at risk for every dollar that passes through the merchant account during a 6 month peroid.
Look at this scenerio:
Company ABC comes out with a new… I dunno… lets say a… MP3 Player for $50 bucks. During their first month, sales are over $50,000 and everyone in the company is excited. Because ABC Company feels they have a hit on their hands they take all remaining capital and toss into advertising to try to drive more sales to their new MP3 Player. Only 2 weeks later ABC company finds out their is problem with their player, a manufacturing bug that is causing almost all their MP3 Players to stop work a couple months after working.
ABC Company doesn’t have the cash to replace them because they dumped all their capital into the extra advertising so they tell customers that they are sorry, they won’t be able to honor the six month warranty that was included.
What do you think these customers who bought the MP3 Player are going to do…? That’s right – issue a chargeback. Then the merchant account provider will try debit ABC Companies bank account to recover the chargeback amount only to find out there is no money to be able to debit. Guess who is on the hook for all these chargebacks…? The merchant account provider, if… they don’t have a guarantee.
Hence why Merchants have to give a “Personal Guarantee” for approval on a merchant account.
You see Merchant Account underwriters have to determine what the risk factor is for each company and business. They look at projected sales and multiply that by 6 months because that is how long a card holder has to issue a dispute a charge (a.k.a. chargeback).
Yes the above example is a Merchants honest mistake, but it is still the merchant account provider that does not want to stuck holding the bag, if Merchant’s businesses goes bust. The above example even though the business made an honest mistake it could be taken the wrong way and they could end up on the TMF Match List. Merchant Accounts are very serious stuff – it’s not just as simple as apply for a credit card (which I think a lot of newbie business owners think).
These procedures are also set-up to prevent your typical fraudsters too. This is where they try to set-up a merchant account, sell stuff (or so they say), get paid by the merchant account provider within 48 hours and then skip town. The “Personal Guarantee” is to try to prevent fraud.
I hope this has shed some light on why a “Personal Guarantee” is required when applying for a merchant account. If not, please let us know your questions by using the comment section below.
15 Ways to Prevent Chargebacks
April 9, 2009 by Matthew Hunt · Leave a Comment
Merchant Account providers DO NOT like chargebacks, getting a lot of chargebacks can cause you to have your merchant account terminated or even worse end up on the TMF List. Some chargeback situations can’t be helped, but many can if you understand how to protect your self. Here are 15 ways to help prevent chargebacks.
- Here is the most obvious way to prevent a chargeback – Do not complete a transaction if the authorization request was declined. Do not repeat the authorization request after receiving a decline. Be sure if you want to get a second verification then phone it in.
- If you receive a “Call” message in response to an authorization request, call your authorization center. Be prepared to answer questions. The operator may ask to speak with the cardholder. If approved, write the authorization code on the sales receipt. If declined, ask the cardholder for another Visa card.
- Make an imprint for all card-present transactions. If you have a point-of-sale terminal with a magnetic-stripe reader, swipe the card through the reader for every face-to-face transaction. If the terminal isn’t working or a card’s magnetic stripe cannot be read, key-enter the account information and make an imprint of the embossed information onto the sales receipt using a manual imprinter. Even if the transaction is authorized and the cardholder signs the receipt, if the receipt does not have an imprint of the embossed account number and expiration date, the transaction may be charged back to you for “no imprint” if the cardholder later denies participating the transaction. This is why having a manual imprinter is essential and make sure staff is trained on how to handle situations like this too. The number one reason merchants end up with chargebacks is due to untrained staff.
- Obtain cardholder signature. The cardholder’s signature on card-present transactions is required. Failure to obtain the cardholder’s signature could result in a chargeback for “no signature” if the cardholder denies authorizing or participating in the transaction. You should also look at the signature to make sure it somewhat matches what you see on the back of the credit card. If doesn’t ask for I.D.
- Stay organized. Make only one imprint of the card for each transaction. Making more than one imprint can lead to duplicate deposits and increase the chance of a chargeback. If you need to redo a sales receipt because of an error, write “VOID” across the incorrect sales receipt, inform the cardholder, and tear up the incorrect sales receipt in view of the customer.
- Ensure that transactions are entered into point-of-sale terminals only once—and deposited only once. Entering the same transaction into a terminal more than once, or depositing both the merchant copy and the bank copy of the sales receipt with your acquirer, or depositing the same transaction with more than one merchant bank can all result in “duplicate transaction” chargebacks. And chargebacks can be anywhere from $10-$50. You end up with 5-7 of these every month and you’ll feel it.
- Ensure that incorrect sale receipts are voided and that transactions are processed only once.
- Be clear about your policies at check-out. If your establishment has policies regarding merchandise returns, refunds, or service cancellation, disclose these policies to the cardholder at the time of the transaction. Your policy should be pre-printed on your sales receipts; if not, write or stamp your refund/return policy information on the sales receipt near the customer signature line before the customer signs (be sure the policy shows clearly on all copies of the sales receipt). Failure to disclose such policies at the time of the transaction will be to your disadvantage should the customer return the merchandise. This is a tough one, but it’s always the Merchant’s burden of proof to show that policies are clear.
- Do your batch closes or sometimes known as settlements daily. Deposit sales receipts with your merchant bank as quickly as possible, preferably within one to five days of the transaction date—do not hold on to them. Failure to deposit in a timely manner can result in chargebacks for “late presentment.” It can also result in higher discount rates or cause your transactions to fall under the higher Non-Qualified MDR rates with some providers.
- Deposit credit receipts with your acquirer as quickly as possible, preferably the same day as the credit transaction is generated. Failure to process credits in a timely manner can result in chargebacks for “credit not issued.”
- If a customer requests cancellation of a recurring transaction which is billed periodically (monthly, quarterly, annually), always respond to the request and cancel the transaction immediately or as specified by the customer. As a customer service, advise the customer in writing that the service, subscription, or membership has been cancelled and state the effective date of the cancellation. Failure to respond to customer cancellation requests almost always leads to chargebacks.
- Keep customers informed on the status of their transactions.
- If the merchandise or service to be provided to the cardholder will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date.
- This one is common sense for most Merchants, but there are always a few creative individuals out that who decide to conduct business in an interesting manner. If the merchandise ordered by the cardholder is out of stock and delivery will be delayed or this item is no longer available, advise the cardholder in writing and offer the cardholder the option of purchasing a similar item or canceling the transaction. Do not substitute another item unless the customer agrees to accept it. By giving the customer notice and the option to cancel, you may help avoid a customer dispute regarding the merchandise and a possible chargeback.
- Know your shipping time lines. Ship merchandise before depositing transaction. Don’t deposit transactions with your merchant bank until you have shipped the related merchandise. If customers see a transaction on their monthly Visa statement before they receive the merchandise, it could lead to a preventable chargeback.
