The credit card industry has been subject to much controversy regarding the way in which their contracts are written, for both consumers and merchants with credit card processing accounts. Millions of consumers have struggled to stay in control of high balance credit card accounts, while merchants become a credit card processing agent and business owners try to reduce the credit card processing fees they pay in order to accept cards from their customers. In some cases, it is the language of the contract which has been questioned. Some people believe the credit card processing contracts are confusing and potentially misleading. At the end of the day, whether you are a credit card user or a merchant involved in processing- what your contract says or doesn’t say can end up costing you a lot of money in the long run.
Making the wrong choice for your processing company can have a devastating impact on your business finances. Paying too much for the ability to accept plastic from your customers results in losing profits that should stay within your business. Depending on the amount of credit transactions you process and the terms of your agreement, you may be paying thousands of dollars more each year than you would have to with another processor charging lower rates.
Processing fees: Whether you are looking for your first credit card processing company or are already accepting credit as payment from customers, carefully reading your contract will help you determine if this is the right processor for your business. Specifically, you want to be on the lookout for any and all fees, and compare them to other processing company’s to ensure you are not overpaying. As with any service or product with fluctuating prices, you may benefit by comparison shopping to find the lowest fees for the services you need. When comparing card processing fees, make sure you compare one pricing structure over another – is it better to pay a flat rate per transaction, or would you save money by paying a monthly fee and lower transaction percentages?
Equipment rental: Also view your contract to determine how much you are being charged to rent equipment, if you do not own it yourself. It is almost always better to invest in your own credit card processing equipment, even if your contract claims the rental or lease of their equipment is free. Somewhere you are going to be charged an inflated fee to offset the use of equipment that is not your own.
Cancellation fees: Some processing company contracts include an early cancellation fee. If you find a company offering lower rates and decide to switch – the company can then charge you the cancellation fee. When looking at contracts to choose a processing company, if the contract includes a cancellation fee – ask to have it removed. If they won’t take out the early cancellation fee, consider looking for a different company to give your business.
One of the biggest concerns shared by both merchants and consumers is the security of credit card processing. Each time a consumer presents a card or credit card information for payment, the security of the transaction comes into question. This is despite efforts within the industry to ensure secure transactions and protection from fraudulent use of credit card account information. Breaches in security do occur, often affecting major players in the industry.
With every advance in technology which makes card processing secure, there are hackers and con artists working on ways to access private information. With so many new ways to process cards, fraud is going to continue to be a fear for all parties involved. Take for example a recent article published on PCWorld. com pointing out the possible risks associated with mobile phone apps which are needed to process mobile payments. Storage and processing information is still secure, however mobile apps may be vulnerable to the developers of other apps which may be used in a more malicious manner.
If you don’t plan on using a smartphone for credit card transactions, do not feel you are safe from security breaches in other areas. Just as hackers are learning ways to go around new mobile technology, the same thing is occurring in other areas of credit card processing. Citigroup Inc is the latest company targeted for attack by cybercriminals. Sony Corp and Lockheed Martin Corp are also on the list making many security experts wary about the security of financial institutions and card processing.
There are several areas of the CARD Act which are intended to prevent card holders from getting hit with exceedingly high interest rates, however there remain ways for credit card issuers to get around these limitations. There is nothing in the CARD Act that actually caps the amount of interest that can be applied to unpaid balances. This means those with poor credit are still likely to suffer high interest rate accounts, some up to 49. 9%. Other factors affecting interest rates are late payments and language. Some card holders are under the false impression that credit card companies can no longer raise your interest rate, however any card with a variable rate (most cards today have variable rates) can increase without notice if the contract terms include language stated the same. Also, miss your credit card payment for 60 days or more, your rate can be raised as a result. The 45-day notice on rate hikes is also misleading in that a new higher rate can be charged to purchases 14 days after a notice has been mailed. You do not have to make a payment at the higher rate until 45 days after the notice, however it may have already been applied to purchases made in the 14 day window.